Futu Holdings Ltd 6-K, filed May 28, 2024
Futu Holdings Ltd (FUTU)
About this 6-K
Futu Holdings Ltd filed this 6-K on May 28, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of May 2024
Commission File Number: 001-38820
Futu Holdings Limited
34/F, United Centre
95 Queensway, Admiralty
Hong Kong S.A.R., People’s Republic of China
+852 2523-3588
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F ¨
Exhibit Index
| Exhibit No. | Description | |
| 99.1 | Press Release - Futu Announces First Quarter 2024 Unaudited Financial Results |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FUTU HOLDINGS LIMITED | |||
| By | : | /s/ Leaf Hua Li | |
| Name | : | Leaf Hua Li | |
| Title | : | Chairman of the Board of Directors and Chief Executive Officer | |
Date: May 28, 2024
Exhibit 99.1
Futu Announces First Quarter 2024 Unaudited Financial Results
HONG KONG, May 28, 2024 (GLOBE NEWSWIRE) -- Futu Holdings Limited (“Futu” or the “Company”) (Nasdaq: FUTU), a leading tech-driven online brokerage and wealth management platform, today announced its unaudited financial results for the first quarter ended March 31, 2024.
First Quarter 2024 Operational Highlights
| ● | Total number of paying clients1 increased 23.5% year-over-year to 1,887,270 as of March 31, 2024. |
| ● | Total number of registered clients2 increased 15.4% year-over-year to 3,812,326 as of March 31, 2024. |
| ● | Total number of users3 increased 12.3% year-over-year to 22.5 million as of March 31, 2024. |
| ● | Total client assets increased 11.2% year-over-year to HK$517.9 billion as of March 31, 2024. |
| ● | Daily average client assets were HK$480.0 billion in the first quarter of 2024, an increase of 6.0% from the same period in 2023. |
| ● | Total trading volume in the first quarter of 2024 increased by 9.5% year-over-year to HK$1.3 trillion, in which trading volume for U.S. stocks was HK$1.0 trillion, trading volume for Hong Kong stocks was HK$280.4 billion, and trading volume for stocks under the Stock Connect was HK$9.5 billion. |
| ● | Daily average revenue trades (DARTs)4 in the first quarter of 2024 increased 7.0% year-over-year to 549,854. |
| ● | Margin financing and securities lending balance increased 8.9% year-over-year to HK$37.6 billion as of March 31, 2024. |
First Quarter 2024 Financial Highlights
| ● | Total revenues increased 3.7% year-over-year to HK$2,592.5 million (US$331.3 million). |
| ● | Total gross profit decreased 3.9% year-over-year to HK$2,122.2 million (US$271.2 million). |
| ● | Net income decreased 13.1% year-over-year to HK$1,035.1 million (US$132.3 million). |
| ● | Non-GAAP adjusted net income5 decreased 11.6% year-over-year to HK$1,121.1 million (US$143.3 million). |
Mr. Leaf Hua Li, Futu’s Chairman and Chief Executive Officer, said, “New paying clients jumped by 330.8% year-over-year to 177 thousand, the third highest quarterly growth in history, thanks to strong market performance and solid execution in new markets. This paying client growth represented over 50% of the full-year guidance we gave out during the last earnings call. We ended the first quarter with around 1.9 million paying clients, up 23.5% year-over-year and 10.4% quarter-over-quarter. Given the year-to-date momentum, we would like to raise our full-year new paying client guidance to 400 thousand for now.”
1 The number of paying clients refers to the number of clients with assets in their trading accounts with Futu.
2 The number of registered clients refers to the number of users with one or more trading accounts with Futu.
3 The number of users refers to the number of user accounts registered with Futu.
4 The number of Daily Average Revenue Trades (DARTs) refers to the number of average trades per day that generate commissions or fees.
