Hello, ladies and gentlemen. Welcome to Futu Holdings First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only-mode. After management prepared remarks, there will be a question-and-answer session. 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, Daniel Yuan, Chief of Staff to CEO, Head of Strategy and IR at Futu. Please go ahead.

Thanks operator, and thank you for joining us today to discuss our first quarter 2025 earnings results. Joining me on the call today are Mr. Leaf Li, 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 involving here invest and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those containing 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 annual report. With that, I will now turn the call over to Leaf. Leaf will make his comments in Chinese, and I will translate.

[Foreign Language] Thank you all for joining our earnings call today. We kicked off 2025 with strong momentum, adding approximately 262,000 new funded accounts in the first quarter, up 48% year-over-year and 22% quarter-over-quarter. By quarter end, total funded accounts stood at 2.7 million, a 42% increase from a year ago, and an 11% rise sequentially. With a third of our annual target already in the back, we're tracking well against our guidance of 800,000 net new funded accounts in 2025. [Foreign Language] For the second quarter in a row, Hong Kong market led in new funded accounts amid a risk on mood for China equities. An active IPO calendar also helped acquire new clients while reactivating previously dormant ones. We believe that brokers with strong brand equity, seamless user experience, and superior execution capabilities are best positioned to convert market tailwinds into sustained growth. Funded account growth in the U.S. picked up pace as we enhanced the platform experience for active traders. I would take charge of your trading campaign in New York City also boosted brand visibility and deepened engagement with retail investors. [Foreign Language] Malaysia delivered the fastest sequential growth in new funded accounts across all seven markets, fueled by effective marketing campaigns and our seamless Malaysian IPO subscription experience. Looking ahead, we still see significant runway for market share expansion and remain committed to product localization and brand investment. In Japan, new funded accounts saw strong sequential growth and reached a historic high, reaffirming our position as the preferred platform for U.S. equity trading among Japanese retail investors. [Foreign Language] Among the products we shipped in the first quarter, the highlight was Futubull AI, a smart investment assistant trained on Futu’s proprietary financial data and investor community insights. This integrated solution combines AI powered search, Q&A,…

Thank you Li and Daniel. Please allow me to walk you through our financial performance in the first quarter. All the numbers are in Hong Kong dollars unless otherwise noted. Total revenue was 4.7 billion up 81% from 2.6 billion in the first quarter of 2024. Brokerage commission and handling charger income was 2.3 billion, an increase of 113% year-over-year and 12% Q-over-Q. The year-over-year increase was mainly driven by higher trading volume, partially offset by the decline in blended commission rate. The year-over-year decline in blended commission rate was mainly driven by changes in product mix and a higher average order size for Hong Kong stock trading. The Q-over-Q increase was mainly driven by the sequential growth in trading volume. Interest income was 2.1 billion up 53% year-over-year and 2% Q-over-Q. The year-over-year increase was driven by high interest income from security borrowing and the lending business, margin financing and the bank deposits. The Q-over-Q increase was driven by higher margin financing income as well as higher interest income from security borrowing and the lending business, partially offset by lower interest income from bank deposits due to higher -- due to lower interest rate on clients' cash deposits. Other income was 314 million, up 101% year-over-year and down 11% Q-over-Q. The year-over-year increase was primarily attributable to higher fund distribution service income, and the currency exchange income. Our total cost was 749 million, an increase of 59% from 417 million in the first quarter of 2024. Brokerage commission and the handling charge expenses was 144 million, up 138% year-over-year and 28% Q-over-Q. Both the year-over-year and the Q-over-Q increase was roughly in line with the movement of our brokerage commission and handling charging income. Interest expenses were 469 million up 50% year-over-year and down 9% Q-over-Q. The year-over-year increase…

[Operator Instructions] First question comes from Cindy Wang of China Renaissance. Please go ahead.

[Foreign Language] Thanks for taking my call. I have two questions here. First, the overall Hong Kong and U.S. stock market fluctuated greatly in April and May. Could you give us some color on the trading velocity, trading volume, and the margin financing security lending balance on your platform so far in the second quarter? Second question is, recently we see Futubull and the moomoo launch membership program. Could you let us know what the business model looks like for this program and how many paying clients have already subscribed these services? In the long run, what do you expect the benefits could bring to the Futu?

