Chinese Fintech Companies Show Mixed Results in Q2 2024 Earnings Reports

FinVolution Group (FINV) Q2 2024 Earnings Conference Call Transcript

Hello, ladies and gentlemen. Thank you for participating in the Second Quarter 2024 Earnings Conference Call for FinVolution Group. At this time, all participants are in listen-only mode. After managements' prepared remarks, there will be a question and answer session. Today's conference call is being recorded. I would now like to turn the call over to your host, Jimmy Tan, Head of Investor Relations for the company. Jimmy, please go ahead. Jimmy Tan Thank you, Alison. Hello, everyone, and welcome to our second quarter 2024 earnings conference call. The company results were issued via Newswire services earlier today and are posted online. You can download the earnings release and sign up for the company email alerts by visiting the IR section of our website at irr.finvgroup.com. Mr. Tiezheng Li, our Chief Executive Officer, and Mr. Jiayuan Xu, our Chief Financial Officer, will start the call with their prepared remarks and conclude with a Q&A session. During this call, we will be referring to several non-GAAP financial measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures and reconsideration to GAAP measures, please refer to our earnings press release. Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor Provisions of the U.S. Private Security Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties are included in the company filings with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable laws. Finally, we will post a slide presentation on our high-end website providing details of our results for the quarter. I will now turn the call over to our CEO, Mr. Tiezheng Li. Please go ahead, sir. Tiezheng Li Thanks, Jimmy. Hello, everyone, and thank you for joining our earnings call. This is Tiezheng Li, CEO of FinVolution Group. We are happy to speak with you today. We ended the first half of 2024 on a positive note, driving progress growth in the China market while maintaining our rapid growth momentum internationally. Through determined, strong execution of our local excellence global outlook strategy, or simply LEGO, legal strategy, we made great strides across our business in the markets in which we operate. Cumulatively, we have served around 31.5 million borrowers across China, Indonesia, and the Philippines as of June 30, 2024. During the first half of 2024, transaction volume for the China market reached RMB92.5 billion, up 6% year-over-year. Transaction volume for the international market continued to grow rapidly, soaring to RMB4.5 billion, up 32% year-over-year. In terms of outstanding balance, China reached RMB64.2 billion, while our international market rose to RMB1.4 billion, up 3% and 27% respectively year-over-year. This stellar performance stands out as a testament to the effective execution of our legal strategy and the unwavering commitment of our team. Customer acquisition is a key element of our legal strategy. We view it as an ongoing investment that will ultimately lead to a higher percentage of better quality repeat borrowers and drive sustainable growth. During the second quarter, our number of total new borrowers reached 823,000, up 22% year-over-year and 15% sequentially, validating our ability to grow our business across different countries. Notably, as we completed the transition to better quality borrowers in Indonesia and began to diversify our business model, the percentage of new international borrowers once again surpassed the percentage of new China borrowers. Furthermore, our number of new borrowers in the Philippines continued to grow robustly in the second quarter, increasing by 198% year-over-year and 69% sequentially. Our effective social media strategy in the international market also continued to yield positive outcomes. As of the end of the second quarter, our followers on leading social media platforms such as Facebook, TikTok and Instagram had risen to approximately 1.3 million, 850,000 and 240,000, up 41%, 30% and 8% year-over-year respectively, validating the strong brand awareness of deep localization we have created in our overseas market. As a fintech leader, technology is deeply engraved in our DNA. It remains the core of our business and our primary competitive edge. During the second quarter, we hosted an internal tech competition called Hackathon [ph], bringing together 60 R&D teams for a 36-hour session in a closed-door environment. Winning projects included Admin AI Bots, which can incorporate API function calls into large language models. This framework can also be expanded to include multiple internal tools and support the management of different tools across platforms. Another standout is e-slot [ph], leveraging AIGC to utilize fragmented time slots to increase productivity. We believe these projects demonstrate great implementation potential for enhancing our operations and overall efficiency. Next, I'd like to share some updates on our ESG progress. We recently published our 2023 ESG report, the sixth in our company's history, highlighting our dedication to transparency and sustainability. In 2023, we advanced our mission of leveraging innovative technologies to make financial services better, as well as our ESG strategy centered on technology, green principles, and candidates. In addition to giving back to society with innovative technologies, FinVolution emphasizes integrity and compliance, low-carbon development, and harmonious relationships with employees, partners, and communities in its ESG management efforts. Moreover, we continue to support small business owners through the second quarter's challenges. During the second quarter of 2024, we cumulatively served around 415,000 small business owners and facilitated RMB14.2 billion of loans to neutralize their debts. I also want to highlight our longstanding cooperation with the national weightlifting team and congratulate them on their recent wins at the Paris Olympics. We are proud to promote awareness of the sport alongside the team and leverage their public image to help small business owners increase their product sales. Our joint initiatives embody our shared interest of the Olympic values of excellence, respect, and friendship, helping to create a better society for all. We will continue to integrate ESG management throughout our business operations and partnerships, providing sustainable development across the industry. Before we move on to our CFO's review of operational and financial metrics, I'd like to share that FinVolution celebrates its 17th anniversary during the second quarter, a milestone that inspires us to look