5 Non-GAAP adjusted net income is defined as net income excluding share-based compensation expenses
“In the first quarter, new paying clients from Hong Kong and Singapore both recorded strong double-digit growth sequentially, but their total contribution to overall client growth dipped to around one-third given triple-digit sequential new paying client growth in other markets. Our recent launch in Malaysia far exceeded our expectations. With industry-leading product experience and high brand recognition thanks to our presence in Singapore, we attracted over 100,000 registered clients within six weeks of brokerage business launch and became the most downloaded financial app in Malaysia. Though growth decelerated in the second quarter, we still expect robust paying client addition in Malaysia for the rest of the year. In Japan, we continued to streamline the account opening process, refine product experience and launch targeted marketing initiatives. As a result, both new paying clients and average client assets increased meaningfully. Despite rapid client base expansion, our quarterly paying client retention rate remained above 98%.”
“While market depreciation of several technology names posted negative impact on client holdings, we saw exceptionally strong net asset inflow across all markets during the quarter, especially in March, when market sentiments in Hong Kong improved. Total client assets were HK$517.9 billion, up 11.2% year-over-year and 6.7% quarter-over-quarter. In Singapore, total client assets and average client assets recorded 25% and 15% sequential growth, respectively, driven by robust net asset inflow into equities and cash management products.”
“Total trading volume increased by 40.0% quarter-over-quarter to HK$1.3 trillion. As clients chased the Hong Kong market rally, Hong Kong stock trading volume rebounded 18.0% sequentially to HK$280.4 billion. Clients showed heightened interests in technology and high-dividend names as well as leveraged and inverse ETFs. The frenzy around crypto and AI-themed stocks drove a 48.1% sequential surge in U.S. trading volume to HK$1.0 trillion. Margin financing and securities lending balance increased by 13.7% sequentially to an all-time high of HK$37.6 billion.”
“Total client assets in wealth management were HK$64.0 billion, up 72.8% year-over-year and 11.1% quarter-over-quarter. Driven by strong demand for U.S. treasury bills, bond holdings increased by 21.3% sequentially. In Singapore, wealth management asset balance grew by 37.1% quarter-over-quarter as money market funds continued to gain traction.”
“We had 430 IPO distribution and IR clients, up 21.8% year-over-year. As of quarter end, over 1,200 companies have set up enterprise accounts in our social community to interact with retail investors.”
First Quarter 2024 Financial Results
Revenues
Total revenues were HK$2,592.5 million (US$331.3 million), an increase of 3.7% from HK$2,499.9 million in the first quarter of 2023.
Brokerage commission and handling charge income was HK$1,082.1 million (US$138.3 million), an increase of 0.3% from the first quarter of 2023. Brokerage income grew at a slower pace than trading volume due to a decrease in blended commission rate from 8.8bps to 8.1bps.
Interest income was HK$1,354.2 million (US$173.0 million), an increase of 4.6% from the first quarter of 2023. The increase was mainly driven by higher margin financing income due to an increase in daily average margin balance and higher interest income from bank deposits.
Other income was HK$156.2 million (US$20.0 million), an increase of 23.7% from the first quarter of 2023. The increase was primarily attributable to higher fund distribution service income.
Costs
Total costs were HK$470.2 million (US$60.1 million), an increase of 61.7% from HK$290.8 million in the first quarter of 2023.
Brokerage commission and handling charge expenses were HK$60.3 million (US$7.7 million), a decrease of 16.5% from the first quarter of 2023. Brokerage expenses didn’t move in tandem with brokerage income mainly due to cost savings from our U.S. self-clearing business.
Interest expenses were HK$312.8 million (US$40.0 million), an increase of 139.1% from the first quarter of 2023. The increase was primarily due to higher expenses associated with our securities borrowing and lending business.
Processing and servicing costs were HK$97.1 million (US$12.4 million), an increase of 10.7% from the first quarter of 2023. The increase was primarily due to higher cloud service and data transmission fees for new markets.
