Ladies and gentlemen, thank you for standing by, and welcome to the UP Fintech Holding Limited Third Quarter 2019 Earnings Conference Call. [Operator Instructions] I must advice you, that this conference call is being recorded today Monday, November 25, 2019. I would now like to hand the conference over to your first speaker today, Mr. Clark Soucy. Please go ahead, sir. Thank you.

Thank you, Rohit. Hello, everyone, and thank you for joining us for the call today. UP Fintech Holding Limited's Q3 2019 earnings release was distributed earlier today and is available on our IR website at IR.itiger.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 [Xiao] [ph], 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. Today's discussion will contain forward-looking statements. These forward-looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with SEC. Any forward-looking statements that we make on this call are based on assumptions as of today and we do not take any obligation to update these 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 an English translation. Mr Wu. Please go ahead with your remarks.

[Foreign Language] Good evening, everyone, and thank you for attending the Tiger Brokers Q3 2019 Earnings Conference Call. In the past quarter, Tiger's business achieved several milestones, despite the uncertain macro environment of the past few months. In Q3, our revenue was $15.3 million, a new all-time high and an increase of 67% on the same period last year. Our revenue streams also became more diverse as net interest income accounted for 40% of net revenue, up from just 20% in the same period last year. The net loss was $1.28 million, a 60% decline from the same period last year. On a non-GAAP basis, for the first time ever, we reported a profit of $660,000. Total client assets increased 47% year-on-year to $3.8 billion. I would now like to take this opportunity to reiterate Tiger's growth strategy, expanding our user base and increasing revenue per user. We plan to stimulate customer acquisition through geographic expansion and differentiated product offer. We recently opened our New York office and in Q1 of next year, we'll formally commence providing securities trading to clients in Singapore. We are confident that integrating different countries to our award winning platform will help us attract more users. We will also continue to invest in ESOP, wealth management and IPO underwriting. The ESOP business maintains a high growth rate. In Q3, we added 15 new corporate customers. In the future, the employees of our ESOP clients will gradually become Tiger customers. For wealth management, we recently launched Cash Plus, a cash management product actively managed by Tiger. Though the assets under management is still growing our goal is to accumulate fund management experience. So we may provide greater customization to the future needs of our customers. With regards to our underwriting business, in the third quarter, we…

Thanks, Tianhua and Clark. Let me go over Tiger third quarter financial performance. All numbers are in U.S. dollar. Total revenue reached an all-time high at $15.3 million, an increase of 67% year-over-year and an increase of 13% quarter-over-quarter. Even commission revenue was down 13% year-over-year correlated with lower trading volume versus the same quarter last year. This shortfall was more than compensated by increase in interest related income and the 2B revenue. Interest related income, which combines the financing service fee and the interest income, stood at $6.95 million, an increase of 270% from the same quarter last year. The increase was due to increase in margin and the securities lending as well as more consolidated account customers versus the same quarter last year. Other revenues which includes our 2B services were $2.1 million, an increase of 13 fold from third quarter of 2018. The increase was primarily due to higher revenue from IPO distribution, advertisement, bank deposit interest and ESOP administration fee. Interest expense was $1.4 million, an increase from zero in the third quarter of 2018, as we have more consolidated accounts. Taking our interest expense, net revenue were $14 million this quarter and 52% increase year-over-year and 11% increase quarter-over-quarter. Net interest account for about 40% of the net revenue, up from 20% in the same period last year. Commissions accounted for 45% of the net revenue, down from 79% same quarter last year. Overall, we think this is solid quarter, as we further diversify our revenue mix while improving the top line. Now on the cost. Total operating cost and expense were $16.5 million, an increase of 26% year-over-year and the 9% quarter-over-quarter. The cost increase is in line with our revenue growth and business development. Execution and clearing expenses were $0.7 million, an increase…

[Operator Instructions] So we have our first question from the line of [Lesley Liu] [ph] from HSBC. Please go ahead.

Hello, management. I have two questions here. The first one is about the margin balance. Do we have a number because we see from the results disclosure that the receivable from customers is actually going down. So do we have a breakdown of on balance sheet and off balance sheet margin balance? And do we have the target for this balance? And what's the cap of the margin balance backed by our own capital? And the second question is because we can see from the results that the difference between GAAP and non-GAAP is mainly from the employee compensation, as well as the equity investment loss. So could you explain what is the equity investment for this item. Thank you.

Sure. Lesley. Thanks for the questions. Let me take a stab on the first one, the margin. So the margin balance and securities lending balance, as we discussed is $967 million as of this quarter, so increase of 17% from last quarter and a slight decrease of 5% from previous quarter. So overall the margin balance on our book are pretty stable, it's probably a $120 million. So the increase in our margin revenue, primarily due to - there are several securities lending products, we are doing, which drive up the margin interest income and also like we expense some margin onto selective clients, which yields higher interest income. As you know, like, so the margin in our book so far is still relative [indiscernible] compared to the total margin balance we have because most of the margin balance is still at our clearing brokers. But I think once we gradually becoming self-clear, hopefully, in the second quarter of next year the marginal balance will be gradually moving on to our book. So for the second question on the equity impairment, I will let Tianhua to answer this question.