towards our sustainable future. As such, we set our vision for 2030 to become an international Fintech platform connecting borrowers and financial institutions across multiple global markets, and leading the industry in each of them. We remain dedicated to leveraging innovative technology to make financial services better and greener, sustainably propelling FinVolution's long-term growth. To summarize, despite China's ongoing macro challenges, we successfully deployed our leading technologies and operations capabilities to achieve solid progress in the second quarter across all the markets in which we operate. Going forward, as China's macro environment improves, we are confident of resuming faster growth and delivering consistent returns across multiple metrics for all our stakeholders. With that, I will now turn the call over to our CFO, Jiayuan Xu, who will discuss our operational and financial results in great detail. Jiayuan Xu Thank you, Li, and hello everyone. Let's go through our key results for the second quarter. To be mindful of the length of our earnings call today, I encourage listeners to refer to our second quarter earnings press release for further details. Despite China's 5% GDP growth in the first half of 2024, uncertainty still persists in the macro environment. Small ticket items and tourism-related activities remained the bright spot with the May holiday, 618 shopping festival and consumption-related index all showing signs of improvement. However, China's overall retail sales slowed to 2% growth year-over-year in June, which does not reflect an optimal recovery trajectory. China's manufacturing PMI index remained largely stable in July with manufacturing PMI holding steady at 49.4 points. Concurrently, the manufacturing PMI and compensated PMI both reached 15.2 points, which is within the expansion range, indicating Chinese enterprises' gradual production recovery. In short, although China's economy is recovering, there are still pockets of turbulence, which we will need to navigate using our vast experience in the technological and operational process. As Li mentioned, our performance in the first half of the year was solid with transaction volume growth in both China and the international market slanting within our guidance range. This was supported by consistent excellence across numerous other areas, such as institutional funding, loan collection, and risk performance, among others. Let me walk you through some of the details. During the second quarter, our average borrowing rate in China remained stable at IRR 22.2%, validating our strong commitment to advancing financial inclusion. Given financial institutions' growing desire to obtain good-quality borrowers for our platform, our funding costs improved significantly, shrinking another 90 bps during the quarter and recording a cumulative improvement of 114 bps in the first half of 2024, leading to consistent improvement in our take rate. Such a huge semi-annual improvement in funding costs underscores financial institutions' deep trust in our credit risk assessment capabilities and our ongoing enhancement of the quality of our borrowers. Given the quality of our borrowers and ample market liquidity, we are confident of achieving continued improvement in funding costs in the second half of the year. Regarding risk management, the recovery economy and our agile adjustment to our credit risk assessment models drove progressive improvement in our day-one delinquency rate, which fell by 10 basis points sequentially to reach 5.1% for the quarter. From a vintage perspective, we maintain our view that vintage delinquency will stabilize at around 2.5%. By referring our responsive payment deduction strategy, we have enhanced the efficiency of our loan collection process, resulting in an improvement in our loan collection recovery rate to 88%, up 200 basis points from the previous quarter. We expect this strong recovery momentum of loan collection will persist in the second half of the year. Furthermore, as we continue to optimize our operations, we have strategically adjusted our business portfolio to adapt our partners' involving requirements. For the first half of 2024, transaction volume for our international market reached RMB4.5 billion, up 32% year-over-year to reach the upper range of our guidance. Supported by the strong global microenvironment and our effective legal strategy, we believe our international business growth momentum is sustainable with further diversification among different business models. Moving on to our international expansion efforts, Indonesia, our first and largest overseas market has shown continued growth in its macroeconomy throughout the first half of this year, with a recorded GDP growth of 5.05% for the second quarter and a targeted GDP growth of 5.2% for full year 2024. The Indonesia Consumer Confidence Index has remained high at above 120% for 18 months. The volume of motorbike sales increased 26% year-over-year and 17% sequentially to 599,000 as of July 2024, further illustrating the nation's heightened consumer optimism. Beside a moderate correction to 49.3% in July 2024, Indonesia's manufacturing PMI has remained above 15% since September 2021, reflecting nearly three consecutive years of sustained economic prosperity. The unemployment rate decreased further year-over-year in March 2024 to 4.8% from 5.5% in the same period last year, further strengthening consumers' confidence. After two quarters of business adjustment towards better quality spoilers under the new pricing cap, we are proud to share that we have stabilized our operations in Indonesia and continue to gain recognition from local customers and other stakeholders. This recognition has attracted new funding partners, including a leading local digital bank. We are also steadily building and strengthening our relationships with larger and more reputable local financial institutions to diversify our funding sources, thereby optimizing funding costs. Next, our second international market, the Philippines. As of July 2024, its manufacturing PMI has remained above 15% for 11 consecutive months. The Philippines' labor market is also exhibiting positive momentum, with the unemployment rate dropping to 3.1% as of June 2024 from 4.5% compared to the same period last year. Furthermore, private consumption contributed 72.5% of the Philippines' nominal GDP in the second quarter of 2024, reflecting robust domestic demand that will further support the nation's rapid economic growth. Notably, our Philippines' operations continue to outperform expectations, with transaction volumes growing 140% year-over-year and 20% quarter-over-quarter