UP Fintech Holding Limited (TIGR), a leading online brokerage firm, reported a record-breaking second quarter of 2024, with significant increases in revenue, newly funded accounts, and client assets. The commission income rose to $34.1 million, marking a substantial increase both quarterly and annually.
Total revenue for the quarter reached an all-time high of $87.4 million. The firm also saw a considerable growth in client assets, with a 121% increase compared to the previous year, totaling $38.2 billion. Despite these gains, UP Fintech faced a setback with a loss provision related to Hong Kong stock pledging, which impacted its bottom line.
Key Takeaways
- UP Fintech’s commission income increased by 22.7% quarter-over-quarter and 54.9% year-over-year.
- The company reported all-time high total revenue of $87.4 million, with quarterly and annual increases.
- Newly funded accounts saw a 69% sequential increase and a 68% increase year-over-year.
- Client net asset inflow remained strong at $1.7 billion, with total client assets reaching $38.2 billion.
- Loss provisions related to Hong Kong stock pledging impacted earnings, but the company has mitigated future risk.
- UP Fintech plans to introduce new product features and expand services to enhance the user experience.
Company Outlook
- UP Fintech anticipates a potential 1% impact on total revenue for Q4 due to a federal reserve recap.
- The company plans to adjust its strategy to offset potential negative impacts on interest income.
- UP Fintech will continue to focus on product innovation and service expansion to attract more users.
Bearish Highlights
- The company made a loss provision for a case of Hong Kong stock pledging and withdrawal, affecting the bottom line.
- Uncertainty due to the US election and Fed interest rate decisions could pose challenges for trading volume.
Bullish Highlights
- The company experienced significant growth in trading volume and commission income, particularly in Singapore.
- Robust growth in new funded accounts from Singapore and Southeast Asia due to market performance and product launches.
- Increased net asset inflow, partnerships, and advertising in the Hong Kong market.
- Strong growth in wealth management with a 20% increase in assets and user numbers quarter-over-quarter.
Misses
- Despite overall growth, the company’s earnings were affected by the loss provision related to Hong Kong stock pledging.
Q&A Highlights
- UP Fintech discussed the outlook for Q3, expressing satisfaction with performance despite market uncertainties.
- The company addressed steps taken to recover losses from Hong Kong stock pledging and has stopped such transactions.
In summary, UP Fintech Holding Limited demonstrated a strong performance in the second quarter of 2024, setting records in revenue and client asset growth. The company’s strategic initiatives in product development and market expansion have contributed to its impressive growth trajectory, particularly in the Southeast Asian markets. Despite facing some headwinds due to loss provisions and market uncertainties, UP Fintech remains optimistic about its ability to navigate potential challenges and continue its growth momentum.
InvestingPro Insights
UP Fintech Holding Limited’s (TIGR) second quarter of 2024 results showcase a company on the rise, with a strong performance that is also reflected in its financial metrics. Here are some InvestingPro Insights to consider:
InvestingPro Tips for UP Fintech indicate that analysts expect the company to be profitable this year, a prediction that aligns with the company’s recent performance. Moreover, UP Fintech has been profitable over the last twelve months, which is a testament to its effective business model and operational efficiency. Notably, the company does not pay a dividend, which suggests that it may be reinvesting its earnings back into the business to fuel further growth. For investors interested in deeper analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/TIGR.
InvestingPro Data metrics further illuminate UP Fintech’s financial health. The company’s market capitalization stands at $569.33 million, with a Price/Earnings (P/E) ratio of 15.51, slightly adjusting to 15.26 over the last twelve months as of Q1 2024. This indicates a reasonable valuation compared to earnings. The Price/Earnings to Growth (PEG) ratio is particularly low at 0.08, suggesting that the stock may be undervalued based on its earnings growth. Additionally, the Price/Book ratio of 1.14 further supports the notion of a potentially undervalued stock. These metrics are crucial for investors who are evaluating UP Fintech’s stock for potential investment opportunities.
The company’s revenue growth is also impressive, with a 7.49% increase over the last twelve months as of Q1 2024, and an even higher quarterly growth rate of 10.78%. Such consistent growth is a positive sign for potential investors looking for companies with strong and sustainable revenue streams.
