Futu Holdings achieves 70% revenue growth, driven by record client assets and international expansion; maintains positive outlook for Q3 2025.

OPERATOR - (00:01:49)

Hello ladies and gentlemen. Welcome to Futu Holdings second quarter 2025 earnings conference call. At this time, all participants are in a listen only mode. After management prepared remarks, there will be a Q and A session. Today's conference call is being recorded. If you have any objections, you may now disconnect at this time. I would now like to turn the conference over to your host for today's conference call, Daniel Yun, Chief of Staff to CEO, Head of Strategy and IR at Futu. Please go ahead sir.

Daniel Yun - Chief of Staff to CEO, Head of Strategy and IR - (00:02:28)

Thanks Operator and thank you for joining us today to discuss our second quarter 2025 earnings results. Joining me on the call today are Mr. Leigh Lee, Chairman and Chief Executive Officer, Arthur Chen, Chief Financial Officer and Robin Hsu, Senior Vice President. As a reminder, today's call may include forward looking statements which represent the company's belief regarding future events which by their nature are not certain and are outside of the company's control. Forward looking statements involving hearing risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those containing any forward looking statements. For more information about the potential risks and uncertainties, please refer to the company's filings with the sec, including its annual report. With that, I will now turn the call over to Lise. Leigh will make his comments in Chinese, and I will translate. Thank you all for joining our earnings call today. As of quarter end, total funded accounts reached approximately 2.9 million, representing a 41% increase year over year and an 8% rise quarter over quarter. We've reached a key milestone in our international expansion which is as of quarter end, over 50% of funded accounts are from clients outside of Futu Securities. Hong Kong, Singapore and the US are our largest international markets, followed by the rapidly expanding Malaysia and Japan, while Australia and Canada show robust growth momentum. This expanding international footprint is a testament to our vision of becoming an influential global financial services platform. Don't.

Leigh Lee - Chairman and Chief Executive Officer - (00:05:37)

During the quarter we acquired 204,000 new funded accounts of 32% from a year earlier. Hong Kong continued to lead all markets to new funded accounts for the third straight quarter. Elevated market volatility from trade tensions in early April, followed by a sharp rebound from trade troops as well as a wave of high profile IPOs in May spurred retail participation. Our US business also delivered robust growth in the second quarter. We became the official sponsor of the New York Mets, a partnership that will continue to broaden our brand reach in the US and internationally. We also launched cryptocurrency trading in most of the states in June reinforcing our value proposition as a one stop trading platform in Malaysia. We further localized our offerings by introducing IPO financing services for local listings and the Malaysian stock earnings calendar. In Japan, we partnered with NASDAQ and the Japan Exchange Group to host our inaugural offline investment event, MOVE Fest Japan, which attracted over 12,000 Tokyo investors to sign up, strengthening our brand recognition in Japan. Building on the successful debut of Futu Bull AI in Hong Kong, we rolled out Mumu AI across all international markets, equipping investors worldwide with smarter tools for more efficient investing. Client engagement remains strong across regions. Our funded account quarterly retention rate was once again well above 98%, reflecting the high level of loyalty and satisfaction among our global client base. Bambe by the end of the second quarter, total plan assets hit a record 974 billion Hong Kong dollars, up 68% year over year and 17% quarter over quarter. Notably, net FD inflow in the first half of 2025 nearly doubled compared to the same period last year thanks to robust net asset inflow and favorable mark to market depreciation from Hong Kong and US Equities. Average client assets across all markets register sequential increase. In Singapore, average client assets and total client assets rose 19% and 26% quarter over quarter respectively. The group's margin financing and security of lending balance remains stable at 51.4 billion Hong Kong dollars by quarter end. While clients initially deleveraged amid the sharp market downturn in early April, a gradual recovery in risk appetite fostered a rebound in margin financing activity. During the quarter in the second quarter, total trading volume reached 3.59 trillion HKD, representing 121% year over year and 12% quarter over quarter growth during the quarter. Volatility stemming from trade talks drove unprecedented spikes in daily trading volume, while renewed enthusiasm in the cryptocurrency space further accelerated trading momentum. US stock trading volume climbed 20% sequentially to 2.7 trillion HKD. Led by Ev and crypto stocks. Hong Kong stock trading volume contracted 9% quarter over quarter to 833.5 billion HKD, primarily due to tempered interest in the technology sector partially offset by higher turnover in new consumption names. Wealth Management client assets were 163.2 billion Hong Kong dollars at the quarter end of 104% year over year and 17% quarter over quarter. In Hong Kong and Singapore, we strengthened our fixed income offerings with Hong Kong dollar and RMB denominated bonds as well as floating rate bonds in Hong Kong, we launched Principal Protective Structure Product, becoming the first online broker to offer retail facing structure products. We also became the first and only online brokerage platform in Hong Kong to distribute China AMC Hong Kong's tokenized Money Market funds, solidifying our position at the forefront of digital asset innovation. As of quarter end, we have 517 IPO distribution and IR clients up 15% year over year. Hong Kong IPO market gained further momentum from the first quarter with increased deal volume and rising investor participation. During the quarter, we acted as joint runners through multiple prominent listings, notably in the Haitian flavoring and food IPO. We attracted a record 102,000 subscribers, ranking first among all brokers in both number of subscribers and total subscription amount. In the first half of 2025, we partnered with six of the ten largest Hong Kong IPOs by fundraising slides and facilitated over 10 billion Hong Kong dollars in subscription amount for 12 IPOs each, underscoring our unparalleled retail distribution capabilities. Next, I'd like to invite our CSO author to discuss our financial performance.

