UP Fintech Holding Ltd. Sponsored ADR Class A (TIGR) Q2 2025 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the UP Fintech Holding Limited Second Quarter 2025 Earnings Conference Call. [Operator Instructions] 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.

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.

[Interpreted] Hello, everyone. Thank you for joining the Tiger Brokers Second Quarter 2025 Earnings Conference Call. In the second quarter, driven by the growth in our user base and client assets as well as enhancements in product offerings, our total revenue, trading volume, commission income, interest income and other income all reached record highs. Our total revenue for the quarter reached USD 139 million, representing a 58.7% year-over-year increase and a 13.1% quarter-over-quarter growth. Trading volume significantly surged both year-over-year and quarter-over-quarter, reaching USD 284 billion, which contributed to a 90.1% year-over-year increase and an 11.1% quarter-over-quarter increase in commission income, reaching USD 64.8 million. Meanwhile, the margin financing and securities lending balance further expanded to USD 5.7 billion, reflecting a 65.3% year-over- year growth. Net interest income for the second quarter amounted to USD 58.7 million, representing a 32.8% year-over-year increase, benefiting from expanded user base and increase in ARPU. Our net income attributable to UP Fintech for the second quarter was USD 41.4 million, up 36.2% from the previous quarter and 16x higher than the same quarter last year. Non-GAAP net income reached USD 44.5 million, increasing 23.5% sequentially and 8.6x the number in the same quarter last year. The non-GAAP net profit margin in the second quarter increased to 32%, set another record high and has increased for 4 consecutive quarters. Additionally, for the first half of the year, our operating profit and net profit have already exceeded the total of last year, indicating a more stable and healthier business model. Our ongoing efforts to penetrate existing markets and expand our high-quality user base, we are better positioned to navigate the market turbulence in a constantly changing environment. In the second quarter, we added 38,900 (sic) [ 39,800 ] new funded accounts, with Singapore and Hong Kong being the primary contributing markets. In the first half of the year, we have acquired more than 100,000 new funded accounts, more than 2/3 of our 3- year target of 150,000 in 2025. As of the end of second quarter, the total number of funded accounts reached 1,192,700, representing a 21.4% year-over-year increase. In addition, we are glad to see that the quality of newly funded users continue to improve in the second quarter with the average net asset inflow of newly acquired clients exceeding USD 20,000, reaching a historic high. Notably, the average net asset inflow of newly acquired clients in Hong Kong and Singapore is substantially higher at around USD 30,000. Regarding total client assets, net asset inflows remained robust, reaching USD 3 billion in the second quarter, over 70% of which came from retail investors. Coupled with approximately $3.2 billion in the mark-to-market gain, total client assets reached a new record of USD 52.1 billion, up 13.5% quarter-over-quarter and 36.3% year-over-year, marking 11 consecutive quarters of growth. In the second quarter, all markets saw double-digit sequential increases in client assets, with Hong Kong and Singapore experiencing around 50% and 20% quarter-over-quarter growth, respectively. Additionally, client assets in the Australia, 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 the Central Provident Fund account trading and Supplementary Retirement Scheme account trading features in July. These new offerings enable eligible clients to utilize a portion of their CPF Ordinary Account savings and retirement funds to invest in approved financial products such as selected Singapore listed stocks, while enjoying tax benefits. We keep investing option features to better serve our high-value users. We added pending order reminder for expiry date options, alerting users through the app or message when they have unfulfilled orders approaching expiration to prevent unnecessary exercise of forced liquidation in consideration to a better user experience. We also introduced conditional market order for single-leg options, allowing users to set parameters such as price, time and underwriting conditions. When triggered, the system automatically submits corresponding single-leg market orders to help users build position a close position, reducing the hassles for constant manual monitoring. Our 2B business also maintained strong momentum. In the second quarter, we underwrote 7 Hong Kong IPOs and 4 U.S. IPOs, helping to boost our other revenue to a new quarterly high. Notable IPOs included Chagee and Zhou Liu Fu Jewelry, with Chagee becoming the first NASDAQ-listed Chinese tea beverage brand, attracting over 30,000 subscribers, setting a new record for U.S. IPO subscription in the past 3 years. In our ESOP business, we added 30 new clients in the second quarter, bringing the total to 663, a year- over-year increase of 15%. Now I would like to invite our CFO, John, to go over our financials.