In summary, UP Fintech’s robust second-quarter performance, coupled with favorable InvestingPro Tips and Data, paints a picture of a company with solid fundamentals and promising prospects for profitability. These insights can be valuable for investors considering UP Fintech as part of their investment portfolio.
Full transcript – Up Fintech Holding Ltd (NASDAQ:) Q2 2024:
Operator: Ladies and gentlemen, thank you for standing by, welcome to the UP Fintech Holding’s Limited Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. I must advise you that this conference is being recorded today August 30th, 2024. I would now like to hand the conference over to your first speaker today, Mr. Aaron Li, the Head of Investor Relations. Thank you. Please go ahead.
Aaron Li: Thank you, Desmond. Hello everyone and thank you for joining us for the call today. UP Fintech Holding Limited’s second quarter 2024 earnings release was distributed earlier today and is available on 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 Litigation Reform Act of 1995. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement.
To learn more about the factors that may cause actual results to differ from the forward-looking statements, please refer to our Form 6-K filed on August 30th, 2024, and our Annual Report on Form 20-F filed on April 22nd, 2024. We do not have any obligation to update forward-looking statements except as required by law. Now, I would like to introduce our Chairman and CEO, Mr. Wu, who will be delivering remarks in Chinese followed by an English translation. Mr. Wu, please proceed with your remarks.
Wu Tianhua: [Foreign Language] [Interpreted] Hello, everyone. Thank you for joining Tiger Brokers’ second quarter 2024 earnings conference call. In the second quarter, we saw positive performance in the U.S. stock market, leading to increased market activity and client trading volume across various products. Our commission income reached $34.1 million, marking a significant increase from the previous quarter and year-over-year. Our total revenue for the quarter hit an all-time high of $87.4 million, showing growth both sequentially and year-over-year. Despite a loss provision related to Hong Kong stock pledging and withdrawal, our pre-tax profit for the quarter would have been $19.4 million excluding this impact. We added a substantial number of newly funded accounts in the second quarter, primarily from Singapore and Southeast Asia, and remain confident in achieving our annual target of at least 150,000 newly funded accounts in 2024. Client assets continued to grow, with total client assets reaching an all-time high of $38.2 billion by the end of the second quarter. We are pleased with the growth in total client assets and the significant increase in client assets from the Hong Kong market. We have introduced new features and products to enhance our offerings, including Hong Kong stock options and short selling, and plan to continue expanding our product suite. Additionally, we have made significant progress in our 2B business, underwriting several IPOs and expanding our ESOP client base. Now, I will turn it over to our CFO, John, to discuss our financial performance in more detail.
John Zeng: Thank you, Tianhua Wu. Let me provide an overview of our financial performance for the second quarter. The market was more active, leading to increased trading commission and total revenue. Our cash equity’s take rate slightly increased this quarter, and interest expenses were higher due to the prevailing high-interest rate environment. The execution and clearing expenses totaled $2.8 million, marking a 38% increase from the previous year, primarily due to the rise in trading volume. Our clearing efficiency continues to improve, with cash equity clearing expenses accounting for about 2.1% of cash equity commission this quarter, remaining one of the lowest in the industry. Employee compensation and benefits rose by 20% year-over-year to $28.6 million, driven by an increase in headcount to support overseas growth and R&D efforts. Meanwhile, occupancy, depreciation, and amortization expenses decreased by 17% to $2.1 million. Communication and market data expenses rose by 14% year-over-year to $8.8 million, reflecting the growth in user base and IT-related services. Marketing expenses reached $6.4 million, a 36% increase year-over-year, as market conditions favored user acquisition and branding efforts in the second quarter. General and administrative expenses surged by 345% year-over-year to $20.2 million, largely due to a $13.2 billion loss provision incurred during the quarter. Overall operating costs increased by 52% year-over-year to $69 million, resulting in GAAP net income and non-GAAP net income of $2.6 million and $5.2 million for the second quarter, respectively. Excluding the impact of the loss provision, pre-tax profit for the quarter would have been $18.4 million, up 14% quarter-over-quarter and 8% year-over-year. Thank you for listening to our presentation. Operator, please open the line for Q&A. Thank you.