to RMB674 million in the second quarter, representing 29% of the international transaction volume. This outstanding performance reflects strong support from our local partners such as SeaBank, Union Bank, and Myer Bank, our latest funding partners who recently partnered with us on a $47 million program. With sufficient funding in place, we believe we can maximize the benefits of our e-commerce cooperation with TikTok Shop, acquire additional new borrowers from diversified channels, and sustain continued high growth rates. Now turning to our financial metrics, this quarter's operational excellence lead to better than expected financial results. Net revenue for the quarter reached RMB3.17 billion, up 3% year-over-year. Our net income was RMB551 million, a 4% increase quarter-over-quarter, underscoring our operational stability. Meanwhile, sales and marketing expenses increased by 5%, sequestering to RMB473 million as we continue to invest in growth across all of our markets. As we restructured our business mix, our leverage ratio adjusted to 3.5 times, indicating opportunities for dramatic growth when the economy further recovers. Our balance sheet remained robust, with short-term liquidity maintaining a healthy level at RMB8.1 billion, reflecting our strength and flexibility in executing our legal strategy to advance our international expansion and drive shareholders' returns. Consistently, rewarding our shareholders remains a top priority for FinVolution, both through business growth across different markets and our market-leading capital return program incorporating share repurchase and dividends. Our first share repurchase program began in March 2018, shortly after our IPO in November 2017, and has been widely embraced by our shareholders. Our buyback history indicates two repurchase programs with a total deployment of around $216 million. We are now conducting our third repurchase program of up to $115 million. Notably, in the second quarter, we deployed around $13 million and repurchased 6.1 million ADS. For the first half of 2024, we have deployed around $57 million for share repurchase. Our total cumulative share repurchase amount reached $337 million as of the end of the second quarter. In addition, our dividends have steadily increased over the past four years, with the cumulative dividend amount reaching $325 million. In total, our capital return program has returned $662 million to our shareholders, with the payout ratio rising to 49% of net profit in 2023. Going forward, we will continue to strengthen our capital return program for our shareholders. In summary, our solid second quarter results showcase our legal strategy's effectiveness. Our nameable business model and our technological advantages, we expect our Indonesia operations to become profitable in 2024 and our Philippines operations to contribute profits in 2025, boosting our confidence in deploying a more proactive international expansion strategy. As we capitalize on the massive opportunities in the international markets, we look forward to delivering sustainable growth and sharing our success with all our stakeholders. That concludes my prepared remarks. We will now open the call to the questions. Operator, please continue. Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Cindy Wang of China Renaissance. Please go ahead. Cindy Wang Thank you management for taking my call. I have two questions here. First question is, could you give us some color on the trend of your China borrowers' loan demand in the second quarter and also in July? And the second question is, in Indonesia, your customer acquisition strategy after the APR meets the requirement. And any updates on the regulation front of the interest rate requirement in 2025? Thank you. Tiezheng Li Hello, Cindy. Let me do the translation. Regarding China demand, during the second quarter, the trend of our borrowers' demand is largely in line with the weakness in residential credit demand. The daily application rate of repeat borrowers declined by mid-single digit around 6% on an annual basis and quarterly comparison, reflecting weak consumer confidence. In July and August, we have observed that the application rate of our repeat borrowers has increased by mid-single digit between 6% to 7% on a daily basis. The demand of our borrowers is concentrated in the area of daily necessity. Therefore, when the economy is weak, it will show more resilience and we expect demand will gradually improve in the second half of the year. Hello, Cindy. Let me do the translation. From the Indonesian market environment, it is presenting a much more positive trend. After the Indonesian election, political situations have normalized with an improving economy such as GDP increase. Let us concentrate on our performance in Indonesia. During the second quarter, transaction volume for Indonesian market reached RMB1.64 billion, up about 6% to 7% annually, with outstanding loan balance between RMB1 billion, up about 4%. Revenue for the quarter reached RMB430 million. Number of borrowers reached RMB530,000 up 4% sequentially, and number of new borrowers reached 200,000, up 9% sequentially. We have cumulatively cooperated with seven financial institutions, and all our funding is from local financial institutions now. Our Indonesian operations has completed its pricing transition in just five months, and we have made adjustments in borrowers' costs, model iteration and credit risk has improved by 28%, meaningfully offsetting the impact of interest rate reduction. Therefore, our take rate returned to 10%, reflecting our business entering a more stable stage. For the second half of the year and for the third quarter, we expect Indonesian operations will resume growth of over 10%, with transaction volume potentially reaching new record high. Indonesian online operations will remain stable, with credit risk, customer acquisitions improving consistently. For offline operations, we have completed the acquisition of a multi-finance license, with a controlling stake of 83.7%. Going forward, we will proactively explore both online and offline China's multi-products and buy now, pay later installments for different scenarios such as electricity and electric bikes, et cetera. We will fully leverage our China expertise and leverage them in our Indonesian market to ensure future growth. Thank you. And our next question will come from Yada Li of CICC. Please go ahead. Yada Li Then I will do the translation. Hello, management. Thank you for taking my questions. And I was wondering, what's the plan and growth target for the company's domestic business? And I've noticed that the company has gained a slightly faster