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, increased 90% year-over-year and 11% quarter-over-quarter. Interest income was $58.7 million, increased 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 bps this quarter, slightly decreased from 6.7 bps 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 expense 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 increase 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 expense were $10.4 million, an increase of 18% year-over-year due to the increase in user base and IT-related service fees. Marketing expense were $9.9 million this quarter, increased 54% year-over-year as we expanded our marketing activities versus a year ago. General and administrative expense were $6.7 million, a decrease of 67% year-over-year as last year, we had a onetime 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, bottom line increased on both GAAP and non-GAAP basis. GAAP net income were $41.4 million, up 36% quarter-over-quarter and 15x higher year-over-year. Non-GAAP net income were $44.5 million, a 24% increase quarter-over- quarter and 8x 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 Instructions] We will now take the first question from the line of Cindy Wang from China Renaissance.

[Foreign Language] Congrats for great Q2 results. I have 2 questions here. First, the company's pretax profit increased sequentially, but income taxes expenses decreased sequentially. And also the effective tax rate dropped to around 15%. So what is the reasoning behind it and whether is it sustainable? And also the other revenue rose strongly. Is it mainly contributed from investment banking business? Second is regarding to the crypto business. So how is the company's cryptocurrency business progressing? And we've heard that the company has brought in strategic investor to jointly develop this area. So what are your plans and views on the development of the Hong Kong crypto market? And do you have any plans to obtain licenses in Singapore and the United States?

[Foreign Language] So there are 2 primary reasons for the decline in the effective tax rate. First, pretax profit rose across all licensed subsidiary in the second quarter, which reduced the weighting of our U.S. subsidiary in terms of total group profit. Since the U.S. has the highest tax rate, okay, this reduced weighting helped to lower the overall group's tax rate. Another reason is that we secured a more favorable tax rate in Singapore, reducing it from 17% to 13.5% in the second quarter. And regarding the substantial increase in other income, the growth in investment banking was indeed a major contributor. In the second quarter, we underwrote 4 U.S. IPOs, out of which 2 of them were the so book runner. In addition, foreign exchange income saw quarter-over-quarter increase due to market volatility. Our wealth management revenue also rose by about 70% due to rapid growth in AUM.

[Interpreted] I'll translate for the second question. We firmly believe that digital asset is now established as a major asset class, and we are committed to expanding our presence in the digital asset market. Our goal is to develop a comprehensive one-stop platform that seamlessly connects traditional financial assets with digital ones. Product experience has always been the key to Tiger's long- term success. Web 3 is still a relatively new area compared to the traditional Web 2 trading. We are committed to maintaining Tiger's high standards in product functionalities. To further these efforts, we have partnered with seasoned strategic investors in the Web 3 ecosystem, who are also pioneers and successful entrepreneurs in the early days of the digital asset exchange. So by combining their expertise with our experience in Web 2 fintech, we aspire to jointly develop leading-edge digital asset trading products that will stand out in the global market. Although this business still accounts for only a small part of our total revenue, we are seeing strong growth, especially as we keep expanding in Hong Kong and roll out industry-leading features, like digital asset deposit and withdrawal. We've seen a significant increase in trading volume on our Hong Kong platform and growth in the digital asset under custody. In the second quarter, digital asset trading volume increased around 65% quarter-over-quarter and asset under custody on our exchange nearly doubled sequentially. As for the global market, we've got digital asset trading license in 14 states in the U.S. and our application in Singapore is actively progressing. So moving forward, we plan to focus more resources on improving our product and supporting more trading features, aiming to offer our users a more comprehensive and seamless trading experience. Thank you. And operator, please move on to the next question.

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

[Foreign Language] I have 2 questions. The first question is regarding on the company's run rate so far in 3Q quarter-to-date. Specifically, could you share with us any early trends around trading volume, client assets and the new paying customers growth? The second question is, can you update us on your progress in the Hong Kong market expansion during second quarter and the third quarter quarter-to-date? We have noticed that since entering -- Tiger entering a Hong Kong market, the company's assets from local clients have been rapidly increasing. So the company has also mentioned that the quality of the local clients is excellent. Given this satisfied ROI, when does Tiger plans to enhance the customer acquisition and advertising efforts in Hong Kong? How is it going to impact on the company's CAC going forward?

