UP Fintech Holding Ltd. Q2 FY2025 earnings call

• Driven by growth in user base, client assets, and product enhancements, total revenue, trading volume, commission income, interest income, and other income all hit record highs in the second quarter. Total revenue was USD 139 million, trading volume was USD 284 billion, and commission income was USD 64.8 million. • In the second quarter, 39,800 new funded accounts were added, with Singapore and Hong Kong being the main contributing markets. By the end of the second quarter, the total number of funded accounts reached 1,192,700. • Total client assets reached a new record of USD 52.1 billion, up 13.5% quarter-over-quarter and 36.3% year-over-year. • In Singapore, features for CPF and SRS account trading were launched. Product features were optimized in other markets, such as pending order reminders for options. • The 2B business was robust, underwriting 7 Hong Kong IPOs and 4 U.S. IPOs in the second quarter, which boosted other revenue. • Costs: Interest expense, execution/clearing expense, employee compensation, occupancy/depreciation, communication/market data, and marketing expense increased, while general and administrative expense decreased due to lower bad debt provision from the previous year.

In the second quarter, UP Fintech Holding Limited achieved record highs in total revenue, trading volume, commission income, interest income, and other income. Total revenue reached USD 139 million, marking a 58.7% year-over-year increase and a 13.1% quarter-over-quarter growth. Trading volume soared to USD 284 billion, contributing to a 90.1% year-over-year increase and an 11.1% quarter-over-quarter rise in commission income, which reached USD 64.8 million. Net interest income for the second quarter amounted to USD 58.7 million, showing a 32.8% year-over-year increase. GAAP net income attributable to UP Fintech was USD 41.4 million, up 36.2% from the previous quarter and 16 times higher than the same quarter last year. Non-GAAP net income reached USD 44.5 million, increasing 23.5% sequentially and 8.6 times the amount in the same quarter last year. The non-GAAP net profit margin in the second quarter climbed to 32%.

• Quarter-to-date in the third quarter, the average monthly number of shares traded on the platform was higher than in the second quarter, and commission revenue was on target. • Client assets saw a high single-digit increase from the end of the second quarter, driven by mark-to-market gains. • Remained committed to user quality and net asset inflows, with the contribution from the Hong Kong market nearly matching that from Singapore. • Accelerated investment in the Hong Kong market, with offline events and incentives enhancing brand awareness and client assets.

Q: Congrats on the great Q2 results. First, the company's pretax profit increased sequentially, but income taxes expenses decreased sequentially, and the effective tax rate dropped to around 15%. What's the reasoning behind this and is it sustainable? Also, other revenue rose strongly. Is it mainly contributed by investment banking business?

A: The decline in the effective tax rate was due to higher pretax profit across licensed subsidiaries reducing the weighting of the U.S. subsidiary (which has a higher tax rate) and a more favorable tax rate in Singapore. Other revenue growth was mainly from investment banking (underwrote 4 U.S. IPOs, 2 as book runner) as well as foreign exchange income and wealth management revenue.

Q: Regarding the company's run rate so far in the third quarter. Specifically, could you share early trends around trading volume, client assets, and new paying customers growth? Also, update on progress in Hong Kong market expansion during the second and third quarters so far, and how it will impact the company's CAC going forward?

A: Trading activity average monthly shares traded were higher than in the second quarter, and commission revenue was on target. Client assets had a high single-digit increase, driven by mark-to-market gains. In Hong Kong, investment was stepped up, with offline events and incentives boosting brand awareness and client assets. CAC in Hong Kong was around 400 plus, with a payback period of about 2 quarters, expected to fluctuate based on marketing strategy.

Q: Could you provide a breakdown of newly added customers with deposits across different regional markets? Also, the newly added customers with deposits in the second quarter declined quarter-over-quarter. What's the reason, and how do you view growth going forward?

A: In the second quarter, about 50% of newly funded accounts were from Singapore and Southeast Asia, 30% from Hong Kong and Greater China, 15% from Australia and New Zealand, and 5% from the U.S. The lower number was due to tariff war impact, investor sentiment fluctuations, and targeted adjustments to customer acquisition channels to ensure a high-quality user base. Plan to continue optimizing customer acquisition strategies focusing on user quality and client assets.