UP Fintech Holding Limited (TIGR) CEO Wu Tianhua on Q1 2019 Results – Earnings Call Transcript
UP Fintech Holding Limited (NASDAQ:TIGR) Q1 2019 Earnings Conference Call May 17, 2019 8:00 AM ET
Clark Soucy – VP of Strategy, Tiger FinTech
Wu Tianhua – Chairman and CEO
John Zeng – CFO
Yonggang Liu – CEO U.S. Tiger securities
Conference Call Participants
Edward Judd – Deutsche Bank
Zeyu Zhou – CICC
Ladies and gentlemen, thank you for standing by, and welcome to the UP Fintech Holding Limited First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen mode. There will be a presentation followed by a question-and-answer session. I must advice you that this conference is being recorded today Friday 17th of May 2019.
I would now like to hand the conference over to your first speaker today Mr. Clark S. Soucy. Thank you. Please go ahead.
Thank you, Albert. Hello everyone and thank you for joining us for the call today. UP Fintech Holding Limited earnings release was distributed earlier today and is available on our IR website at email@example.com as well as Globe Newswire services.
On the call today from UP Fintech are Mr. Wu Tianhua, Chairman and Chief Executive Officer; Mr. John Zeng, Chief Financial Officer; Mr. Yonggang Liu, the Chief Executive Officer of U.S. Tiger Securities; Ms. [indiscernible], Legal Manager; and Mr. Kenny [indiscernible], our Financial Controller.
Mr. Wu will give us 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 will contain forward-looking statements. These forward-looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risk and uncertainties include but are not limited to those outlined in our public filings with the SEC. Any forward-looking statements that we make on this call are based on assumptions as of today, and we do not take any obligation to update these statements except as required under applicable law.
It is my pleasure to now introduce our Chairman and Chief Executive Officer Mr. Wu. Mr. Wu, please go ahead with your remarks.
Thank you everyone for joining us for our first earnings call as a public company. I am unable to announce [indiscernible] for the first quarter. Total revenue was 9.6 million despite Chinese New Year holiday. I would like to highlight three new developments in our business. First our IPO subscription business enjoyed the revenue growth in Q1. We pioneered with U.S. IPO subsidiary for retail investors.
Our users are enjoying the growth aspect of emerging companies. Since we announced this service, we have audited more than 30 U.S. IPOs. The most among Chinese online brokers; secondly, our [indiscernible] is growing revenue as their system is [indiscernible] their employee benefits, unlocking future high continue users.
Last but not least, we have obtained broker in the AIP from Monetary Authority of Singapore. As you know, our goal is to serve global Chinese and our pending AIP in Singapore is an important milestone for our intentional growth strategies. Maybe I’ll keep getting more licenses across mid regions. Less driven licenses are in test with our trading platform and focused on user experience. We will be able to definitely expand our user base and generate more revenue. Overall, this development will have after is spending to international markets.
Since this is our first earning call, I would like to take this opportunity to research our vision and strategy, which is titrated four year years ago. We also use cutting edge technology to enable our user to cater all over the world. We are more responsible to the needs of our customers than conditional brokers. And now you mentioned it as you continue developing our proprietary infrastructure. We now over trading our cost market in the USA, Hong Kong, UK, and Asia through programs and also a showing diverse range of securities to our customers.
I like you in this March this year was a critical milestone for the Company. We move forward to leveraging our incredible brands are releasing, and our media to investing in technology and talent. We aim to create a comprehensive financial services ecosystem for both the individual and institutional investors as well as our corporate partners. We are confident that we can deliver long-term value to our shareholders.
I will now conclude my remarks and hand the call over to Mr. John Zeng, our CFO. Thank you.
Hi. Thank you, Tianhua. Let me just quickly go through the financials. Our total revenue in the first quarter were S$9.6 million will operate S$6.4 million in trading commissions. Net revenues were 9.4 million after interest expense. Financing service fee in the first quarter were $2.1 million or 22% of the revenue. This increase was attribute to the increasing the margin trading balance. Interest income was $0.5 million or 5% of the revenue. The interest income referenced the interest fee we divide from the marginal balance of this consolidated account as well as well portion of the interest fund our cash balance.
Other revenues were $0.6 million, up 6.8% from the same quarter last year. Currently divided from fees we gathered by IPO subscription service and the ease of promotional services with IPO couple of times. Now on the cost, total costs were $14 million, up 36.4% over the same quarter last year. The increase was due to the marginal resides of operation mostly came from our headcount increase compared to one year ago.