[Interpreted] Okay. So overall, we are quite satisfied with our operating performance quarter-to-date. In terms of trading activity, the average monthly number of shares traded on our platform in the, say, past 2 months has been higher than the monthly average in the second quarter. Since we earn commissions based on the numbers of shares traded in the U.S. stock market, commission revenue so far in the third quarter has been on target. Regarding client assets, there has been a high single-digit increase compared to the end of the second quarter. A significant part of this increase has been driven by mark-to-market gains. The trend in the net asset inflow is also quite positive, especially with retail clients contributing a large portion of this growth. As for the new funded accounts, we remain committed to our second quarter customer acquisition strategy of prioritizing user quality and net asset inflows. We are glad to see a meaningful improvement in the contribution from the Hong Kong market, which now almost matches the contribution from Singapore. Since the quality of users in Hong Kong is the highest across all the markets we enter, we are confident in maintaining the user quality of the new credit accounts in the third quarter.

[Foreign Language] So in the second quarter and third quarter so far, we stepped up our investment in the Hong Kong market. We organized and participated in numerous offline events and exhibitions actively engaging with the local community. Our goal is to boost brand awareness and increase customer engagement. Combining off-line activities with innovative fintech solutions and incentives, we were able to reach a bigger pie of local investors. We have seen tangible results both in the user quality and client asset. For example, in the second quarter, the average net asset inflow per new Hong Kong funded users reached around USD 30,000, which contributed to a roughly 50% quarter-over-quarter increase in overall client assets in Hong Kong. So far in the third quarter, the number of new funded accounts in Hong Kong has now nearly matched the growth we have seen in Singapore. Our accelerated expansion in Hong Kong not only creates a healthier, more sustainable growth, but also deepen our understanding of the local market. Over the past 2 years, our dedicated efforts have started to pay off. Going forward, we will continue to speed up our efforts in Hong Kong, and you will see more tighter events to drive user growth and brand awareness. Regarding CAC, since we started ramping up our customer acquisition in Hong Kong in the second quarter, the average CAC is around 400 plus. It's relatively higher than other markets, but the payback period remains quite healthy, about 2 quarters under current market conditions. For third quarter and the rest of the year, we expect the average CAC in Hong Kong to fluctuate based on our marketing strategy. We anticipate it will stay around this level.

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

[Foreign Language] So big congratulations to the set of strong results, and I'm Dennis from UBS. I have 2 questions. The first is about, could you please give a breakdown of the newly added customers with deposits across different regional markets? And the second is we've noticed that the newly added customers with deposits in the second quarter declined quarter-over-quarter. What's the reason behind? And how do you view the growth looking forward?

[Interpreted] For the first question about the regional breakdown of new funded accounts. In the second quarter, about 50% of newly funded accounts came from Singapore and Southeast Asia region, approximately 30% were from Hong Kong and the Greater China area, 15% from Australia and New Zealand market and around 5% from the U.S. market. In the second quarter, we added nearly 40,000 new users. We believe this number fully meets our expectations, both in terms of annual targets and customer acquisition pace. From another perspective, although the number is a bit lower than the fourth quarter, the main reason includes the impact of tariff war in April, some investor sentiment fluctuates and most importantly, targeted adjustments we made to our customer acquisition channels. This included shutting down some low-quality, low ROI channels and posting certain online advertisements in Singapore to ensure the high-quality user base. Overall, these adjustments have been proved to be effective. We place a great emphasis on increasing client assets and maintaining a healthy net asset inflow mix. As mentioned earlier, the average net asset inflow of the newly acquired clients exceeded USD 20,000 and in Singapore and Hong Kong, it even reached about USD 30,000. More importantly, the nearly 40,000 new users in Q2 contributed more net asset inflow in the quarter than the over 60,000 new users in the first quarter. Additionally, our overall customer acquisition cost decreased by about 10% compared to the first quarter. So looking ahead, whether from an efficiency perspective or on a profitability standpoint, we plan to continue optimizing and dynamically adjust our customer acquisition strategies by focus on user quality and client assets. Thanks, Dennis.

Operator, is there any other questions?

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

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.

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

Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]