Earnings Call Transcript - TIGR Q2 2025

Operator, Operator

Ladies and gentlemen, thank you for standing by, and welcome to the UP Fintech Holding Limited Second Quarter 2025 Earnings Conference Call. I must advise you that this conference is being recorded today, August 27, 2025. I would now like to hand the conference over to your first speaker today, Mr. Aron Lee, the Head of Investor Relations. Thank you. Please go ahead.

Aron Lee, Head of Investor Relations

Thank you, operator. Hello, everyone, and thank you for joining us on the call today. UP Fintech Holding Limited's Second Quarter 2025 earnings release was distributed earlier today and is available on our IR website at ir.itigerup.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. Huang Lei, CEO of U.S. 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. 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 Litigation Reform Act of 1995. A number of factors could cause actual results to differ materially from those contained in any forward-looking statements. 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, August 27, 2025, and our annual report on Form 20-F filed on April 23, 2025. We undertake no obligation to update any forward-looking statements, 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 English translation. Mr. Wu, please go ahead with your remarks.

Tianhua Wu, Chairman and Chief Executive Officer

Hello, everyone. Thank you for joining the Tiger Brokers Second Quarter 2025 Earnings Conference Call. In the second quarter, our user base and client assets grew, along with enhancements in our product offerings, leading our total revenue, trading volume, commission income, interest income, and other income to all reach record highs. We achieved total revenue of USD 139 million for the quarter, which represents a 58.7% increase year-over-year and a 13.1% growth quarter-over-quarter. Trading volume saw a significant increase, reaching USD 284 billion, contributing to a 90.1% year-over-year rise and an 11.1% quarter-over-quarter increase in commission income, which totaled USD 64.8 million. Our margin financing and securities lending balance grew to USD 5.7 billion, reflecting a 65.3% increase year-over-year. Net interest income for the second quarter was USD 58.7 million, a 32.8% year-over-year rise, benefiting from an expanding user base and increased ARPU. Net income attributable to UP Fintech for the quarter 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 was USD 44.5 million, reflecting a 23.5% sequential increase and 8.6 times the figure from the same quarter last year. The non-GAAP net profit margin for the second quarter rose to 32%, achieving another record high and has increased for four consecutive quarters. For the first half of the year, our operating profit and net profit have already surpassed last year's total, indicating a more stable and healthier business model. Our efforts to penetrate existing markets and expand our high-quality user base position us to navigate market turbulence in a constantly changing environment. In the second quarter, we added 39,800 new funded accounts, primarily from Singapore and Hong Kong. In the first half of the year, we acquired over 100,000 new funded accounts, exceeding two-thirds of our three-year target of 150,000 by 2025. By the end of the second quarter, our total number of funded accounts reached 1,192,700, a 21.4% increase year-over-year. We are pleased to see an improvement in the quality of newly funded users in the second quarter, with the average net asset inflow of newly acquired clients exceeding USD 20,000, reaching a historic high. In Hong Kong and Singapore, the average net asset inflow for newly acquired clients was significantly higher at around USD 30,000. Total client assets saw robust growth, with net asset inflows reaching USD 3 billion in the second quarter, over 70% of which came from retail investors. Combined with an approximate $3.2 billion mark-to-market gain, total client assets hit a record of USD 52.1 billion, marking a 13.5% increase quarter-over-quarter and a 36.3% increase year-over-year, representing 11 consecutive quarters of growth. All markets experienced double-digit sequential increases in client assets, with Hong Kong and Singapore seeing around 50% and 20% quarter-over-quarter growth, respectively. Client assets in the Australian, New Zealand, and U.S. markets increased by over 30% quarter-over-quarter. In the second quarter, we continued to optimize product features and enhance user experience. In Singapore, we launched trading features for the Central Provident Fund account and the Supplementary Retirement Scheme account in July, allowing eligible clients to use a portion of their savings and retirement funds for investment in approved financial products with tax benefits. We are also investing in options features to better serve our high-value users, including pending order reminders for expiry date options and conditional market orders for single-leg options to facilitate smoother trading experiences. Our B2B business continued to show strong momentum in the second quarter, underwriting seven Hong Kong IPOs and four U.S. IPOs, contributing to a new quarterly high in other revenue. Notable IPOs included Chagee and Zhou Liu Fu Jewelry, with Chagee attracting over 30,000 subscribers, setting a new record for U.S. IPO subscriptions in the past three years. In our ESOP business, we added 30 new clients in the second quarter, bringing the total to 663, up 15% year-over-year. Now I would like to invite our CFO, John, to discuss our financials.