Gross Profit
Total gross profit was HK$2,122.2 million (US$271.2 million), a decrease of 3.9% from HK$2,209.0 million in the first quarter of 2023. Gross margin was 81.9%, as compared to 88.4% in the first quarter of 2023.
Operating Expenses
Total operating expenses were HK$929.5 million (US$118.8 million), an increase of 15.6% from HK$804.1 million in the first quarter of 2023.
Research and development expenses were HK$335.5 million (US$42.9 million), a decrease of 5.5% from the first quarter of 2023. The decrease was due to stricter cost control.
Selling and marketing expenses were HK$292.7 million (US$37.4 million), an increase of 107.1% from HK$141.3 million in the first quarter of 2023. This was driven by a 330.8% year-over-year increase in net new paying clients, offset by lower client acquisition costs.
General and administrative expenses were HK$301.3 million (US$38.5 million), a decrease of 2.1% from the first quarter of 2023. The decrease was primarily due to lower professional service fees.
Income from Operations
Income from operations decreased by 15.1% to HK$1,192.7 million (US$152.4 million) from HK$1,405.0 million in the first quarter of 2023, mostly due to higher marketing expenses. Operating margin declined to 46.0% from 56.2% in the first quarter of 2023.
Net Income
Net income decreased by 13.1% to HK$1,035.1 million (US$132.3 million) from HK$1,191.8 million in the first quarter of 2023. Net income margin for the first quarter of 2024 declined to 39.9% from 47.7% in the year-ago quarter.
Non-GAAP adjusted net income decreased by 11.6% to HK$1,121.1 million (US$143.3 million) from the first quarter of 2023. Non-GAAP adjusted net income is defined as net income excluding share-based compensation expenses. For further information, see "Use of Non-GAAP Financial Measures" at the bottom of this press release.
Net Income per ADS
Basic net income per American Depositary Share (“ADS”) was HK$7.53 (US$0.96), compared with HK$8.54 in the first quarter of 2023. Diluted net income per ADS was HK$7.46 (US$0.95), compared with HK$8.44 in the first quarter of 2023. Each ADS represents eight Class A ordinary shares.
Conference Call and Webcast
Futu's management will hold an earnings conference call on Tuesday, May 28, 2024, at 7:30 AM U.S. Eastern Time (7:30 PM on the same day, Beijing/Hong Kong Time).
Please note that all participants will need to pre-register for the conference call, using the link
https://register.vevent.com/register/BId660c7b39e644d93a175d1316d925493.
It will automatically lead to the registration page of "Futu Holdings Ltd First Quarter 2024 Earnings Conference Call", where details for RSVP are needed.
Upon registering, all participants will be provided in confirmation emails with participant dial-in numbers and personal PINs to access the conference call. Please dial in 10 minutes prior to the call start time using the conference access information.
Additionally, a live and archived webcast of this conference call will be available at https://ir.futuholdings.com/.
About Futu Holdings Limited
Futu Holdings Limited (Nasdaq: FUTU) is an advanced technology company transforming the investing experience by offering fully digitalized financial services. Through its proprietary digital platforms, Futubull and moomoo, the Company provides a full range of investment services, including trade execution and clearing, margin financing and securities lending, and wealth management. The Company has embedded social media tools to create a network centered around its users and provide connectivity to users, investors, companies, analysts, media and key opinion leaders. The Company also provides corporate services, including IPO distribution, investor relations and ESOP solution services.
Use of Non-GAAP Financial Measures
In evaluating the business, the Company considers and uses non-GAAP adjusted net income, a non-GAAP measure, as a supplemental measure to review and assess its operating performance. The presentation of the non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. The Company defines non-GAAP adjusted net income as net income excluding share-based compensation expenses. The Company presents the non-GAAP financial measure because it is used by the management to evaluate the operating performance and formulate business plans. Non-GAAP adjusted net income enables the management to assess the Company's operating results without considering the impact of share-based compensation expenses, which are non-cash charges. The Company also believes that the use of the non-GAAP measure facilitates investors' assessment of its operating performance.
