UP Fintech Holding Limited (TIGR) Earnings

Management highlights

- **Global User & Asset Growth**: Total funded accounts reached 1.32 million (+10.3% YoY), adding 32,600 new accounts in Q2. Client assets grew to $60.7 billion (+16.7% YoY), driven by strong inflows from Singapore and Hong Kong markets. - **International Expansion Success**: International markets showed robust growth; Hong Kong client assets rose nearly 30% QoQ, Australian/New Zealand markets grew over 30%, and US market assets increased nearly 50%. This validates the core strategy of internationalization. - **Product Localization & Innovation**: Launched fractional share trading for Singapore stocks and CPOE index options in Hong Kong. Introduced dedicated tax reporting tools in Singapore, Hong Kong, and New Zealand to simplify compliance for users. - **Investment Banking Momentum**: Maintained strong IPO coverage in AI, hard tech, and semiconductor sectors in both Hong Kong and the US. Participated in major listings including MoneyCore, Deep Zero, and Wenguo AI in HK, and DSC Holding in the US. - **ESOP Business**: Added 50 new clients in Q2, bringing the total ESOP client base to 840, demonstrating steady growth in this segment.

Guidance

- **Client Assets**: Management expects client assets to continue growing steadily in Q3, with both net inflows and market gains contributing significantly (over $1 billion each YTD in Q3). - **Trading Activity**: Trading volume and commissions are expected to run slightly below Q2 levels due to a high base effect from the strong Q2 market rally, though activity remains healthy. - **New Users**: Expects new funded accounts in Q3 to be flat or slightly increased compared to Q2, supported by ongoing brand campaigns in key markets. - **CAC Outlook**: Average Customer Acquisition Cost (CAC) is projected to remain in the range of $450 to $550 for the second half of the year, reflecting continued investment in high-quality user acquisition. - **Take Rate**: Cash equity take rate is expected to recover somewhat in Q3 as share prices pull back from their Q2 highs, reversing some of the downward pressure seen in Q2.

Segment performance

The company reported total revenue of $182 million, an all-time high, representing a 31.4% year-over-year increase and a 17.7% quarter-over-quarter increase. Commission income reached $78.3 million (up 21% YoY), while interest-related income was $79.8 million (up 36% YoY). Operating profit stood at $56.8 million (up 12.6% YoY), and GAAP net income attributable to shareholders was $39.4 million, with non-GAAP net income at $42.8 million, marking a return to profitability after a loss in the previous quarter.

Risks & headwinds

- **Regulatory Impact**: The May 22 regulatory update caused a temporary outflow of mainland retail assets (approx. $500 million in Q2). While largely stabilized, mainland user asset contribution dropped to under 10% of total assets, and revenue contribution fell to 15-20%. - **Tax Rate Volatility**: Effective tax rate rose to ~28% in Q2 due to non-cash deferred tax adjustments related to employee share-based compensation and the treatment of a one-off penalty as a non-deductible expense. Normalized rate is expected to be 10-15%. - **FX Losses**: Recognized a $2.24 million other net loss primarily driven by foreign exchange fluctuations (RMB appreciation/USD depreciation). - **One-off Penalties**: A $59.7 million penalty incurred in Q1 impacted prior results; management is still evaluating the full financial impact and deductibility of this fine.

Analyst Q&A

• Q: Analyst Fan Youyou asked about the reasons for the $2.24M other net loss and the elevated 28% effective tax rate, as well as Q3 run-rate expectations. /

  A: CFO Zhang Zeng explained the FX loss was non-cash due to RMB appreciation. The high tax rate resulted from a non-cash deferred tax asset write-down linked to employee stock price drops and the prudent accounting of a $59.7M penalty as non-deductible. CEO Wu Tianhua noted that Q3 client assets will grow steadily (>1B inflow/gain), trading activity may ease slightly from Q2 highs, and new user quality (avg asset per user) has improved to ~$25k.

• Q: Analyst Cindy Wang inquired about post-May 22 regulatory stability, mainland user behavior, and the significant drop in cash equity take rate from 5.9 bps to 3.6 bps. /

  A: CEO Wu stated the regulatory impact has largely run its course, with mainland assets now <10% of total and no further policy changes expected. CFO Zhang attributed the take rate drop to three factors: high-volume/high-price AI/Semi stocks (low take rate), NASDAQ’s >20% rise reducing per-share commission value, and zero-commission US local users. He expects take rates to recover in Q3 as prices normalize.

• Q: Analyst Emma Xu requested a geographic breakdown of new users and drivers behind the rising marketing expenses/CAC. /

  A: CEO Wu confirmed Singapore and Hong Kong accounted for >70% of new accounts, with Australia/NZ at ~25%. CFO Zhang clarified that part of the cost increase was FCM rebates, not direct acquisition. Excluding rebates, CAC rose from $420 to $450 due to heavy brand building in HK (SpaceX-themed campaign) and Singapore (GastroBeats, World Cup ads). These investments yielded higher-quality users ($25k avg asset vs <$20k in Q1). Full-year H2 CAC guidance is $450-$550.