[Foreign Language] So the new funded accounts in the second quarter will probably see double digit sequential decrease sequentially, mostly due to a very high base in the first quarter, but overall, we maintain very strong client acquisition momentum in the second quarter, and we are very confident to hit our 800,000 new paying clients guidance for 2025 and with very big market volatility, clients continue to trade very actively and based on the current run rate, we expect a further sequential increase in total trading volume. Clients also deposit a lot of assets into our platform according to date based on the run rate, net asset inflow will stay at a very high level, similar to what we saw in the first quarter, coupled with the mark to market a positive impact since the second half of April due to the market rebound, we expect a further sequential lift to our total client assets. [Foreign Language] In terms of the membership programs we've launched recently, it is more catered to our wealth management products clients, particularly for these clients with huge assets or higher trading velocity or even have some particular risk appetite into some alternative wealth management products. So, we will start to layer different clients, in terms of their risk appetite, their client assets, and the different product needs. Given, we just launched the programs recently, the penetration and absolute number of these membership clients versus our total clients, the proportion is still very small.

Thank you for the questions. [Operator Instructions] Our next question comes from Charles Zhou from UBS. Please go ahead.

[Foreign Language] So first of all, congratulations to the management. I think it's a very strong set of results and beat the consensus and also our estimate. So, I have two questions. The first one, could you please maybe just give us a little bit more color about the timeline of your crypto trading business and also the implication of the passage of the Hong Kong stable coin spill recently to your company. The second question is about, can we talk about the customer retention and also the client AUM following the rising recent concern over the taxation on mainland China clients oversee investment income.

[Foreign Language] So the crypto prices experienced some pullback since the first quarter that affected the enthusiasm of the crypto investors on our platform, but the monthly trading volume and the number of crypto traders stayed at a pretty high level and since May, the crypto prices rebounded, and we've seen investors quickly picked up interest in crypto trading and we also saw a rebound in daily trading volume. We'll continue to build crypto-related product capabilities. Recently, we launched the crypto deposit functionalities in Hong Kong, which made it easier for our clients to seamlessly deposit the crypto onto Futu’s platform and make it easy to switch between different asset classes. So, after we launched this function, we got very good feedback from the Web3 community and also very positive feedback from our clients, and we planned to launch crypto withdrawal functions very soon. We also launched the crypto paper trading function in Hong Kong, and we're the first regulated crypto platform to allow for paper training, which really helped the newly investors to familiarize themselves with the trading rules and in the trading procedures, especially during market volatility. Couple of days ago, we launched crypto trading on a grayscale basis in most of the states in the United States, and we now support over 30 mainstream cryptocurrency trading. We'll closely monitor our clients' trading behaviors to iterate on our product, and we plan to increase the number of cryptocurrencies in the near future. So, from a long term perspective, we are very bullish about virtual assets as an asset class and for Futu the take rate for crypto trading is higher than cash equities, and we believe that as the regulatory landscape and the regulatory guidelines to become more clear, there will be more cryptocurrency allowed and more functions…

Thank you for the question. One moment for the next question. Our next question comes from the line of Emma Xu of Bank of America Securities. Please go ahead.

[Foreign Language] So, congratulations on another quarter of outstanding performance. I have a question regarding HIBOR. Recently, HIBOR dropped sharply. How will this impact your net interest income? Meanwhile, with HIBOR falling, are we seeing changes in client behavior such as increased fund deposits and more allocations to money market file equity asset or more active trading?

[Foreign Language] In our last earning call actually we provided sensitivity analysis, assume every 25 basis rate cut, our pre-tax monthly pre-tax profit will be down HKD 8 million to HKD 10 million roughly. But since the Fed rate cut last year by 50 basis points, we see the overall interest income revenues in the first quarters continue to grow on a Q-on-Q basis, which is mainly because the average size of our idle cash balance largely offset the rate cut implications. At the same time, as you mentioned the recent decline in HIBOR, which will trigger more clients trading activities in terms of velocity and consequently we will benefit from the trading commissions. On the other hand, we think the reasons of sharp declines by HIBOR may be just temporary, partially due to certain mega IPOs in Hong Kong. So, whether it will be sustained in such a low level, it is still way to see.

Thank you for the questions. One moment for the next question. Our next question comes from the line of Chiyao Huang from Morgan Stanley. Please go ahead.

[Foreign Language] So, my first question is on the client asset inflows that it's hitting a record high this quarter. And so just wondering the mix of the inflows by different regions, especially from a [indiscernible] China region contribution and what's the outlook for the full year. And second question is about is there any quantitative metrics that we can look at to measure the [indiscernible] engagement satisfaction and the clients thickness arising from the AI tools that we have launched and what could potentially -- could be done more in this space.