Non-GAAP adjusted net income is not defined under U.S. GAAP and is not presented in accordance with U.S. GAAP. This non-GAAP financial measure has limitations as analytical tools. One of the key limitations of using non-GAAP adjusted net income is that it does not reflect all items of expense that affect the Company's operations. Share-based compensation expenses have been and may continue to be incurred in the business and are not reflected in the presentation of non-GAAP adjusted net income. Further, the non-GAAP measure may differ from the non-GAAP information used by other companies, including peer companies, and therefore their comparability may be limited.
The Company compensates for these limitations by reconciling the non-GAAP financial measure to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating the Company's performance.
For more information on this non-GAAP financial measure, please see the table captioned "Unaudited Reconciliations of Non-GAAP and GAAP Results" set forth at the end of this press release.
Exchange Rate Information
This announcement contains translations of certain HK dollars (“HK$”) amounts into U.S. dollars ("US$") at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from HK$ to US$ were made at the rate of HK$7.8259 to US$1.00, the noon buying rate in effect on March 29, 2024 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the HK$ or US$ amounts referred could be converted into US$ or HK$, as the case may be, at any particular rate or at all.
Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the quotations from the management team of the Company, contain forward-looking statements. Futu may also make written or oral forward-looking statements in its periodic reports to the SEC, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Futu's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Futu's goal and strategies; Futu's expansion plans; Futu's future business development, financial condition and results of operations; Futu's expectations regarding demand for, and market acceptance of, its credit products; Futu's expectations regarding keeping and strengthening its relationships with borrowers, institutional funding partners, merchandise suppliers and other parties it collaborates with; general economic and business conditions; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in Futu's filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Futu does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
For investor inquiries, please contact:
Investor Relations
Futu Holdings Limited
ir@futuholdings.com
FUTU HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
| As of December 31, | As of March 31, | |||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HK$ | HK$ | US$ | ||||||||||
| ASSETS | ||||||||||||
| Cash and cash equivalents | 4,937,538 | 6,643,541 | 848,917 | |||||||||
| Cash held on behalf of clients | 44,369,310 | 45,559,208 | 5,821,593 | |||||||||
| Restricted cash | 1,232 | 1,179 | 151 | |||||||||
| Term deposit | 5,540 | 5,200 | 664 | |||||||||
| Short-term investments | 3,114,613 | 3,269,084 | 417,726 | |||||||||
| Securities purchased under agreements to resell | 133,039 | 178,413 | 22,798 | |||||||||
| Loans and advances-current (net of allowance of HK$45,949 thousand and HK$41,441 thousand as of December 31, 2023 and March 31, 2024, respectively) | 32,528,421 | 37,592,073 | 4,803,546 | |||||||||
| Receivables: | ||||||||||||