Employee compensation and benefits was $7.8 million for this quarter, up 61% from first quarter last year. This is due to the rapid growth of headcount in 2018, which almost doubled from last year. Much of the increase came from our investment in R&D, finance and compliance personals, as well as share base composition.
Occupancy, depreciation and amortization were $0.6 million, up 14.5% from the same quarter last year. As we are expanding onshore and offshore, which were running office space. Communication and marketing our cost was $1.2 million up 87% from the same quarter last year. The increase is due to we offer more market data to our customers on our platform.
Marketing and branding costs was 1.9 million, down 28% from the same quarter last year, as we’re optimizing our operations to decrease referral payments to third-party platform and marketing partners.
SG&A was $2.2 million, up 39% from the same quarter last year, mostly due to increase the consulting expense and [indiscernible] of fees we paid as a listed company.
Executive and recurring costs were viewed as $0.3 million. This increase was reflecting the increase number of consolidated accounts. Net loss attributable to ordinary shareholder in the quarter was $2.9 million compared to a loss of US dollar $2.2 million the same quarter of last year. Net loss per ADS was $0.06 compared to a loss of $0.07 per ADS during the same quarter last year.
As of March 31st, our company had a very strong balance sheet, with a cash and cash equivalent balance of $144 million, our IPO was sold on March 20, so we are confident in our ability to continue investing our business.
This concludes our prepared remarks. Operator, we’re not ready to begin the Q&A session. Thank you.
[Operator Instructions].Your first question comes from the line of Edward Judd from Deutsche Bank. Your may now ask the question.
Now, let me just transfer it to English. Most of my work — I have two question. My first question is that. Can you share some color on your overseas license application progress? And what’s your expectation on a contribution to your business, once you successfully acquire those licenses? And my second question is about that you shared the impact expectation on the impact from the Xiaomi degradation digital banking license especially in a cost saving angle and any potential contribution to your revenue?
So let me just quickly translate and what was my answer to your first question, Eddy. So in terms of licensing, our goal is to be able to serve the global Chinese population. So having more licensing enabled us to conduct more business in the other region of the China. So, like the AIP, we got an [indiscernible] examples how we are executing our global expansion strategy. So another type of licenses which will enable us to increase our revenue and decrease our cost, when we will reach certain scales, but this is now something we are working on, based on our occurrence operating. Hopefully, on day we will be able to extract more revenue out of our operations.
Just quick summary, so we feel like we know like Xiaomi is out of the digital banking license as you know Xiaomi is our long-term shareholder. They seem that in the first quarter, so we have already Google issue with Xiaomi. In the short-end, we don’t think this will have a meaningful difference to our is this based on what the peaceful banking license can operate under the current Hong-Kong regulating but we do think by going forward if you look at long-term this will definitely help us with our account converting especially with the transformation in technology and the banking system we do hope my one or two years down the road this is kind of digital license will help our operation.
[Operator Instructions] Your next question comes from the line of Zeyu Zhou from CICC. Please go ahead. You can ask question.
Thank you, management. Congratulations again on our successful listing. I have two questions. First, we observed TIGR has already participating in mining, I check cashing IPOs subscription in the U.S. stock market such as TME and Zoom, which is a really popular and value added service for our clients. So should we expect TIGR will continue expanding U.S. IPO subscription service in the next few years? And how can we get more promotions or market shares in those IPOs? And secondly, our compensation and benefit increased significantly in this quarter. And so what’s the outlook for our recruitment plan and how should we project this past in our forecast?
So, a great summary. I’ve heard as you already know of you know like the U.S. IPO process is different from Hong Kong and Asia. So in the U.S. and typically, there is no retail chance most of this, which are came from DSP which means that you have to both the management or part of the employee programs to be able to participate. So, Tiger, you know broke away pannier this kind of IPO subscription service for the investors a year ago. And we want to just say, past the benefits of providing the high growth US companies, such as kind of benefits to the retail investors.
And also this kind of service is actually a two way for us to also get closer, with corporate issuers, we can supply with retail demands, also institutional events. We can also apply our IRPR services to those corporate insurance, which is a good way for us to help them to built public image. I think now that as Mr. Wu was just mentioned, I think lot of retail investors they do see the value of Tiger vocalize to see it’s differentiated from other brokers in this kind of industry. So, that’s right, they do want to join us is our path to be able to subscribe for US IPOs.