Arthur Chen - Chief Financial Officer - (00:14:31)

Thank you Leigh and Daniel. Please allow me to walk you through our financial performance in the second quarter. All the numbers are in Hong Kong dollars unless otherwise noted. Total revenue was $5.3 billion, up 70% from $3.1 billion in the second quarter of 2024. Brokerage commission and handling charge income was $2.6 billion, an increase of 87% year over year and 12% Q. The year over year increase was driven by higher trading volume, partially offset by the decline in blended commission rate. We adopt per share and per contract pricing model for US Stocks and US Option trading respectively. As a result, brokerage income will grow at a slower rate than trading volume where our clients trade higher price stocks and options. The quarter-over-quarter increase was mainly driven by the sequential growth in trading volume. Interest income was $2.3 billion, up 44% year over year and 11% Q. The year over year increase was driven by high interest income from security borrowing and lending business, bank deposits and margin financing. The quarter-over-quarter increase was driven by higher interest income from security borrowing and the lending business as well as higher interest income from bank deposits partially offset by lower margin financing income due to sequential decline in daily average margin financing. Balance Earned income was 444 million, up 176% year over year and 41% Q. The year-over-year and The Q increase was primarily attributable to higher fund distribution service income and the currency exchange income. Our Total cost was 671 million, an increase of 13% from 574 million in the second quarter of 2024. Brokerage commission and handling charge expenses was 161 million, up 84% year over year and 12% quarter-over-quarter. Both the year over year and the quarter-over-quarter increase was roughly in line with the movement of our brokerage commission and handling charge income. Interest expenses were 378 million left year over year and down 20% quarter-over-quarter. The year over year increase in interest expenses associated with our security borrowing and the lending business was offset by the year over year decrease in margin financing interest expenses. The quarter-over-quarter decrease was mainly due to lower interest expenses associated with our security borrowing and the lending business as well as lower margin financing interest expenses because of the hybrid rate decline. Processing and servicing costs was 133 million, up 21% year over year and down 2% quarter-over-quarter. The EOV increase was largely due to higher data transmission fees and market information and data fees. The quarter-over-quarter decline was mainly driven by lower market information and the data fee as well as lower crowd service fees. As a result, total Gross profit was $4.6 billion, an increase of 82% from $2.6 billion in the second quarter of 2024. Gross margin was 87.4% as compared to 81.6% in the second quarter of 2024. Operating expenses was up 21% year over year and 3% Q to $1.3 billion. R&D expenses was 442 million, up 18% year over year and 14% quarter-over-quarter. The year over year and quarter-over-quarter increase was mainly driven by greater investment in AI capabilities. Selling and marketing expenses was 429 million, up 27% year over year and down 7% quarter-over-quarter. The year over year increase was mainly attributable to higher new fund accounts partially offset by lower client acquisition costs per unit. The quarter-over-quarter decrease was due to sequential decrease in new fund accounts partially offset by higher client acquisition costs per unit. General administrative expenses were 425 million, up 17% year over year and 2% quarter-over-quarter. The year over year increase was primarily due to an increase in general administrative headcounts. As a result, income from operation increased 126% year over year and 25% quarter-over-quarter to 3.3 billion. Operating margin increased to 63% from 47.3% in the second quarter of 2024, mostly due to strong top line growth and operating leverage. Our net income increased by 113% year over year and the 20% of Cuba Q to 2.6 billion. Net income margin expand to 48.4% in the second quarter as compared to 38.6% in the same quarter last year. Our effective tax rate for the quarter was 18.4%. That concludes our prepared remarks. We now like to open the call to questions Operator, please go ahead.