| Clients | 293,505 | 2,433,652 | 310,974 | |||||||||
| Brokers | 5,189,155 | 6,363,276 | 813,105 | |||||||||
| Clearing organizations | 4,244,793 | 2,821,118 | 360,485 | |||||||||
| Fund management companies and fund distributors | 151,691 | 222,871 | 28,479 | |||||||||
| Interest | 268,504 | 248,317 | 31,730 | |||||||||
| Prepaid assets | 54,691 | 66,737 | 8,528 | |||||||||
| Other current assets | 135,479 | 177,395 | 22,668 | |||||||||
| Total current assets | 95,427,511 | 105,582,064 | 13,491,364 | |||||||||
| Operating lease right-of-use assets | 224,092 | 204,663 | 26,152 | |||||||||
| Long-term investments | 238,556 | 235,162 | 30,049 | |||||||||
| Loans and advances-non-current | 18,934 | 18,959 | 2,423 | |||||||||
| Other non-current assets | 1,226,754 | 1,290,500 | 164,901 | |||||||||
| Total non-current assets | 1,708,336 | 1,749,284 | 223,525 | |||||||||
| Total assets | 97,135,847 | 107,331,348 | 13,714,889 | |||||||||
| 1 |
FUTU HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(In thousands, except for share and per share data)
| As of December 31, | As of March 31, | |||||||||||
| 2023 | 2024 | 2024 | ||||||||||
| HK$ | HK$ | US$ | ||||||||||
| LIABILITIES | ||||||||||||
| Amounts due to related parties | 69,018 | 130,804 | 16,714 | |||||||||
| Payables: | ||||||||||||
| Clients | 48,762,263 | 49,032,693 | 6,265,438 | |||||||||
| Brokers | 15,648,286 | 24,590,217 | 3,142,158 | |||||||||
| Clearing organizations | 24,096 | 1,729,714 | 221,024 | |||||||||
| Fund management companies and fund distributors | 175,575 | 173,917 | 22,223 | |||||||||
| Interest | 44,109 | 66,352 | 8,479 | |||||||||
| Borrowings | 5,651,565 | 3,730,044 | 476,628 | |||||||||
| Securities sold under agreements to repurchase | - | 104,000 | 13,289 | |||||||||
| Lease liabilities-current | 114,682 | 111,309 | 14,223 | |||||||||
| Accrued expenses and other current liabilities | 1,939,004 | 1,874,506 | 239,526 | |||||||||
| Total current liabilities | 72,428,598 | 81,543,556 | 10,419,702 | |||||||||
| Lease liabilities-non-current | 123,335 | 107,665 | 13,757 | |||||||||
| Other non-current liabilities | 12,183 | 11,534 | 1,474 | |||||||||
| Total non-current liabilities | 135,518 | 119,199 | 15,231 | |||||||||
| Total liabilities | 72,564,116 | 81,662,755 | 10,434,933 | |||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||||
| Class A ordinary shares | 71 | 71 | 9 | |||||||||
| Class B ordinary shares | 27 | 27 | 3 | |||||||||
| Additional paid-in capital | 18,456,438 | 18,547,608 | 2,370,029 | |||||||||
| Treasury Stock | (5,199,257 | ) | (5,199,257 | ) | (664,365 | ) | ||||||
| Accumulated other comprehensive loss | (49,433 | ) | (78,839 | ) | (10,074 | ) | ||||||
| Retained earnings | 11,360,890 | 12,399,028 | 1,584,360 | |||||||||
| Total shareholders' equity | 24,568,736 | 25,668,638 | 3,279,962 | |||||||||
| Non-controlling interest | 2,995 | (45 | ) | (6 | ) | |||||||
| Total equity | 24,571,731 | 25,668,593 | 3,279,956 | |||||||||
| Total liabilities and equity | 97,135,847 | 107,331,348 | 13,714,889 | |||||||||
| 2 |
FUTU HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except for share and per share data)
| For the Three Months Ended | ||||||||||||
March 31, | March 31, | March 31, | ||||||||||
| HK$ | HK$ | US$ | ||||||||||
| Revenues | ||||||||||||
| Brokerage commission and handling charge income | 1,079,311 | 1,082,107 | 138,273 | |||||||||
| Interest income | 1,294,260 | 1,354,166 | 173,036 | |||||||||
