Futu Announces Second Quarter 2019 Unaudited Financial Results
HONG KONG,Aug. 26,2019 --Futu Holdings Limited ("Futu" or the "Company") (NASDAQ: FHL),a leading tech-driven online brokerage platform in China,today announced its unaudited financial results for the second quarter ended June 30,2019.
Second Quarter 2019 Operational Highlights
Total number of registered clients[1] increased 64.7% year-over-year to 614,504
Total number of paying clients[2]increased 50.5% year-over-year to 164,717
Total number of users[3]increased 26.5% year-over-year to 6.1 million
Total client assets increased 22.9% year-over-year to HK$68.3 billion
Daily average client assetsincreased 20.9% year-over-year to HK$65.4 billion
Total trading volumedecreased 1.8% year-over-year to HK$213.1 billion
Daily average revenue trades (DARTs)[4]increased 17.3% year-over-year to 108,625
Margin financing and securities lending balancewas HK$4.1 billion,a decrease of 0.9% from June 30,2018 and an increase of 7.0% from March 31,2019
Daily average margin financing and securities lending balancereached HK$4.1 billion,an increase of 1.0% from the same period in 2018 and an increase of 19.5% from the first quarter of 2019
Second Quarter 2019 Financial Highlights
Total revenuesincreased 39.6% year-over-year to HK$259.9 million (US$33.3 million)
Total gross profitincreased 55.9% year-over-year to HK$196.1 million (US$25.1 million)
Net income increased 128.5% year-over-year to HK$55.3 million (US$7.1 million)
Non-GAAP adjusted net income[5]increased 121.7% year-over-year to HK$59.2 million (US$7.6 million)
[1]The number of registered clients refers to the number of users who open one or more trading accounts on Futu's platform.
[2]The number of paying clients refers to the number of the clients with assets in their trading accounts on Futu's platform.
[3]The number of users refers to the number of user accounts registered with our Futu NiuNiu applications or websites.
[4]The number of Daily Average Revenue Trades (DARTs) refers to the number of average trades per day that generate commissions or fees.
[5]Non-GAAP adjusted net income is defined as net income excluding share-based compensation expenses.
"We are pleased to report solid performance in the second quarter of 2019,despite ongoing market volatility," said Mr. Leaf Hua Li,Futu's Chairman and Chief Executive Officer. "Our superior technology infrastructure has always been a major source of our competitive advantage. In June,we became the first Chinese broker to offer full market-depth for US option quotes,with quote refresh rates that are much faster than our peers in the region. Our technological capabilities continue to redefine traditional investing for individual investors who we believe deserve a best-in-class trading experience."
"Our growth outside of Mainland China remains strong. In the second quarter of 2019,the number of paying clients in Hong Kong rose 115% year-over-year as we continue to enhance our brand awareness and our new wealth management products gain traction in the region. In May,we officially launched Money Plus,a money market mutual fund distribution platform,in Hong Kong,which marks our initial foray into the wealth management business. Since the end of the second quarter,we have already started to offer a number of fixed income and equity funds,and we plan to distribute more financial products on our platform in the quarters to come."
"In May,we launched our new enterprise service brand,I&E,to integrate our IPO subscription and ESOP solution services. As of June 30,2019,we had 39 ESOP clients,and among the 11 new additions in the second quarter were Douyu,the recently-IPO'd game-streaming business,and a number of other leading Chinese new economy companies. We continue to see good synergies between our retail business and enterprise service business,which serves as an important client acquisition channel."
Mr.Arthur Yu Chen,Futu's Chief Financial Officer,said,"We were able to maintain our strong growth momentum in the second quarter. The total number of paying clients increased 50.5% year-over-year to over 164 thousand. We think it is particularly encouraging that as our paying clients continued to grow,our quarterly client retention rate also reached a stunning 98.1%,which is a new high since 2018."
"Overall,our revenue and gross profit reached HK$259.9 million and HK$196.1 million,representing increases of 39.6% and 55.9%,respectively,from the same period in 2018. As we scale our business,our gross margin also rose to 75.5% from 67.6% in the second quarter of 2018. We will continue to invest in technology to sustain our competitive advantages and market our business as we expand globally. We remain confident in our ability to solidify our leading position in the market."
Second Quarter 2019 Financial Results
Revenues
Total revenues were HK$259.9 million (US$33.3 million),an increase of 39.6% from HK$186.2 million in the second quarter of 2018.
Brokerage commission and handling charge income was HK$122.3 million (US$15.7 million),an increase of 35.7% from HK$90.1 million in the second quarter of 2018. The increase was mainly attributable to a rise in trading volume in the U.S. market as well as the growth in effective fee rates.
Interest income was HK$113.9 million (US$14.6 million),an increase of 30.8% from HK$87.1 million in the second quarter of 2018. The rise was primarily due to 1) the increase in the balance of client deposits and the improved return on the balance due to enhanced capital management and higher benchmark interest rates in the U.S. and Hong Kong; 2) the growth of the Company's U.S. margin financing business.