UNKNOWN - (00:19:28)

Thank you.

OPERATOR - (00:19:30)

Thank you. As a reminder to ask a question, please press Star one and one on your telephone keypad and wait for your name to be announced. To withdraw your question, please press Star one and one Again. Please stand by as we compile the Q and A roster. Thank you for your patience. Thank you for your patience. Please stand by as we compile the Q and A roster. Our first question comes from the line of Cindy Wan from China Resonance. Please go ahead.

Cindy Wan - (00:21:38)

Thanks for taking my call and congrats for the very good results in second quarter. And I have two questions here. First one is the net asset inflow was very strong in first half of this year and almost double compared to last year. So what's the reasoning behind it and did you adjust any marketing campaign to attract asset inflow and how do you maintain the momentum in second half? Second question is crypto trading has launched in Hong Kong, Singapore and us. Can you give us some color on the number of clients and trading volume in the second quarter or the first half and also July and any new product or market will launch in second half. Thank you.

Leigh Lee - Chairman and Chief Executive Officer - (00:25:51)

Terms of a very strong asset inflow in the first half, I think alongside the benefit we got from the market itself, given that the US market and the Hong Kong markets performed quite well in the first half, which definitely is a positive implications to the client as the inflows internal wise. On the product side, we further enrich our product offering especially in the first half. A lot of new products in the areas of wealth management, crypto and the fixed incomes actually you know, provide, you know, further enrich our positions as a one stop investment platforms to our users. This will definitely be a positive for our clients engagement and also new client asset inflows. On the marketing, branding wise and operational wise. We also put a lot of efforts especially in the overseas markets such as the us. Our collaborations with MET in the second quarters bear a very strong fruit in terms of the new client acquisition in the US and also the brand implication further expands to other overseas markets as well. In particular in the second quarter all the assets inflows from the overseas markets outside of Great China's the amounts of is almost exceed the absolute amount what we acquired from similar markets in 2024 which was very very impressive. I think in the second half we will continue to enhance our brand acquisitions in terms of for instance there will be more physical stores roll out in different markets in the second half and also there will be some new product offering in the wealth management and in the crypto side as well in the second half for instance we do have the plans to provide crypto transfer-in and transfer-out functionalities for overseas markets alongside other Hong Kong markets as well. And secondly for specific for the crypto tradings in terms of the momentum we saw, we saw very strong Q on Q momentum in terms of crypto asset holding and also the trading velocity. For instance the asset value of the cryptos at the second quarter end reached $4 billion compared with the first half which record over 40% q on q increase. And I do believe that the numbers will continue see a very strong robust in the in the third quarter as well thanks to further penetrations in our main clients to engage crypto trading in the second half we also there will be some new, you know, product pipelines in the crypto trading as well. Besides that we are also doing some new feasibility studies for certain new markets which we want to acquire the license Exchange License.

UNKNOWN - (00:29:06)

Well, thank you.

OPERATOR - (00:29:13)

Thank you. Just a moment for our next question please. Next we have Qiu Yao Huang from Ms. Please go ahead.