Fei Zeng, Chief Financial Officer

Great. Thanks, Tianhua Wu and Aron. Let me go through our financial performance for the second quarter. All numbers are in U.S. dollars. We saw encouraging growth in all revenue components this quarter. Commission income was $64.8 million, an increase of 90% year-over-year and 11% quarter-over-quarter. Interest income was $58.7 million, an increase of 33% year-over-year and 9% quarter-over-quarter, in line with our sequential increase in margin financing and securities lending balance. Total revenue reached $138.7 million, up 59% year-over-year and 13% quarter-over-quarter. Cash equity take rate was 6.4 basis points this quarter, slightly decreased from 6.7 basis points of last quarter as the U.S. market runoff in the second quarter contributed to a higher average price per share. Within commission revenue, about 65% comes from cash equities, 28% from options, and the rest from futures and other products. Regarding costs, interest expense was $17.3 million, increased 28% year-over-year, in line with the increase in our interest income and margin and securities lending business. Execution and clearing expenses were $5.4 million, increased 92% from the same period of last year, in line with the increase in commission and trading volume. Employee compensation and benefits expense were $35.8 million, an increase of 25% year-over-year due to headcount increases in overseas offices and R&D. Occupancy, depreciation and amortization expense were $2.7 million, increased 29% year-over-year due to the increase in office space and relevant leasehold improvements. Communication and market data expenses were $10.4 million, an increase of 18% year-over-year due to the increase in user base and IT-related service fees. Marketing expenses were $9.9 million this quarter, increased 54% year-over-year as we expanded our marketing activities compared to a year ago. General and administrative expenses were $6.7 million, a decrease of 67% year-over-year as last year we had a one-time bad debt provision of $13.2 million. Total operating costs were $71 million, an increase of 3% from the same quarter of last year. As a result, the bottom line increased on both GAAP and non-GAAP basis. GAAP net income was $41.4 million, up 36% quarter-over-quarter and 15 times higher year-over-year. Non-GAAP net income was $44.5 million, a 24% increase quarter-over-quarter and 8 times higher year-over-year. The non-GAAP net profit margin further expanded to 32% in the second quarter. Now I have concluded our presentation. Operator, please open the line for Q&A. Thanks.

Operator, Operator

We will now take the first question from Cindy Wang from China Renaissance.

Yun-Yin Wang, Analyst

Congrats on great Q2 results. I have two questions. First, the company's pretax profit increased sequentially, but income tax expenses decreased sequentially, and the effective tax rate dropped to around 15%. What is the reasoning behind this, and is it sustainable? Also, the other revenue rose strongly. Is this mainly due to the investment banking business? Second, regarding the crypto business, how is the company's cryptocurrency business progressing? We have heard that a strategic investor has been brought in to jointly develop this area. What are your plans and views on the development of the Hong Kong crypto market? Do you have any plans to obtain licenses in Singapore and the United States?

Fei Zeng, Chief Financial Officer

There are two main reasons for the decline in the effective tax rate. First, pretax profit increased across all licensed subsidiaries in the second quarter, which reduced the U.S. subsidiary's share of total group profit. Since the U.S. has the highest tax rate, this reduction helped lower the overall group's tax rate. The second reason is that we secured a more favorable tax rate in Singapore, decreasing it from 17% to 13.5% in the second quarter. Regarding the significant increase in other income, the growth in investment banking was a major factor. In the second quarter, we underwrote four U.S. IPOs, with two of them being the sole book runner. Additionally, foreign exchange income saw a quarter-over-quarter increase due to market volatility. Our wealth management revenue also rose by about 70% due to rapid growth in assets under management.

Tianhua Wu, Chairman and Chief Executive Officer

We firmly believe that digital assets have now established themselves as a significant asset class, and we are dedicated to increasing our presence in the digital asset market. Our aim is to create a comprehensive platform that seamlessly integrates traditional financial assets with digital ones. The product experience has always been crucial to Tiger's long-term success. Web 3 is still a relatively new area when compared to traditional Web 2 trading. We are committed to upholding Tiger's high standards in product functionalities. To advance these efforts, we have teamed up with experienced strategic investors in the Web 3 ecosystem, who are also pioneers and successful entrepreneurs from the early days of digital asset exchanges. By merging their expertise with our experience in Web 2 fintech, we hope to co-develop cutting-edge digital asset trading products that will stand out in the global market. While this business currently represents only a small portion of our total revenue, we are witnessing robust growth, particularly as we continue our expansion in Hong Kong and introduce industry-leading features such as digital asset deposits and withdrawals. There has been a noticeable increase in trading volume on our Hong Kong platform and growth in the digital assets under our custody. In the second quarter, digital asset trading volume surged by around 65% quarter-over-quarter, and assets under custody on our exchange nearly doubled sequentially. On a global scale, we have acquired digital asset trading licenses in 14 states in the U.S., and our application in Singapore is making good progress. Moving forward, we intend to allocate more resources toward enhancing our product and supporting additional trading features, aiming to provide our users with a more comprehensive and seamless trading experience. Thank you. And operator, please proceed to the next question.

Operator, Operator

We will now take the next question from the line of Judy Zhang from Citi.