Other income was HK$23.6 million (US$3.0 million),an increase of 159.3% from HK$9.1 million in the second quarter of 2018. The rise was primarily due to the increase of underwriting fee income and enterprise public relations service charge income.
Costs
Total costs were HK$63.8 million (US$8.2 million),an increase of 5.6% from HK$60.4 million in the second quarter of 2018.
Brokerage commission and handling charge expenses were HK$24.3 million (US$3.1 million),an increase of 20.9% from HK$20.1 million in the second quarter of 2018. The rise was primarily due to the increase in trading volume,which was in line with the Company's brokerage commission income.
Interest expenses were HK$18.8 million (US$2.4 million),a decrease of 21.3% from HK$23.9 million in the same period of 2018. The decrease was primarily because the Company had fully repaid funds borrowed from other parties by the end of the first quarter of 2019.
Processing and servicing costs were HK$20.7 million (US$2.6 million),an increase of 25.5% from HK$16.5 million in the second quarter of 2018. The rise was primarily due to the increase in both market information and data fees and cloud service fees as the Company continued to expand market data service and enhance infrastructure.
Gross Profit
Total gross profit was HK$196.1 million (US$25.1 million),an increase of 55.9% from HK$125.8 million in the second quarter of 2018.
Gross margin was 75.5%,compared with 67.6% in the second quarter of 2018. The rise was primarily due to greater operating leverage as a result of the Company's larger scale and improved operating efficiency.
Operating Expenses
Total operating expenses were HK$144.9 million (US$18.6 million),an increase of 66.6% from HK$87.0 million in the second quarter of 2018.
Research and development expenses were HK$63.7 million (US$8.2 million),an increase of 82.5% from HK$34.9 million in the second quarter of 2018. The rise was primarily due to the continued increase in research and development headcount to support the Company's business growth.
Selling and marketing expenses were HK$42.3 million (US$5.4 million),an increase of 45.9% from HK$29.0 million in the second quarter of 2018. The rise was primarily due to higher branding and marketing spending in the second quarter of 2019.
General and administrative expenses were HK$38.9 million (US$5.0 million),an increase of 67.7% from HK$23.2 million in the second quarter of 2018. The rise was primarily due to an increase in headcount for general and administrative personnel.
Net Income
Net income increased by 128.5% to HK$55.3 million (US$7.1 million) from HK$24.2 million in the second quarter of 2018. The rise was primarily due to strong topline growth and local tax rebates in relation to prior R&D expenses.
Non-GAAP adjusted net income increased 121.7% to HK$59.2 million (US$7.6 million) from HK$26.7 million in the corresponding period of 2018. Non-GAAP adjusted net income is defined as net income excluding share-based compensation expenses. For further information,see "Use of Non-GAAP Financial Measures" at the bottom of this press release.
Net Income per ADS
Basic net income per American Depositary Share ("ADS") was HK$0.50(US$0.06),compared with HK$0.08 in the second quarter of 2018. Diluted net income per ADS was HK$0.44(US$0.06),compared with HK$0.08 in the second quarter of 2018. The rise was primarily due to higher net income and the conversion of preferred shares to ordinary shares. Each ADS represents eight Class A ordinary shares.
Conference Call and Webcast
Futu's management will hold an earnings conference call on Monday,Aug 26,at 8:00 AM U.S. Eastern Time (8:00 PM on the same day,Beijing/Hong Kong Time). Dial-in details for the earnings conference call are as follows:
International: +65-6713-5090
Mainland China: 800-819-0121
US: +1-845-675-0437
Hong Kong: +852-3018-6771
Passcode: Futu
A telephone replay will be available after the conclusion of the conference call through 9:59 AM U.S. Eastern Time,Sep 3,2019. The dial-in details are:
International: +61-2-8199-0299
US: +1-646-254-3697
Passcode: 5267959
Additionally,a live and archived webcast of this conference call will be available at https://ir.futuholdings.com/.
About Futu Holdings Limited
Futu Holdings Limited (Nasdaq: FHL) is an advanced technology company transforming the investing experience by offering a fully digitized brokerage platform. The Company primarily serves the emerging affluent Chinese population,pursuing a massive opportunity to facilitate a once-in-a-generation shift in the wealth management industry and build a digital gateway into broader financial services. The Company provides investing services through its proprietary digital platform,Futu NiuNiu,a highly integrated application accessible through any mobile device,tablet or desktop. The Company's primary fee-generating services include trade execution and margin financing which allow its clients to trade securities,such as stocks,warrants,options and exchange-traded funds,or ETFs,across different markets. Futu enhances the user and client experience with market data and news,research,as well as powerful analytical tools,providing them with a data rich foundation to simplify the investing decision-making process. Futu has also embedded social media tools to create a network centered around its users and provide connectivity to users,investors,companies,analysts,media and key opinion leaders.
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