Qiu Yao Huang - (00:30:05)

And so yeah, let me briefly translate two questions. Basically one is on crypto Just wondering what's the mid to long term strategic views on crypto business in terms of licensing products and also the potential for monetization in particular I was wondering what's the strategic upside coming from the crypto exchange license in Hong Kong? And the second question is regarding the Japan market. As the company has been in Japan market for almost two years. What is the understanding about the market Any change in the understanding especially regarding the competitive landscape and the major competitive strength of the incumbents How FUTU is dealing with the competition, what's our key value add at the moment and what's our targeted clients there versus the incumbents.

Jill - (00:37:06)

In my personal view I think our narrative for the whole group in the crypto side can be consists of four aspects I will summarize I call it the race Race. The R means the real World assets because you know, we have a very strong position in terms of the traditional finance. So there will be a lot of, you know, bargaining powers or positions in the traditional asset products offerings. For instance, we have a very strong positions in the wealth management segment. We have already partnership over 80 world class fund manager companies. For instance, recently we just do a collaboration with China Asset Management in Hong Kong to be the first and exclusive retail distributors for their first tokenized money marketplace down the road. I think such kind of collaborations in the fund distributions, how to connect traditional finance from Web3s from the offline to on chains will be definitely a very big, very interesting areas to explore. Secondly, the A means advanced technologies. I think this is a very important part to set us apart from our partners or from our peers because we always emphasize the safe safety as the first parameters when we do Web3 products. Not to mention there will be more integrations for our AI capabilities. How to further utilize our AI capabilities in the Web3 segment as well. Thirdly is the conversions between the traditional finance and the crypto native in terms of the new clients referrals and also the cross selling opportunities. For instance, a couple of days ago we just launched the product offerings for the Solana tradings to all Hong Kong retail investors and we do have the plans to provide paper trading for Solana tradings in a very short time in order to further engage the newcomers to the crypto universe. The last word E means exchange. As you said, we are in the phase 22 of the AGP license application in Hong Kong and we are doing the feasibility studies for more license applications in other markets. Exchange definitely will be a gateways to connect crypto native and also traditional finance. And also in terms of monetizations, despite now the monetization more come from the trading itself. But in the long term I think VATP will will save our upstream cost to further enhance our user experience to provide a seamless user experience to our clients. And secondly, our client target will not only be the retail investor for ourselves, we may also to expand our offerings to other peers or institutional clients as well as thirdly, as you can see a lot of new initiatives mentioned by Hong Kong regulators. For instance, they mentioned Aspire initiative this year which was quite encouraging. I think there will be a lot of new monetization potentials such as the derivatives, the staking. So these are all incremental revenue streams.

UNKNOWN - (00:40:50)

In.

Jill - (00:40:50)

The long term which will benefit from the regulatory push up. Thank you.

Daniel Yun - Chief of Staff to CEO, Head of Strategy and IR - (00:40:57)

Hi Jill, this is Daniel and.

UNKNOWN - (00:41:03)

I'll

Daniel Yun - Chief of Staff to CEO, Head of Strategy and IR - (00:41:03)

Take your second question on Japan I think I'm going to first share about our understanding about the competitive landscape market dynamics and then I'm going to talk about what we have done in 2Q accordingly. So in terms of the competitive landscape, as we all know it's been a pretty steady market structure over the past couple of years. SBI and Rakuten consistently have 80% of the market share in terms of retail investors and they have both constructed a very robust ecosystem of one stop financial services and even beyond financial services and created lots of very sticky touch points with the end clients. That being said, we think Moomoo still has a very unique value proposition especially for self directed investors interested in the US markets. Whether it's our pricing or market data or trading experience or our social community, these are all very friendly and super competitive for self directed investors. So we're thinking there is a real gap in the market for us to fill. And on top of that, what we have come to realize and also something we've shared before is that branding is super important in Japan. It takes time to win the trust of the Japan retail investors. So quarterly we have done lots of branding events, whether it's advertising or hosting events with some of the other very prominent financial institutions or organizations in Japan. And back to what we have done in the second quarter based on these understanding. So we continue to optimize our U.S. related trading capabilities and to streamline that investing experience. In the second quarter we launched US Options trading and we have seen that the penetration of US Options as well as the revenue contribution from US Options has been coming up steadily month over month. We also started to support the deposit and the outflow of US dollars so before clients need to exchange that into Japanese yen. So by doing that we reduced the friction in this currency exchange. We have also seen very high engagement and turnover in the second quarter in Japan and in fact the total trading.