volume growth compared with the peers. And looking ahead, how likely the company can maintain such growth? And how does the company balance the volume growth and profitability? That's all. Thank you. Jimmy Ta Hello Yada, let me do the translation for Alexis. As you know, China market has some changes this year, and it is very different from the previous years. And currently, the scale of China consumer market has slowed down and entered into a stage of increased competition. After the fiscal risk fluctuation in the industry during the second half of 2023, many players have experienced varying degree of earnings reduction. Under the uncertain macro environment, we are searching for certainty that is beneficial for us and execute sustainable development in China. We have a few ways to achieve this. First of all, we have certainty for success on acquiring new borrowers through information fees, leveraging on data and behavior. We continue to optimize the information fees in China and improve the algorithms, and conduct joint modeling to enhance ROI. And we are able to increase the accuracy in determining the lifetime value of our customers and maintain stable customer acquisition strategy. Transaction volume contributed by new borrowers was up 2% and 27% year-over-year. Our percentage of new customers was between 12% to 15%. At the same time, we are able to have better cost control and a healthy LTB level. Apart from information fees in China, we are also actively diversifying our customer acquisition in China and have found multiple new internet platform partners to work with us. In addition, we are also leveraging on our brand to influence our borrowers. For example, during the Olympics period, our support for the national weightlifting teams has achieved tremendous success along with their wins at the games. Along with promoting a positive image for China Olympics, we have also gained remarkable results of over 100 million views and over 20 million counts of video traffic transmission. And secondly, the management of repeat borrowers is a certainty for us, and we have over 17 years of operating history and we are very familiar with our borrowers. Through deeply excavating their diversified multi-layers and differentiated requirements, we will then refer them with the most suitable products based on different scenarios such as user profiles and behavior characteristics. And all these have led us to increase our users' promotion impact by 36% in the first half, which leads to a higher transaction volume for repeat borrowers. Thirdly, our business operations remain healthy with stable performance coupled with continuous improvement in funding costs, which leads to progressive improvement on multiple funds such as tick rates. All these ensure our high-quality growth, which is above the industry and lay the cornerstone for sustainable growth going forward. Thank you. [Operator Instructions] And our next question today will come from Alex Ye of UBS. Please go ahead. Alex Ye Thank you. So, my first question is on asset quality. We have noted that early indicators have claimed to improve in the second quarter. Just wondering what are the key drivers behind a recent trend? And should we be worrying about any potential uptick in NPR in the second half, like in the third quarter last year? And the second question is on the sequential trend on the take-away. What have been the key drivers behind? What is the outlook for the second half? And is there any more room for improvement for the final cost? Thank you. Jiayuan Xu Hello, Alex. Let me do the translation. Regarding our overall asset quality. During the initial phase of restoration last year, we leveraged on our years of experienced and [Indiscernible] accurate predictions of industry trends and higher approval rates for riskier borrowers and higher debt, higher risk, and deploy different strategies for medium risk groups, and quickly adjust for the risk strategies during the early stages of delinquencies. In the first quarter, risk performance stabilized, and we are one of the earliest platformers in the industry that are able to contain risk at a lower level. During the second quarter, we further optimized, adjusted and iterated on the overall credit limit, and explored solutions for different types of users, while maintaining growth in transaction volume and balancing risk. We have also shared that during the second quarter, our vintage delinquency remained stable at 2.5%, while day one delinquency reduced by 10 basis points to 5.1%, and loan collection recovery rates improved to 88%. We don't think this situation will happen in the second half as the overall environment is much more stable now. I would like to share more information with you. Over the past 17 years in our operating history, industry-wide fluctuations in asset qualities have occurred four times, and such fluctuations on average last around 4-5 months, with the longest lasting 7 months and the shortest lasting 2 months. The fluctuation for this round is considered to be mid-term, and the impact of fluctuation is smaller. Based on past recovery experience, the recovery process normally takes place at between the 4 to 6 month. Therefore, the fluctuation this time round is not unique, and has already shown signs of recovery. And we are confident to handle any more of such fluctuations in the future, based on our experience. Hello, Alex, let me do translation. Regarding take rates during the second quarter our average borrowing rates remains at 22.2%. Funding cost optimized by 90 bps in the second quarter while vintage delinquency remain stable at 2.5% and take rate further improved to 3.1%. For the second half of 2024, we expect average borrowing rate to remain stable and funding cost and vintage delinquencies to have further optimization. Our asset quality is popular in such environment and we are one of the few platforms that are able to maintain growth. This is the reason why we are more room to negotiate for better funding costs with our funding partners. Funding costs has continued to improve by 140 basis points in the first half, improved by 90 basis sequentially. And going forward we still believe it will have room for improvement based on how it adjusted for the year. Okay, thank you. As there are no further questions now, I'd like to turn the call back over to the company for closing remarks. Jiayuan Xu Thank you once again for joining us today. If you have any further questions, please feel free to contact FinVolution Group's Investor Relations Team. Thank you all, and have a nice day. This concludes this conference call. Thank you for joining. You may now disconnect your line.