[Foreign Language] In terms of the first quarter asset inflows, actually we see a very strong inflow of momentum across our seven different markets. The overall asset inflow by the group increased over 50% Q-on-Q basis and also as we've mentioned in the opening remarks it is our record high in a single quarter numbers. In terms of the geographic breakdown, Hong Kong and Singapore still are the majority contributor markets for the asset inflows, and going forward we are constructively positive on the overall -- on the full year asset inflow situation. [Foreign Language] So, we've launched the Futubull AI functions for about two months now, so it's not been that long. We're still analyzing more data, but based on the preliminary numbers we have seen, our users have very good feedback of our Futubull AI function, and that also leads to more engagement and activity on our platform. We've also packaged our AI functions into our membership programs, so there's a limited number of free questions you could ask to AI and that depends on the tier of your membership and that is based on the client assets and the trading behavior on our platform, which means that the AI function has helped with net asset inflow and the trading velocity. I think that's why we're trying to roll out AI functions to more international markets based on the initial traction we have seen of our Hong Kong clients.

Thank you for the question. One moment for the next question. Next question comes from You Fan of CICC. Please go ahead.

[Foreign Language] This is You Fan from CICC, and I have two questions here. The first one is about the customer acquisition cost of the CAC. We see it decline much this culture. So what's the reason behind? And do you have any new guidance for the future CAC? And the second question is that we see we have announced to entry the New Zealand market. Would you please share more color on this market?

[Foreign Language] In terms of the cap, in the first quarters, the average cap, we reached around in the first quarter is around HKD 1800, which is relatively lower than our objectives in the beginning of this year, partially due to a very strong market tailwinds we got regardless in China, the China assets rating, very strong IPO markets in Hong Kong and volatilities in the U.S. And in these trading windows, our marketing colleagues, time they catch these windows and thanks to our brand equities influence as well, we got a very good result. Going forward, we do expect -- we will continue to set client growth as our first priority. At the same time, we will further emphasize our brand building deployments in terms of the funding. So in the long run, we think, the further incomes of the brand equity will let us become more resilient in different trading investment cycles. So, the investment on this brand equity, the effect in the near term, it is very difficult to predict, not to mention the overall market environments and the market environment still include a lot of uncertainties. So, from the prudence angles, we will maintain our full-year guidance on cap unchanged, but we will revisit this assumption in the coming quarters. [Foreign Language] Futubull is now the number 2 broker in Australia – [CAU] [ph], and we've accumulated a lot of brand equity and we feel like expanding into New Zealand was a natural extension. And we've also seen that Australian stocks and U.S. stocks are the two most popular as the classes for Kiwi investors, and we have already built very strong product capabilities for these two products in Australia. So, expanding to New Zealand will not incur much investments in terms of licensings or personnel or R&D and we can largely replicate the IT infrastructure and the marketing resources and the brand equity built in Australia. So, the incremental costs will be quite manageable and we think the New Zealand business will present very favorable ROIs.

Thank you for the question. One moment for the next question. The next question comes from Peter Zhang from JP Morgan. Please go ahead.

[Foreign Language] Thanks for giving me the opportunity to ask questions. This is Peter Zhang from JP Morgan. I have two questions. First is about the effective tax rate. We notice that effective tax rate pick up in first quarter to 18%. Wondering what's the reason behind and what's the medium to long term effective tax rate level for Futu going forward. Second question is about the blended commission theory. We noticed that in first quarter blended commission theory stabilize and pick up slightly. We wish to understand the reason behind and what will be the trend going forward?

[Foreign Language] In terms of the effective tax rate in the first quarter, this quarter, our effective tax rate is around 18.6%. There are two reasons behind that. One is, as more and more our overseas markets start to generate a profit. The historical accumulated tax credit has been fully utilized, which will consequently enhance our overall -- effective tax rate. Secondly, after the implementation of Pillar Two by OECD in different markets and the different countries, our overall effective tax rate will be impacted to some extent as well. So I would expect our overall effective tax rate will maintain 17% to 18% in the coming quarters. [Foreign Language] For the second question regarding the blended commission rate changes, actually there's a slightly uptake on Q-on-Q basis in terms of the blended commission rate. The reason behind that is mainly due to the product mix change. There's more clients trading on certain derivatives such as U.S. options, etc. Going forward, as we are launching more new products, for instance, the crypto trading, etc., I do expect that our overall blended commission rate will maintain stable.