UNKNOWN - (00:43:17)

Volume in Japan went up by over

Daniel Yun - Chief of Staff to CEO, Head of Strategy and IR - (00:43:20)

50% quarter over quarter. And we have seen sequential increase in both the trading turnover of US stocks and Japan stocks and the average client assets as of quarter end also register double digit sequential growth. So we think these are all super encouraging signs and data points. And going forward we'll continue to optimize our trading experience for both the US stocks and Japan stocks. And in the second quarter we also launched some AI related capabilities in Japan and what we have seen is that the penetration or adoption rate of AI chatbots is actually the highest in Japan among all of our international markets. And the customer satisfaction rate consistently stayed above 90% which shows that There are a sizable number of self directed Japanese investors who are interested in doing their own research and help use these tools to help them make informed investment decisions. And we want to leverage AI leveraged financial technology to continue to lower the barrier of investing for us to stocks. And we think that there is a growing demand for US stocks for us to cater to. And also in terms of brand building, we've also done a fair amount. In the second quarter we partnered with NASDAQ and the Japan Stock Exchange to host the MOVE fest event. Over 12,000 retail investors in Tokyo signed up, which we think is a quite sizable crowd. And we think that over the past couple of quarters we've really been able to elevate our brand recognition and trust among the retail investors in Japan. And let me translate for myself the Sushi Sing and do that. Chong Guano Nash. Yeah.

Yu Fan - (00:48:16)

Thank you. Just a moment for our next question please. Next we have Yu Fan from cicc. Please go ahead. Thanks management for taking my question. This is Yoyo Fan from CICC and I have two questions here. The first one is can you please give more color on the third quarter regarding like the client acquisition, the net asset inflow and also the trading volume. And the second question is about the US market. We see solid growth achieved this year so would you please share more data and also with the plan and target for the US market. Thank you.

Daniel Yun - Chief of Staff to CEO, Head of Strategy and IR - (00:49:49)

Well, thank you for these two questions. This is Daniel. I'll take both of these questions. First of all, in terms of the third quarter quarter to date trend, based on the run rate we expect a steady Q on Q net new funded accounts. So it's pretty steady compared to the last quarter. We've also seen a positive market to market impact which coupled with net asset inflow should continue to push total client AUM to grow sequentially. We've also seen very active trading behaviors and based on the current run rate, if the market sentiment is able to persist, we think there is a chance that our trading volume could have another Q1Q increase on top of the very high base in the second quarter. And in terms of our development in the U.S. market, a couple of data points we could share. Well, first of all we've really seen the positive flywheels thanks to the continued product development and we're strengthening brand equity. The net new adds in terms of funded accounts in the US continue to contribute very meaningfully to the group. And in the second quarter we've also seen the number of options traders as well as the total number of options contracts traded reached historic high and in fact both numbers registered five consecutive quarters of sequential increase. So we think these are super encouraging. And in the second quarter, as we said earlier, we strive this partnership with the New York Mets and we've been deeply embedded in this ecosystem of New York Mets. We think this strategic partnership helped us elevate our brand image among the team's tens of millions of fans in the US but also we really get our name out there internationally thanks to the sports teams' international influence. Besides building our brand, we've also iterate our product. In June we launched cryptocurrency trading in most states in the US and we now support over 30 mainstream crypto trading pairs and we've seen a continuous increase in adoption rate among our US clients. We've also launched MOOMOO AI including AI Chatbox, AI-empowered stock investment tools and lots of technical charts and stock related fundamental data. We also in the future we plan to launch kind of AI stock screeners to help our investors better sift through the thousands of stocks. So yeah, lots of product innovations as well. And overall we are very optimistic about the growth prospects in the US market. And let me translate.

UNKNOWN - (00:52:48)

Which is a

OPERATOR - (00:54:56)

Thank you, thank you. One moment for our next question please. Next we have Charles Zhou from ubs. Please go ahead.