Earnings call: Yiren Digital Q2 2024 financials show growth and challenges By Investing.com

Yiren Digital (ticker: NYSE:YRD), a prominent player in the financial services sector, reported a mixed financial performance for the second quarter of 2024. The company's financial services business exhibited robust growth, with a 59% year-over-year increase in total loan volume, reaching RMB12.9 billion. However, Yiren Digital faced a notable 77% year-over-year decline in insurance segment revenue, totaling RMB91.5 billion. Despite this, the company's strategic investments in artificial intelligence (AI) and international expansion, particularly in the Philippines and Mexico, have shown promising progress. The company also announced a new dividend policy and the appointment of Mr. Yuning Feng as the new CFO. Key Takeaways Company Outlook Bearish Highlights Bullish Highlights Misses Q&A Highlights In conclusion, Yiren Digital delivered a strong performance in its financial services and international business, backed by strategic AI investments and expanding market reach. However, challenges in the insurance sector and increased expenses have impacted profitability. The company remains focused on growth and technological innovation, with a positive outlook on its international ventures and a commitment to shareholder returns through dividends. InvestingPro Insights Yiren Digital's recent financial results paint a picture of a company with significant strengths, particularly in its financial services sector, bolstered by strategic AI investments and international expansion. To provide a deeper understanding of the company's financial health and investment potential, let's consider some real-time data and insights from InvestingPro. InvestingPro Data highlights Yiren Digital's compelling valuation metrics, with an extremely low P/E Ratio of 1.45 and an even more attractive adjusted P/E ratio for the last twelve months as of Q1 2024 at 1.39. This suggests that the company's earnings are robust relative to its share price. Additionally, the company's Price / Book ratio stands at 0.35 for the same period, indicating that the shares may be undervalued compared to the company's net assets. The company's Revenue Growth for the last twelve months as of Q1 2024 was an impressive 42.28%, signaling strong sales performance. This is further supported by a high Gross Profit Margin of 80.9%, which indicates efficient cost management and a strong competitive position in its market. InvestingPro Tips further enrich our understanding of Yiren Digital's strategic moves. The company has a perfect Piotroski Score of 9, which is a strong indicator of financial health across several measures, including profitability, leverage, liquidity, and operating efficiency. Moreover, management has been aggressively buying back shares, which can be a signal of their confidence in the company's future prospects and a commitment to enhancing shareholder value. For those interested in exploring Yiren Digital's financials and strategic position further, InvestingPro offers additional tips, including insights on sales growth anticipation for the current year and the company's high return over the last year. There are 9 more InvestingPro Tips available that can provide investors with a comprehensive analysis of Yiren Digital's potential. In light of these insights, investors may want to consider the potential undervaluation of Yiren Digital's shares and the company's commitment to growth and shareholder returns. With a fair value estimation of 6.32 USD from InvestingPro, the current share price presents an interesting opportunity for those looking to invest in the financial services sector. Full transcript - Yirendai Ltd (YRD) Q2 2024: Operator: Good day, and welcome to the Yiren Digital Second Quarter 2024 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Keyao He, Investor Relations Officer. Please go ahead. Keyao He: Thank you, operator. Good morning, good evening, everyone. Today's call features a presentation by our Founder, Chairman and CEO of CreditEase, Mr. Ning Tang; and our CFO, Ms. Na Mei; our new CFO, Mr. Yuning Feng, will also attend the Q&A session after the prepared remarks. Before beginning, we'd like to remind you the discussions during this call contain forward-looking statements made under the safe harbor provision of U.S. Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties, and factors that can cause actual results to differ materially from those contained in any such statements. Further information regarding future risks, uncertainties, or factors is included in our filings with the U.S. Securities and Exchange Commission. We do not undertake any obligation to update any forward-looking statements as required under the relevant laws. During the call, we will be referring to certain non-GAAP financial measures and supplemental measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures and reconciliations to GAAP measures, please refer to our earnings press release. I will now pass it on to Ning for opening remarks. Ning Tang: Thank you all for joining our earnings conference call today. Despite the evolving market environment, we are pleased to report another solid quarter with strong unit economics, reflecting the resilience of our business structure and operational strategies as well as our commitment to quality growth over mere expansion. Additionally, our strategic investments in AI and the seamless integration of technological innovation into our operations have fostered due growth in both technological advancements and operational efficiency. Our strategic direction positions us well to evolve into a leading AI-driven platform, paving the way for groundbreaking solutions and setting new industry standards. Now I would like to go through our business highlights for this quarter. First, our financial services business. The second quarter of 2024 saw a steady growth with total loan volume reaching RMB12.9 billion, marking