[Foreign Language] Yes. So the equity impairment was from a early investment we did in [indiscernible] back in 2018. So the company will own a minority stake in this company and the company didn't work out so well. So that's why we incurred a loss on our balance sheet as an impairment.

Sure. Thank you. And I also have a question about the zero commission campaign in U.S., does it have any impact to our business or our business in the future?

[Foreign Language]

Okay. Let me just do a quick translation on what Tianhua just said. So we observe the trend in the U.S. [now online] [ph] brokers are starting to offer zero commission, but they're actually - some of them just only offer zero commission for cash equities because there are other commission you can share with option futures those kind of stuff. And also like - even though some of those broker offer zero commissions, you still can make some of the money back by selling the order for like some other online brokers is doing in the U.S. From Tiger's perspective, we don't think first of all, right now, it's going to impact our user base because most of the zero commission strategy are offered to the U.S. investors - U.S. domestic investors. And we think Tiger's product are already pretty value added and also it's already a very competitive pricing. So I don't think in the near term, there will be zero pricing, commission pressure on us, but we are closely monitor the situation and we will make our adjustment when necessary.

Thank you. Shall we move to the next question? We have the next question from the line of Daphne Poon from Citibank. Please go ahead.

Hi, management. Thanks for taking my question. So two questions from my side. So first one is regarding the commission income. So we noticed that the commission rate on a net basis is down slightly on a quarter-over-quarter basis. So can you explain on the reasons behind that, whether it's driven by maybe the different mix in terms of securities in this quarter? And second question is about the OpEx. So first is, we noticed the marketing expense [stands] [ph] a bit this quarter, so wondering what would be - what's the drivers behind? In terms of the OpEx outlook, so I guess you also mentioned that you will spend more on the marketing side because of your multiple overseas business initiatives. And I will be - also want to like to chat on the other OpEx such as the headcount or the R&D expense, whether you will also spend more on that front associated with the overseas business? And if possible, can you give us maybe an operating margin outlook for this year? Thank you.

Daphne, let me answer your first question, okay. So the commission rate, actually, it's pretty stable. I think you look at the financial statements, there are some, like - actually the reported fund are fully disclosed on a net basis, but if we just look at gross basis - overall at the gross commission rate has been pretty stable. If you take everything open together, it's about a 3 basis points, okay. So it's on par with the last quarter. So the commission came down primarily due to the trading volume came down, yeah, I think that's the major reason behind the 10% drop in commission revenue. In terms of marketing expense, so the reason we spend less on this quarter is, first of all, we think the market backdrop is not that favorable, so we rather keep the cash on hand to spend when we think there is a better chance we can acquire user. And also given Tiger is already listed. We got a chance to optimize a lot of existing relationship with our business partners. So we can spend less on those business collaborations. And going forward, for this quarter, we are trying to spend a little bit more in the U.S. The number will be relatively small I think of about $0.5 million because we want to try it out based on the current strategy we have. And for the next quarter, I would say, starting in 2020 we will be able to spend more money on marketing based on the results we generated from this quarter. So I didn't get your last question Daphne, what was your question in the end

Yes. So other than the marketing expense, how about the other OpEx, like, the headcount or other G&A cost, would that also increase in association with the overseas business?

Well, I think first of all for our office, you know, those like occupancy, I think should be relatively stable [indiscernible] because our office in New York is already open and Singapore already identified, you know, the office. So I think that should be relatively stable. Headcount wise, I think for Singapore and the U.S., we pretty much should have majority of people in place now. I think the only people we're going to increase will be the R&D people, you know, those are our core group of competencies, so we'll keep adding those people. But the gross rate I don't think will be - starting from next year will be as high as this year. You can see, you know, year-over-year, our headcount costs increase about 50%. I think next year I think quarter over - year-over-year should be around 30% something around there. But that being said, you know, if we identify better strategy or better location to get into we will try to spend more to build our thesis right there but so far I think the headcount cost should be moderated starting in 2020

Thank you. [Operator Instructions] Ladies and gentlemen, I would now like to hand the conference back to our speakers for any ending remarks. Please go ahead, sir.

I would like to thank everyone for joining our call today. I am now closing the call on behalf of the management team here at UP Fintech. We do appreciate your participation in today's call. If you have any further questions or concerns, please reach out to our Investor Relations team. This concludes the call and thank you very much for your time.

Thank you, sir. Ladies and gentlemen, that does conclude our conference for today. Thank you all for your participation. You may disconnect now.