Hello, Ladies and gentlemen. Welcome to Futu Holdings First Quarter 2020 Conference Call. [Operator Instructions] Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host for today's conference call, Mr. Daniel Yuan, Chief of Staff and Head of IR at Futu. Please go ahead, sir.

Thank you, operator and thank you for joining us today to discuss our first quarter 2020 results. Joining me on the call today are Mr. Leaf Li, our Chairman and Chief Executive Officer; Arthur Chen, Chief Financial Officer; and Robin Xu, Senior Vice President. As a reminder, today's call may include forward-looking statements, which represent the Company's belief regarding future events, which by their nature are not certain and are outside of the Company's control. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. For more information about the potential risks and uncertainties, please refer to the Company's filings with the SEC, including its registration statement. So with that, I would now turn the call over to Leaf Li. Leaf will make his comments in Chinese and I will translate.

[Foreign Language] Hello, everyone. Thank you for joining us today. We are pleased to announce that we generated remarkable growth across our operating matrices in the first quarter of 2020. [Foreign Language] We added 40,154 paying clients on a net basis in the first quarter, which account for over 60% of our total net paying client addition in 2019. This brought our total number of paying clients to 239,000, up 60% year-on-year, which marks our highest paying client growth rate since the first quarter of 2019. Notably, our Hong Kong business, again, maintained a significant growth rate. Total number of Hong Kong paying clients almost doubled from the last March quarter, adding to its streak of over 90% year-on-year growth rate since we launched our Hong Kong business. We believe that the Hong Kong market offers tremendous opportunities and we are confident to drive further business growth there with our diversified products and excellent user experience. [Foreign Language] Besides total paying clients, our two other KPIs, namely client retention and total client assets also performed well. In the first quarter, we maintained a high paying client quarterly retention rate of 98.1%. Despite the equities market plunge in March, we were still able to increase our total client assets by 59% year-on-year to HKD99 billion as at the end of first quarter. [Foreign Language] As our paying client base rapidly expanded and as the huge market swing peaked trading interest, total trading volume reached HKD595 billing in the first quarter, representing a 166% year-on-year increase. In March, we officially launched Hong Kong index futures trading. We will continue to expand our trading product offerings in the quarters to come. [Foreign Language] As for our wealth management business, we on-boarded mutual funds from a number of leading fund houses in the first…

Thanks, Lee. In the first quarter, we delivered outstanding financial results on top of the remarkable operating metrics. We recorded total revenue of HKD491 million, up 108% year-over-year and up 58% quarter-on-quarter. Non-GAAP adjusted net income was HKD161 billion, up 226% year-over-year and quarter-on-quarter. Let me walk you through some of our key financial details for the first quarter. Brokerage commission and handling charge income was HKD299 million, an increase of 161% from the same period in 2019 and up 97% from the last quarter. The growth was primarily due to 166% year-over-year growth in our total trading volume. Our blended commission rate this quarter was 5 basis points, flat year-over-year, but down from 6.7 basis points in the last quarter. This sequential decrease was primarily due to the increase in trading volume products for clients that use the flat rate pricing package option we offer for the U.S. stock trading. On an apples-to apple-basis, our commission rates remain quite stable. Brokerage, commission and handling charge income accounts for 61% of our revenue in the quarter. Interest income was HKD145 million, an increase of 34% year-over-year and 13% quarter-on-quarter. Margin financing interest income increased on the back of higher daily average margin financing balance. IPO financing interest income surged, thanks to the active Hong Kong IPO market. However interest income from the bank deposits decreased by 10% since the Federal Reserve cut the benchmark interest rate to nearly zero. Interest income contribute about 29% of our total revenue. Other income was HKD47 million, the 238% year-over-year growth was primarily due to higher IPO financing service charge income and a higher fund distribution service income. Other income contributed about 10% of our total revenue. On the cost side, total cost was HKD118 million, an increase of 92% year-over-year and 36% quarter-on-quarter.…

[Operator Instructions] Your first question comes from the line of the Weicheng Tang. Please ask your question

