- Revenue: HKD3.1 billion, up 26% year-over-year.
- Brokerage Commission and Handling Charge Income: HKD1.4 billion, up 45% year-over-year and 27% quarter-over-quarter.
- Interest Income: HKD1.6 billion, up 13% year-over-year and 18% quarter-over-quarter.
- Other Income: HKD161 million, up 27% year-over-year and 3% quarter-over-quarter.
- Total Costs: HKD574 million, up 53% year-over-year.
- Gross Profit: HKD2.6 billion, up 21% year-over-year.
- Gross Margin: 81.6%, down from 84.9% year-over-year.
- Operating Expenses: HKD1.1 billion, up 26% year-over-year and 16% quarter-over-quarter.
- Income from Operations: HKD1.5 billion, up 18% year-over-year and 24% quarter-over-quarter.
- Operating Margin: 46%, down from 50.6% year-over-year.
- Net Income: HKD1.2 billion, up 8% year-over-year and 17% quarter-over-quarter.
- Net Income Margin: 78.6%, down from 41.1% year-over-year.
- Effective Tax Rate: 15.2%.
- Total Client Assets: HKD579 billion, up 24% year-over-year and 12% quarter-over-quarter.
- Margin Financing and Securities Lending Balance: HKD44 billion, an all-time high.
- Total Trading Volume: HKD1.62 trillion, up 69% year-over-year and 21% quarter-over-quarter.
- Hong Kong Stock Trading Volume: HKD358 billion, up 28% quarter-over-quarter.
- US Stock Trading Volume: HKD1.24 trillion, up 19% quarter-over-quarter.
- Wealth Management Assets: HKD80 billion, up 84% year-over-year and 25% quarter-over-quarter.
- IPO Distribution: 451 IPOs, up 21% year-over-year.
Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Futu Holdings Ltd (FUTU, Financial) acquired 155,000 new paying clients in Q2 2024, representing a 168% year-over-year growth.
- Total client assets jumped 24% year-over-year and 12% quarter-over-quarter to a record HKD579 billion.
- The company launched cryptocurrency trading in Hong Kong and Singapore, tapping into markets with supportive regulatory environments.
- Total trading volume grew to HKD1.62 trillion, up 69% year-over-year and 21% quarter-over-quarter.
- Wealth Management assets grew by 84% year-over-year and 25% quarter-over-quarter to around HKD80 billion.
Negative Points
- Operating margin declined to 46% from 50.6% in the second quarter of 2023, mostly due to higher marketing expenses.
- Interest expenses increased by 21% quarter-over-quarter, driven by higher costs associated with securities borrowing and lending.
- The company faces challenges in client acquisition costs, which increased by 30% quarter-over-quarter.
- Cryptocurrency trading volumes and client assets are still small compared to the overall business, impacted by recent market fluctuations.
- The effective tax rate for the quarter was 15.2%, which could impact net income margins.
Q & A Highlights
Q: Could you provide some color on client feedback on crypto trading and your client acquisition strategy? Also, can you give us some trends for the third quarter, including trading volume, trading velocity, AUM, and margin financing and securities lending?
A: We launched cryptocurrency trading in Hong Kong and Singapore recently. Client feedback has been positive, but trading volume and assets are still small due to market fluctuations. Our focus is on enhancing product capabilities and investor education. For the third quarter, client asset inflows remain robust, and trading indicators show strong sequential growth. However, the commission rate benefit from low-value stock trading in Q2 may normalize in future quarters.
Q: Can you provide more color around the Q-on-Q increase in client assets? How much is inflow and how much is market-driven? Also, what's the trend in Japanese client acquisition?
A: Total client assets increased by 12% Q-over-Q, with the majority coming from client asset inflows (high single-digit contribution) and the remaining 2-3% from market appreciation. Hong Kong and Singapore contributed 80% of the net asset inflow. In Japan, we saw robust growth in new paying clients, with close to 800,000 users by quarter-end. We remain confident in reaching our year-end target of 1-1.5 million users in Japan.
Q: What are your plans for new product offerings, especially in new markets like Japan and Malaysia? Also, what's the progress of the share repurchase program?
A: In Japan, we plan to roll out tax-saving accounts, mutual funds, and US margin financing in the coming months. In Malaysia, we recently launched IPO subscription services and Cash Plus products. We aim to introduce stock transfer services for Malaysian stocks soon. Regarding the share repurchase program, it covers 2024 and 2025, but we have not exercised it yet.
Q: What's the business model of your crypto services? Also, why did interest expenses increase by 21% sequentially in Q2?
A: Our cryptocurrency trading business model is straightforward; we charge a commission. We work with an upstream provider, ensuring a good gross profit margin. Interest expenses increased mainly due to higher client margin financing and stock borrowing costs, which are market-driven and hard to project precisely.
Q: You raised your full-year new paying client target to 550,000. Which markets are driving this growth in the third quarter? Also, how do rising rate expectations and AI stock volatility impact client asset allocation and interest income?
A: Hong Kong and Singapore contributed over one-third of new paying clients in Q2, with Japan and Malaysia accounting for 40%. We expect similar contributions in Q3. Rate cuts could impact our pre-tax profit by HKD5-8 million per 25 bps cut. We haven't seen significant changes in client asset allocation yet, but there's more interest in fixed income products.
Q: Could you share your client acquisition strategy and updates on CAC guidance for 2024? Also, can you break down interest income components for Q2?
A: Our CAC was around HKD2,200 in Q2, a 30% increase from Q1. We expect it to remain below our guidance range of HKD2,500-3,000 for the year. Interest income is almost equally derived from client idle cash and margin financing, with IPO financing being less material.
Q: Can you provide more details on the progress of the Malaysia business and the rationale behind the Airstar Bank investment?
A: In Malaysia, client profiles show higher investment experience and income levels. Trading turnover is higher than the group average, and average client assets increased by 45% Q-on-Q. The Airstar Bank investment aims to address client pain points in fund transfers and create synergies between brokerage and banking services.
Q: What is the share of meme stock trading in total US trading volume, and how did it influence the commission rate in Q2? Also, what is the fee rate for fund distribution?
A: Meme stocks accounted for 20-30% of US trading volume in Q2. We don't have a concrete dividend policy yet, as we see higher returns from reinvesting capital. The fund distribution fee rate is typical of industry standards.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