Charles Zhou - (00:55:25)

so I have two questions. So first can you maybe give us a little bit more information about the regional mix of the client acquisition in the second quarter? And also we noticed that on a Q on Q basis there's a sequential slowdown for the customer acquisition. Meanwhile, also noticed some news report about more stringent onboarding of the mainland Chinese clients in Hong Kong in June. So, so what will be the potential impact on your client acquisition moving forward and also any potential change to your full year guidance of 800,000.

UNKNOWN - (00:56:32)

Thank you. In terms of new clients, we acquired in the second quarter, Hong Kong and Malaysia collectively account. Shoot down In terms of the new clients, new paying client fund accounts we acquired in the second quarter, Hong Kong and Malaysia collective basis account for over 50% of the new client acquisitions in the second quarter. Then the remaining part was mainly come from Singapore, US and also Japan. In total for the first half of this year we have already achieved 460k new fund accounts which accounts for over 50% of our annual 800k new fund accounts targets. We remain very confident to achieve our full year target nowadays and we do not see any meaningful Implications for the new regulations in terms of the new client onboardings in Hong Kong so far all the new clients acquisition across different markets remain very healthy and robust. So I personally feel very confident to achieve our full year target. Thank you.

OPERATOR - (01:00:10)

Thank you. Just a moment for our next question please. Next we have Emma Xiu from BRFA Securities. Please go ahead.

Emma Xiu - (01:00:31)

Shuda Huishang Now Shua Bao Kuji Fanta so the first question is about the interest income. It's actually stronger, much stronger than expected. So you mentioned that the gross interest income increased mainly due to the increased income from the stock borrowing and lending business as well as interest income from idle cash. But in second quarter HIBOR dropped a lot. It seems it doesn't impact your interest income a lot. So could you tell us what's the reason behind? But on the other hand, your interest income expense decline due to lower cost related to the stock borrowing and lending business as well as lower hybo so why there is a divergence between the trend of the gross interest income and interest expense? And what would be the trend in the third quarter for your net interest income? The second question is about other income which grew very strongly in second quarter, up 42% quarter over quarter and 176% year over year. You mentioned that it is mainly related to your phone distribution business and FX income business. So could you tell us what drives the strong growth and do you expect could you tell us what drive the strong growth behind and do you expect such strong momentum to continue in the Future? Thank you.

Arthur Chen - Chief Financial Officer - (01:05:49)

The first question regarding the interest income, despite we see a very meaningful HIBOR declines which may have some certain negative implications to our interest income. But thanks to some policy factors, number one is given the markets become more volatile and the people the investor take different opinions, then the interest for the short on the short side has increased a lot in the second quarter. In particular, we got a lot of benefit from some hard to borrow stocks from the securities lendings. Secondly is we see more clients to lock in their profit given the markets become volatile and they want to take some money off the tables. Consequently, the cash positions within their portfolios increase a lot. Therefore, these benefits actually fully offset the negative implications from the yield. And also in the third quarter so far we see a little bit rebound in the high volts and at the same time we also see the cash positions as clients continue to be maintaining relatively high levels. And also we see a very strong client asset inflow as well. So you know, compare with the second quarter, I think the interest income in the third quarter. The momentum will continue. Then for the second question regarding the other incomes, you are right. We got some benefits, you know, from the FX and also you know, the management fees arising from our wealth management products. And I strongly believe that these two revenue streams can continue in line with our expansions for our wealth management products. And also if the market continue to be choppy, actually there will be more consequence demand for the FX exchange. So besides these two normal parts, also we record certain technology service fee incomes from our technology expansion service provided by L Star bank in the second quarter as well. Thank you.

UNKNOWN - (01:08:10)

Thank you. Very helpful.

OPERATOR - (01:08:13)

Thank you. Thank you for all the questions. I will now pass back to Daniel for closing remarks. Thank you for all the questions. I will now pass back to Daniel for closing remarks.

Daniel Yun - Chief of Staff to CEO, Head of Strategy and IR - (01:08:40)

That concludes our call today. On behalf of the FUTU management team, I would like to thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our investor relations representatives. Thank you and goodbye.

OPERATOR - (01:08:55)

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