Hi. Hi Leaf, Arthur and Daniel. Yes, first congratulations on the very robust first quarter results. I got two questions. One is about the turnover. So as you had mentioned I think that the market share of Futu has grown tremendously in the first quarter as we see. It's basically a 100 percentage point growth quarter-on-quarter outpacing the Hong Kong Exchange turnover. So can you share more on the, like how you dissect the growth of market share. Like, on one hand we see the paying client growth is quite strong at 40,000 and also the client turnover has also peaked. Actually, I think it's the highest over the past nine quarters as we had seen. So is there any particular drivers? We know that market volatility is quite high to drive the turnover. But is there any other particulars that will drive the overall volume increase? And also regarding the paying client growth, how much of that is coming from Hong Kong local investors versus Mainland China? And how do you think in the second quarter or rest of the year, how the trend of paying client growth and their turnover will be like? The second question is regarding the cost. So we see in the first quarter, the operating leverage is quite significant, so leading to a much higher bottom line growth. So regarding the -- both the R&D and marketing expense, is there any budgeting for 2020, particularly for marketing. So we see the per client acquisition cost has come down quite a lot. I'm not sure it's because of the seasonality or the -- it's just the peaking of single quarter paying client growth that led to a decline of per client acquisition costs and how you see the per client acquisition costs will be like for the rest of the year. Thank you.

Okay, thank you, Weicheng. This is Arthur. I will answer your first question regarding the market shares and also partial of your second questions regarding the costs. I leave the trend of the paying clients in the first quarter and also the remaining years to my colleague Robin later on. In terms of market shares, you're right we have gained a market share in Hong Kong, particularly in the first quarter. Compared with last year's, last Q4, our estimation is, on average, our market share has increased by 20% in Hong Kong. At the end of last year, our market share in Hong Kong was around 1.03%. And this year, on average, in the first quarter, our market share, the highest is close to 1.4%. And also I think the spike of the trading volumes is heavily related to the overall market volatilities, particularly in February and also in March. Then on the cost side, we have some guidance to the market in the fourth quarter -- in the fourth quarter earning call last time. We expect the number of our head counts this year will be roughly in the range of 20%, something around. In terms of the marketing expenses, we target for the acquisition cost per each new clients will be 10% lower than the average numbers of last year's. I think so far in the first quarters our progress was very smooth. So we will not give a fixed absolute amount on the marketing expenses. We'll be more depending on our client acquisition strategies. Given that our this year's economic units still make valid sense, I think for us is we'll be -- we will be more aggressively on the marketing spending in order to further enhance our market share and also the number of our paying clients. I will leave more comments to Robin for the number of paying clients trend her observed in the second quarter and also all estimations in the second half of this year. Thank you. [Foreign Language]

So a large part of our paying client growth can be attributable to the strong growth momentum of our Hong Kong local business. So in the first quarter, as Li mentioned in his opening remarks, our number of Hong Kong paying clients grew 97% year-over-year and that growth rate has consistently topped 90%. So for the rest of the year, in our 4Q 2019 earnings results, we gave a guidance of 90,000 net paying client addition in 2020 and so far observing from the run rate, we are pretty confident about succeeding this previous guidance that we gave out, partly because I think we are ramping up our marketing in Hong Kong local market and also we have seen very strong growth momentum from word of mouth paying clients referral.

Yes. Thank you, Robin and Arthur. It's actually -- I just have a very small follow-up question regarding the tax rate. We see the tax rate in the first quarter is around 10%, the effective tax rate. So is that like a normalized or what we can expect for the rest of the year or like first quarter it's like just, there is still some seasonalities on recognizing the tax.

Sure, Weicheng. We expect that this year's full-year effective tax rate will be in the range of 10% to 12%, mainly due to our offshore tax claim benefit in Hong Kong and also our tax [payment] -- provincial [payment] in the Mainland. And also I think this effective tax rate will be valid in the next one or two years as well. Thank you.

Yes. Got it. Thanks Arthur.

[Operator Instructions] There are no further question at this time. I would now like to hand the conference back to Mr. Daniel Yuan for the closing remarks.

That concludes our call today. On behalf of the Futu Management team I would like to thank you for joining us today. If you have any further questions please do not hesitate to contact me or any of our Investor Relations representatives. Thank you and good bye.

Ladies and gentlemen that does conclude our conference for today. Thank you for participating. You may all disconnect.