Thank you for the questions. One moment for the next question. Our next question comes from Alan Chan from Citi. Please go ahead.

[Foreign Language] Thanks management for giving me the chance to ask a question. This is Alan from Citibank. My first question is on Hong Kong markets. Futu previously has a market share target of about 40% in Hong Kong, that basically implies about 1 million paying customers in Hong Kong. So, judging from our 1Q numbers, our paying customer numbers is already approaching close to around [indiscernible]. And given the pace of our new paying customer acquisition in Hong Kong is so fast, I think our long-term goal of market share of 40% in Hong Kong is probably within reach within the next couple of quarters. So against this backdrop, wondering if management could share your updated view on the Hong Kong market, especially considering that there's recent changes in the competitive landscapes with potential competition for [indiscernible]. If you look beyond the 40% market share, how much additional headroom do we see to further increase market share in Hong Kong? The second question is on interest income. We see that idle cash balance has grown very notably during the first quarter. Wondering if management could help us break down the interest income. How much of that is coming from idle cash, and how much of that is from margin finances, [indiscernible] lending, etc.

[Foreign Language] For the second question regarding the idle cash, roughly, the idle cash related income accounts for 35% to 40% of our total interest income for this quarter. The very strong robust increase in the revenue arising from idle cash partially due to two reasons. Number one is, we got a very strong net asset inflows from existing clients, not to mention a lot of new clients we acquired in the first quarter. Secondly, it's due to the market was quite volatile in the first quarter. So in our observation, a lot of clients actually, partially inclined to increase their cash position and lower their stock positions, so which is we got some benefits arising from that as well. [Foreign Language] So, in terms of our Hong Kong market share, the absolute number of fund accounts you mentioned applies to our greater China business, while the market share target you mentioned was about our Hong Kong local business, so these two numbers are not apple to apple comparisons. In the past two quarters we have seen the Hong Kong market contribute at the highest number of paying clients among all of our seven markets, which gave us confidence that as a leading broker in Hong Kong we'll be able to gain outsized benefits from favorable market conditions, and we think that our Hong Kong business has huge runway for growth, both in terms of client numbers and client assets. And the Hong Kong market has never been short of competition, and in the past few years there have been a number of our peers, very notable peers, entering into Hong Kong. But regardless how the outside market environment changes, we've always been doing product innovation and product iteration, and we believe that our product capabilities have built a very…

Thank you for the questions. Our last question comes from Zoey Zong from Jefferies. Please go ahead.

[Foreign Language] Thanks management for taking my questions and congratulations on your solid results. I have two questions. Firstly, I have a follow-up question on Futubull AI. Management mentioned that more AI products will be launched in overseas markets in Q2. So, wondering what's your AI product strategies and investment scale. And my second question is about VATP. Could you please share an update on the business development with your VATP license?

[Foreign Language] For VATP license, actually, there's not any update in the first quarter, despite we got shortlist by Hong Kong SFC for VATP license alongside with other couple of applicants. Now, we are still in the process of phase two. There's still a lot of validations need to be conducted by the third-party consultant, independent consultants, and there's a lot of process testing work need to be complete in order to get the final approval from SFC. We will keep you posted, before there's any progress. [Foreign Language] In terms of our AI strategy, Futu has assembled our own AI team. We're closely monitoring the industry developments and keeping up with innovations. So, the AI is applied in two ways, Futu, one internally, we use that to increase operating efficiency, and we also leverage AI to develop new products and features for our clients and in terms of operation efficiency we've already leveraged AI in a number of scenarios including customer services, the account opening documentation verification processes, and we've seen AI bring in tangible uplift to our operating efficiency. And in terms of our client facing features, we think that for active traders, a key benefit of AI would be to lower the investment threshold and help them more efficiently gather information to make informed investment decisions. For example, we'll launch algo trading very soon. So, before algo trading is almost exclusively for the sophisticated institutional investors and now for our retail clients by telling AI the stock you are interested in, the parameters you want to monitor, and what kind of conditions will trigger trade, our AI can generate an algo trading function for our clients, which we think significantly lower their barrier. So, we're around that goal and we'll continue to innovate to bring more AI powered features.

Thank you for the questions. With that, I'd like to hand the call back to Mr. Daniel Yuan for closing.

That concludes our call today. On behalf of 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 goodbye.

That concludes today’s conference call. Thank you for your participation. You many now disconnect.