| Other income | 126,282 | 156,186 | 19,958 | |||||||||
| Total revenues | 2,499,853 | 2,592,459 | 331,267 | |||||||||
| Costs | ||||||||||||
| Brokerage commission and handling charge expenses | (72,246 | ) | (60,301 | ) | (7,705 | ) | ||||||
| Interest expenses | (130,840 | ) | (312,842 | ) | (39,975 | ) | ||||||
| Processing and servicing costs | (87,724 | ) | (97,103 | ) | (12,408 | ) | ||||||
| Total costs | (290,810 | ) | (470,246 | ) | (60,088 | ) | ||||||
| Total gross profit | 2,209,043 | 2,122,213 | 271,179 | |||||||||
| Operating expenses | ||||||||||||
| Research and development expenses | (354,899 | ) | (335,487 | ) | (42,869 | ) | ||||||
| Selling and marketing expenses | (141,278 | ) | (292,664 | ) | (37,397 | ) | ||||||
| General and administrative expenses | (307,893 | ) | (301,335 | ) | (38,505 | ) | ||||||
| Total operating expenses | (804,070 | ) | (929,486 | ) | (118,771 | ) | ||||||
| Income from Operations | 1,404,973 | 1,192,727 | 152,408 | |||||||||
| Others, net | (7,732 | ) | 31,741 | 4,056 | ||||||||
| Income before income tax expense and share of loss from equity method investments | 1,397,241 | 1,224,468 | 156,464 | |||||||||
| Income tax expense | (201,701 | ) | (185,641 | ) | (23,721 | ) | ||||||
| Share of loss from equity method investments | (3,695 | ) | (3,694 | ) | (472 | ) | ||||||
| Net income | 1,191,845 | 1,035,133 | 132,271 | |||||||||
| Attributable to: | ||||||||||||
| Ordinary shareholders of the Company | 1,192,043 | 1,038,138 | 132,655 | |||||||||
| Non-controlling interest | (198 | ) | (3,005 | ) | (384 | ) | ||||||
| 1,191,845 | 1,035,133 | 132,271 | ||||||||||
| 3 |
FUTU HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Continued)
(In thousands, except for share and per share data)
| For the Three Months Ended | ||||||||||||
March 31, | March 31, | March 31, | ||||||||||
| HK$ | HK$ | US$ | ||||||||||
| Net income per share attributable to ordinary shareholders of the Company | ||||||||||||
| Basic | 1.07 | 0.94 | 0.12 | |||||||||
| Diluted | 1.06 | 0.93 | 0.12 | |||||||||
| Net income per ADS | ||||||||||||
| Basic | 8.54 | 7.53 | 0.96 | |||||||||
| Diluted | 8.44 | 7.46 | 0.95 | |||||||||
| Weighted average number of ordinary shares used in computing net income per share | ||||||||||||
| Basic | 1,116,767,496 | 1,102,929,775 | 1,102,929,775 | |||||||||
| Diluted | 1,129,538,989 | 1,114,429,420 | 1,114,429,420 | |||||||||
| Net income | 1,191,845 | 1,035,133 | 132,271 | |||||||||
| Other comprehensive income/(loss), net of tax | ||||||||||||
| Foreign currency translation adjustment | 111,435 | (29,441 | ) | (3,762 | ) | |||||||
| Total comprehensive income | 1,303,280 | 1,005,692 | 128,509 | |||||||||
| Attributable to: | ||||||||||||
| Ordinary shareholders of the Company | 1,303,475 | 1,008,732 | 128,897 | |||||||||
| Non-controlling interests | (195 | ) | (3,040 | ) | (388 | ) | ||||||
| 1,303,280 | 1,005,692 | 128,509 | ||||||||||
| 4 |
FUTU HOLDINGS LIMITED
UNAUDITED RECONCILIATIONS OF NON-GAAP AND GAAP RESULTS
(In thousands)
| For the Three Months Ended | ||||||||||||
March 31, | March 31, | March 31, | ||||||||||
| HK$ | HK$ | US$ | ||||||||||
| Net income | 1,191,845 | 1,035,133 | 132,271 | |||||||||
| Add: Share-based compensation expenses | 76,110 | 85,938 | 10,981 | |||||||||
| Adjusted net income | 1,267,955 | 1,121,071 | 143,252 | |||||||||
Non-GAAP to GAAP reconciling items have no income tax effect.
| 5 |