Operator: Thank you. [Operator Instructions] Our first question is from Hua Fan at CICC. Please proceed.
Hua Fan: [Translated] Hi, this is Hua Fan from CICC. I have two questions. Firstly, could you provide an update on the performance metrics for the past two months, such as new user numbers, client assets in China, and the impact on financial performance amid the recent volatility in the U.S. stock market? Secondly, how does Tiger plan to adjust its business strategy in response to potential rate cuts, and what impact would a 25 basis point cut have on the company’s interest income?
Wu Tianhua: [Translated] In the first two months of the third quarter, we continued to see strong net asset inflows from China and robust growth in newly funded users, with July marking a record revenue month. While August’s trading volume remains active, September’s outlook is uncertain due to factors like the U.S. election and Fed interest rate decisions. As for rate cuts, while they may impact interest income, we anticipate increased market activity leading to higher trading volume and commission income. We will adjust our strategy accordingly to maintain a balance between commission, interest-related businesses, and wealth management. A 25 bps cut next month could lead to a 1% impact on total revenue for the fourth quarter.
Hua Fan: Thank you.
Aaron Li: Operator, please proceed to the next question. Thank you.
Operator: Our next question is from Cindy Wang at China Renaissance. Please go ahead.
Cindy Wang: [Translated] Thank you for the opportunity to ask questions. Could you provide insights into the loss provisions impacting profitability this quarter, particularly related to receivables from customers? Additionally, could you share details on client treatments, potential write-backs, and the likelihood of similar provisions in the future? Secondly, could you elaborate on the regional breakdown of new funded accounts in the second quarter and any customer acquisition strategies implemented? Thank you.
Wu Tianhua: [Translated] The impairment was tied to our Hong Kong stock pledging transaction business, prompting a cautious write-off in the second quarter. We are actively seeking recovery and have implemented risk controls to prevent similar incidents. If repayment is received, the provision will be reversed. In terms of new accounts, about 65% came from Singapore and Southeast Asia, 15% from Hong Kong, and 10% each from Australia, New Zealand, and the U.S. Market conditions and increased marketing efforts have contributed to this growth. In addition, we experienced a significant increase in Singapore due to the launch of new products in the fourth quarter, such as the Tiger Vault debit card and contract trading features. The local clientele’s enthusiasm for these functions surpassed our expectations, with approximately 10,000 Tiger Vault cardholders by the end of August, mainly comprising new funded users from the second quarter. Moreover, the contract trading feature also made a substantial contribution to revenue in terms of dollars and commissions over the past three months. As a result, we have observed remarkable growth not only in user numbers but also in trading volume and commission income in Singapore on a quarter-to-quarter and year-over-year basis.
Regarding the Hong Kong market, we are pleased with our progress in the traditional brokerage business. In the second quarter, the average net asset inflow from newly acquired clients exceeded $15,000. The market was more active, leading to a doubling of the Average Revenue Per User (ARPU) compared to the previous year’s fourth quarter. Through increased local partnerships and advertising efforts, we onboarded over 7,000 new funded users in the second quarter, representing a 2.5-fold increase from the previous quarter. Additionally, the virtual asset business received regulatory approval to offer spot crypto trading for retail investors, resulting in a successful campaign for professional investors and a doubling of Professional Investor (PI) users on the platform by the end of June.
In terms of wealth management, our business witnessed robust growth in the second quarter, with assets and user numbers increasing by over 20% quarter-over-quarter and approximately 50% year-over-year. The Tiger Vault product saw increased adoption among new funded clients, with enhancements implemented to support faster market trading. The underlying assets of Tiger Vault continued to perform well, providing investors with attractive returns above market averages for cash management. The wealth management business has experienced significant growth in product offerings and Assets Under Management (AUM) over the past two years, with a focus on providing users with a variety of asset management products accessible through the app interface.
We appreciate your participation in today’s call and encourage you to reach out to our Investor Relations team for any further inquiries. Thank you for your time, and we look forward to continued growth and success. phrase: “The quick brown fox jumped over the lazy dog”
into: “The speedy brown fox leaped above the lethargic dog”