a 59% increase year-over-year and maintaining a resilient consecutive quarterly growth despite an industry slowdown. The momentum is largely driven by the concrete growth of our new customers with higher credit quality as we continue to optimize our asset quality of loan portfolios. Since the second half of 2023, when the entire industry experienced substantial credit risk fluctuations, we started to proactively upgrade our customer mix and diversify our online acquisition channels. The strategy has proven effective, leading to secure growth and improved asset quality. Meanwhile, we have refined our proprietary RTA credit model for borrower acquisition, which has notably enhanced our overall credit approval efficiency. In this quarter, the number of borrowers served increased by 47% year-over-year to RMB1.5 million. Moreover, our loan facilitation platform continued to gain popularity with monthly active users rising by 88% year-over-year to RMB4.5 million in the second quarter of this year, showcasing strong customer engagement and loyalty. As we maintain our focus on attracting high-quality borrowers and note that existing high-value borrowers repeatedly use our revolving loan products, we expect this growth momentum to continue throughout the year. Meanwhile, our international business is showing exciting progress. The total loan volume overseas nearly doubled in the second quarter of 2024 compared to the prior quarter. In the Philippines, monthly loan volume facilitated exceeded RMB20 million milestone with the growth rate remaining robust as we move into the second half of the year. Moreover, as our business continues to grow, we are benefiting from economies of scale, with customer acquisition costs decreasing by 18% quarter-over-quarter. In June 2024, our business in the Philippines achieved a positive net profit margin. It's worth mentioning that our rapid growth is closely tied to our AI development and integration. Our proprietary large language models have been implemented across various operations, including customer acquisition, customer service, risk management and asset management. For instance, in our international operations, our anti-fraud AI models have processed over 10 different types of identification documents this quarter. achieving a 93% accuracy rate and significantly enhancing our risk management efficiency. Additionally, to standardize our services, our large language models are used in our overseas call centers to translate local languages, detect the sensitive work and analyze service quality and assurance, thereby boosting customer satisfaction. As more data are processed, we expect continued enhancement of our models in both accuracy and their applicability to a wider range of scenarios and uses. Turning into asset quality. Delinquency rates continue to show an encouraging trend as assets from upgraded borrowers increase. Specifically, the 15-day to 89-day delinquency rate for the second quarter of 2024 declined to 3.8%, down 10 basis points. The FPD 30-plus delinquency rate decreased for the third consecutive quarter, and then the M1 collection rate for the second quarter of 2024 increased by 290 basis points quarter-over-quarter to a historic high. We expect a sustained improvement in asset risk performance in the second half of this year as we continue to optimize our customer mix and retune our credit risk models. Now on funding costs. Our efforts in building an efficient funding management system is showing results. In the second quarter of this year, our funding costs decreased by 82 basis points quarter-over-quarter, reaching a historic low and exceeding our internal targets. The downward trend will continue in the third quarter. Moreover, given the current market funding conditions, we are strategically increasing our loan volume under the risk-taking model to better balance risk management and profitability. Regarding our insurance brokerage business, we have focused more on property insurance and expanded our customer acquisition channels to hedge against the ever-changing regulatory environment and uncertainties in the life insurance sector. In the second quarter, gross written premiums totaled RMB1.1 billion, reflecting a year-over-year decrease of 20% and a quarter-over-quarter increase of 16%. The annual decline was primarily due to the impacted life insurance business, which experienced limited sales of first year premiums as a result of product changes and the new regulations. The quarter-over-quarter growth in premiums is largely attributable to the property insurance business, where premiums reached RMB557 million, marking a 19% increase from the previous quarter and setting a new record. Going forward, we will continue to focus on three key areas in our insurance business. First, strengthening channel partnerships and expanding the scale of property insurance, optimizing our product mix and continuously increasing the proportion of higher profitability products such as liability insurance. Second, in life insurance, we will focus more on high-net-worth clients, addressing their comprehensive protection needs for retirement and savings. Thirdly, we will enhance online customer acquisition by utilizing AIGC tools to improve market outreach and boost sales volume. In our consumption and lifestyle service segment, our GMV increased by 40% year-over-year to RMB554.6 million. However, due to the high penetration rate of these services among our current customer base, we are observing a moderation in growth rates. Moving forward, the company will focus on acquiring new customers and refining customer profiles to better understand and address their comprehensive needs. Moreover, with the aim to enhance shareholder returns and boost market confidence, we are pleased to announce that the Board has approved a new dividend policy. Under this policy, the Board plans to declare dividends amounting to no less than 10% of the company's anticipated net income after