Judy Zhang, Analyst

I have two questions. The first is about the company's current run rate in the third quarter. Could you provide any early insights on trading volume, client assets, and growth in new paying customers? The second question pertains to your progress with the Hong Kong market expansion in the second and third quarters. We've observed a significant increase in assets from local clients since Tiger entered the Hong Kong market, and the quality of these clients appears to be high. Given this positive return on investment, when does Tiger plan to boost its customer acquisition and advertising efforts in Hong Kong, and how will that affect the company's customer acquisition cost in the future?

Tianhua Wu, Chairman and Chief Executive Officer

Overall, we are quite satisfied with our operating performance so far this quarter. In terms of trading activity, the average monthly shares traded on our platform in the last two months have exceeded the monthly average from the second quarter. Since we earn commissions based on the number of shares traded in the U.S. stock market, our commission revenue for the third quarter is on track. Regarding client assets, we've seen a high single-digit increase compared to the end of the second quarter, largely driven by mark-to-market gains. The trend in net asset inflow is also positive, especially as retail clients contribute significantly to this growth. In terms of new funded accounts, we're continuing our focus from the second quarter on quality and net asset inflows. We're pleased to see a notable improvement in contributions from the Hong Kong market, which now nearly matches Singapore's. Given that the user quality in Hong Kong is the highest across all our markets, we are confident in maintaining the quality of new credit accounts in the third quarter.

Fei Zeng, Chief Financial Officer

In the second and third quarters, we increased our investment in the Hong Kong market by organizing and participating in various offline events and exhibitions to actively engage with the local community. Our aim is to enhance brand awareness and boost customer engagement. By integrating offline activities with innovative fintech solutions and incentives, we successfully reached a broader segment of local investors. This led to noticeable improvements in user quality and client asset growth. For instance, in the second quarter, the average net asset inflow per new funded user in Hong Kong was approximately USD 30,000, contributing to a roughly 50% increase in overall client assets in the region. So far in the third quarter, the number of new funded accounts in Hong Kong has approached the growth we experienced in Singapore. Our rapid expansion in Hong Kong not only fosters healthier, more sustainable growth but also enhances our understanding of the local market. Over the last two years, our focused efforts have begun to yield results. Moving forward, we will continue to accelerate our initiatives in Hong Kong, with more targeted events planned to stimulate user growth and increase brand awareness. Concerning customer acquisition cost, since we intensified our efforts in Hong Kong in the second quarter, the average cost has been around $400 or more. While this figure is relatively high compared to other markets, the payback period is still quite favorable, averaging about two quarters under current market conditions. For the remainder of the year, we anticipate that the average customer acquisition cost in Hong Kong will vary according to our marketing strategy, but we expect it to remain around this level.

Operator, Operator

We will now take the next question from the line of Dennis Bai from UBS.

Weizhou Bai, Analyst

Congratulations on the strong results. This is Dennis from UBS. I have two questions. First, could you provide a breakdown of the newly added customers with deposits across different regional markets? Second, we've noticed that the number of new customers with deposits decreased in the second quarter compared to the previous quarter. What is the reason for this decline, and how do you see growth moving forward?

Tianhua Wu, Chairman and Chief Executive Officer

For the first question regarding the regional breakdown of new funded accounts, in the second quarter, approximately 50% of newly funded accounts originated from Singapore and Southeast Asia, around 30% came from Hong Kong and the Greater China area, 15% from Australia and New Zealand, and about 5% from the U.S. In the second quarter, we welcomed nearly 40,000 new users, which aligns well with our expectations for both annual targets and the pace of customer acquisition. Although this number is a bit lower than that of the fourth quarter, this can be attributed to factors such as the impact of the tariff war in April, fluctuations in investor sentiment, and most notably, the targeted adjustments we implemented in our customer acquisition channels. These adjustments included closing down some low-quality, low ROI channels and placing certain online advertisements in Singapore to ensure a high-quality user base. Overall, these changes have been effective. We prioritize increasing client assets and maintaining a healthy mix of net asset inflow. The average net asset inflow from newly acquired clients surpassed USD 20,000, with figures from Singapore and Hong Kong reaching about USD 30,000. Significantly, the nearly 40,000 new users in Q2 contributed more net asset inflow than the over 60,000 new users in Q1. Additionally, our overall customer acquisition cost has decreased by about 10% compared to the first quarter. Looking ahead, we plan to continue optimizing and dynamically adjusting our customer acquisition strategies, focusing on user quality and client assets. Thank you, Dennis.

Aron Lee, Head of Investor Relations

Operator, is there any other questions?

Operator, Operator

There's no further questions. I would now like to turn the conference back to Aron Lee for closing remarks.

Aron Lee, Head of Investor Relations

Okay. 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, Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

Fei Zeng, Chief Financial Officer

Thank you. Portions of this transcript were spoken by an interpreter present on the live call.