Yes, in terms of employee compensation and accounts. So, as you can see from 2018 or 2017, we have been increasing our line in terms of to attract talents. Most of the increase came from R&D. We think this is something sets us apart from other traditional brokers is we do see technology can transform brokerage business. So, we’ll keep investing, but the headcount increase won’t as be as dramatic as last year given when our headcount is almost double from last year. We look selectively keep recruiting key talents to make sure we stay on top of this kind of industry. Thank you.
Thank you. [Operator Instructions] Your next question comes from the line of [indiscernible] TD Bank. You may now ask your question.
Hi, good evening management. Thanks for taking my question. So my first question is about the [indiscernible] management in that we understand that you’re launched quite recently in late 2018. So I would like to understand more, how is your progress here, for example, in terms of the number of contracts that you have signed up so far? And also how is that expected to contribute in terms of your longer term like [indiscernible] and also track your revenue growth?
And secondly, I would like to check on your progress in terms of the migration of clients account from the fully disclosed account model to the consolidated client model like so far. What percentage of the clients account has been migrated? And how is the like clients acceptance level to that change? And do you see any push back from your clients?
And lastly, the first question is regarding the outlook on your commission income or maybe your shooting over the direct of the year. So, we see Q1, if you look at slow as you extending is due to the weaker clients sentiment but as we get in Q1 we see the U.S. and Hong -Kong market has both performed quite well while going into Q2 now we have this like trade well concern and market become more volatile. So how do you see that like this trading volume or clients activity trending into Q2 or into rest of the year. Thank you.
So resulting just frankly to say whether we started relative in May, but we have been making a very good progress. So, right now, those may ease of clients haven’t been really reflecting to our revenue, but we believe in the next 6 months to 12 months when the IPO is completed. They will be able to be our high calibers customers for the next several quarters.
So also like how we approach, if you stop service. We don’t actually have single product. We do think it’s a complete package we offer to company issuers. And like we mentioned already here, no matter it’s a IPO subscription or PR IR services. So, if you think by mixing which is a complete package especially like our reputation in the U.S. market, we do think it’s offer us the complete edge over outcome inhibitors in this current U.S. IPO and maybe self services.
And that is answer to your second question. I would just — so the we see the one migration back in February so I see the consolidated accounts so, so far transaction has been pretty smooth we don’t see a much push back from the investors. And waiting this may constantly attempt to give us more flexibility to better serve our customers in terms of some other value added services, for example like IPO subscription services.
For your third question on outlook of the transaction volume, so, you’re right, the transaction value if you just look at the market, the January especially a second half of January, the market in Hong Kong and U.S. to pick up. For our transaction volumes, it’s a little slow to pick-up. I think there is a lagging effect plus there is Chinese holiday in February. So, that’s why our like commissioning our revenue was little bit nice decreased or slowed versus the last quarter.
If I looking forward to [indiscernible]. So far we think just by looking at the management comp stock numbers, we think it’s going okay, the transaction volume and also in terms of tradition and commissions. So we don’t know, of course, you start to screening the market volatility and see we’ll definitely impact our business. But so far, I think we’re on the right track.
[Operator Instructions] Your next question comes from the line of Edward Judd Deutsche Bank. You may now ask a question.
I just had some follow-up questions for the financial data for your first quarter or the color or the growth rate or just number about your money and finance and trading along? And my second questions about that. Can I have the growth commission breakdown this quarter certainly into like Hong Kong stock, U.S. stock, U.S. features, U.S. options and other products? And in the meanwhile, again I have also the share trading volume, present a share unit in the above mentioned the credits and the total trading a month by U.S. dollar or $100 by about mentioned product? And that’s all my question. Thank you.
Okay. I have answer to your questions. So in terms of trading volumes, I think it’s on progress our numbers last year, okay. The same quarter last year, the trading big in terms of the mix of the different products is my U.S. equity is upon income of the revenue mix. The U.S. equity is about I close to 50% of our revenue. The Hong Kong equity in terms of revenue is from close to 20%. Then we also have option product is about a 20% of our revenue and futures have has flown a high-single-digits of our revenue.
In terms of transaction volume mix is about a U.S. comes for close to 30%. The Hong Kong [indiscernible] slightly over 10%, future or equities then our options upon a high-single-digits. That’s the mix of the transaction volume and the revenue. Income margin on balance also, it’s on par slightly above our first quarter last year. So that’s why you see our financial service fee increase from last year. When do you see multiple adding on margins starting from the first quarter? And we thinking so far the train like I mentioned earlier, so we’re on the right track.
So, hopefully, for this next quarter we can report more financial income from margin balance.
Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.
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