tax for each half-year starting from the first half of this year. The cash dividend for the first half of 2024 set at USD0.2 per American depository share, is expected to be paid on or about October 15, 2024, to holders of the company's ordinary shares and ADSs of record as of the close of business on September 30, 2024, Hong Kong Time and New York Time, respectively. We would like to express our gratitude to our shareholders and investors for their ongoing support. Finally, we have a management change to announce. First, let me introduce our newly appointed CFO, Mr. Yuning Feng. Yuning possesses over a decade of experience in venture capital investment, investment banking and the financial control. Before joining us, he was a partner at CE Innovation Capital, where he led investments in fintech, enterprise solutions and AI sectors. Prior to that, Yuning was also served as an investment banker at China Renaissance, and a financial controller at Goldman Sachs (NYSE:GS) and UBS. We are confident that Yuning's extensive experience and proven track record will enhance our global strategy and AI focus, and we look forward to the positive impact this will bring. Also, on behalf of the Board, I would like to extend our deep gratitude to Na for her significant contributions and outstanding work during the past years. With that, I will pass it to Na, who will go through the financial performance for this quarter. As this marks her final earnings call with us, we once again thank her for her leadership and wish her continued success. Na Mei: Thank you, Ning, for all the kind words and support. Hello, everyone. On this call, I will only focus on our key financial highlights. And Yuning will join us for the Q&A section after the prepared remarks. First of all, we are glad to deliver a solid quarter with the wholesale profitability. In the second quarter of this year, our total revenue reached RMB1.5 billion, 30% increase year-over-year. In the Financial Service segment, total loan facility continued to grow slightly, reached RMB12.9 billion, up 59% year-over-year. This growing demand driven by the number of our new power [ph] and the strong demand of our small working loan products. Revenue from financial service business increased 14% year-over-year to RMB851 million. The momentum remained strong throughout the year. In the insurance sector, our gross written premium was RMB1.1 billion, a decrease of 20% year-over-year but an increase of 15% compared with the prior quarter. The year-on-year decline was driven by a substantial drop in our life insurance sales following local revenue change. During the same period last year, sales of life insurance products with cap 3.5% interest rate burdened before being withdrawn from the China market due to the new regulation. Therefore, the premium in the second quarter of last year was [indiscernible] high, making sharp contraction to the decline of the second quarter this year. Meanwhile, the causative growth in our total premium was mainly driven by the expansion of our property insurance business. Consequently, the property insurance in our overall primary mix increase, translating into a lower average revenue take rate due to the lower commission fee rate complied with life insurance products. In the second quarter of this year, revenue for our insurance segment reached RMB91.5 billion, down 77% year-over-year. Going forward, we expect continued growth in our property insurance business in the foreseeable future and gradually cover our life insurance products, along with the market trend. In the consumption and lifestyle segment, the total GMV for this quarter reached RMB555 million, an increase of 40% year-over-year but decline of 11% quarter-over-quarter. As mentioned by Ning, as the penetration rate of service and products in this segment grows into a substantial level, with past growth rate of this segment will continue to moderate. On the expense side, sales and marketing expense increased 21% year-over-year to RMB285 million. This growth was mainly fueled by the swift pension of our financial service segment and enhanced marketing efforts focused on tracking new and high-quality customers as we continue to redefine our customer base. Research and development expense increased to 69% year-over-year to RMB56 million due to our ongoing investment in AI enhancements and technology advancements. Administrative and service costs decreased to 29% year-over-year to RMB247 million. This is primarily attributed to the deeply insurance business volume, especially the sharp decrease in the first premium for our life insurance products, which led to a low channel base and relevant settlement counts. Our G&A cost increased 8% year-over-year to RMB138.7 million, remained largely stable. The launch for control assets and receivables RMB123 million for this quarter or 152% year-over-year increase and 20% quarterly growth. The increase was mainly driven by the growth in total loan volume facility. Moreover, provision for contingent liability this quarter increased to RMB278.9 million for RMB12 million in the same period of last year. This is due to our rapid write-off in loan volume facility by our risk-taking model, which led was significant upfront provision under current accounting policy. However, over time, this provision will appear to be transferred to guaranteed service side. Actually, in the second quarter of this year, the revenue from guaranteed service reached RMB78.9 million, more than 4x upside in the same period last year. Now on the bottom line, our net income decreased 22% year-over-year to RMB410 million this quarter due to three reasons. Firstly, our profitability in the insurance business declined as mentioned above. Secondly, marketing expense increased due to our ongoing investment in targeting new high-quality borrowers for our financial service business. Thirdly, substantial upfront provision has been accrued as we led up our loan volume under the risk-taking model. Currently, our profit margin reached 27.4%, still high level in the industry. Regarding the cash flow, with general profit RMB369 million net cash from our operation in this quarter, remaining healthy and strong. On the balance sheet side, our balance sheet remains strong with RMB5.5 billion in cash and cash equivalents as of the end of this quarter, and we [indiscernible] to enhance our shareholder returns. As Ning just introduced, we are pleased to announce the same dividend plan with no less than 10% of our after-tax income for the prior 6 months distributed to our shareholders. The dividend of USD0.2 American Depository Share is intended to be paid on or about October 5, 2024, for holders of the company's ordinary shares and ADSs of record as of close business on September 30, 2024. Moreover, we are still doing share buybacks. In the second quarter of this year, we allocated USD4 million to purchase shares in the popular market, where our total deployment for the share repurchase program to USD13.5 million by June 13, 2024. Lastly, our business outlook based on our assessment on the current business and marketing conditions, we expect our revenue for the third quarter of 2024 to stand between RMB1.4 billion to RMB1.5 billion with a healthy net profit margin. This represents our current and preliminary assessment, which may be subject to change and uncertainties. This concludes our remarks. Operator, now we are open for questions. Thank you. Operator: We will now begin the question-and-answer session. [Operator Instructions]. The first question comes from Ethan Yu [ph] with First Trust Group Inc. please go ahead. Unidentified Analyst: Hi, good evening. Thanks for taking my questions. Congrats on a really solid quarter. My first question is about your AI development. As disclosed in your ESG report, the company has developed a range of AI systems. Regarding your AI strategy, have there been any notable advancements in AI applications or research? Can you share more details about any specific investments in AI sector? And also, have there any been significant risk in our AI product commercialization? Operator: Excuse me, Ethan, I'm sorry, you're not coming through clearly. Is it possible to move the microphone closer to you and repeat, please? Ning Tang: I got the majority of the question and it's about the AI development, investment, commercialization, right? Yes? Operator: Okay. He accidentally disconnected. Just a moment, Walt, he must have pressed something accidentally. So, would you like to go to the next question and have him come back... would you like me to have the next questioner ask... and then when... The next question is from Bruce Oren with Black Lab Fund. Please go ahead. Bruce Oren: Yes. Hello. I'd like to express appreciation to the Board for the new dividend. I mean that's a good move. I'd also like to congratulate and thank Ms. Na Mei for helping to build an extraordinary company under circumstances that were often difficult. Thank you. I have two questions. The first is, could you add some insight into the large second quarter increase in net cash used in investing activities and net cash used in financing activities? And my second question is, where is most of the international business growth? Thank you. Ning Tang: Na, please cover them first. Na Mei: Yes. As per my script for cash flow for our operation business, as we mentioned to the purpose, our financial service segment, the management is from a financial leasing opportunity to pick [Indiscernible]. Na Mei: Yes, I'm explaining our investment cash flow, the reason why we increased so much in the first quarter. And as I mentioned, as you remember that last year, we purchased a new financial guarantee company, Chongqing Jintong, to our financial service segment purpose. For this year, the management is still going on to [indiscernible] financial license to purchase for our financial service business like the AMC Assets Company and micro-small lending companies and other financial guarantee companies for this purpose. So, for this financial license companies before the [indiscernible] come to the formal operations and repurchase process based on the communication status, we should replace some investment amount to our partners to lock the acquisition target. So, you can see our investment cash flow remains catch out that most of our investment payment to our potential financial lease target. I hope my answer has answered your question. Bruce Oren: Yes. Do you see the cash used plateauing or continuing to grow greatly? Na Mei: Yes, I think you can see for the cash from the operating well keeps healthy and stable cash flow. And also, we have used the cash to other investment opportunity, no matter the internal financial license or the international overseas business development also in our AI strategy. We also have many cash implementation. But in our forecast, we still have the confidence in our cash and cash equivalent balance with strong status in the next quarter, yes. Ning Tang: Our international business covers the Philippines and Mexico. And we're also looking to expand to certain other markets in Southeast Asia and other parts of the world. Ning Tang: Yes, I can hear you very clearly. And actually, as I reported at the beginning, we use AI extensively in our operations. And we also try and yes, leverage the technology capabilities developed internally for potential like external like opportunities like we have fintech partners, financial institutions that are interested in our solutions. And yes, I hope we'll see some results later this year or, yes, first half next year. At the same time, we try and build a strategic investment and partnership infrastructure like ecosystem. And so, we've made a couple of small, but in my view, hopefully, yes, very promising investments in the AI space, but their contributions are very tiny. And going back to our like AI, like the use cases internally, for example, like, we use AI in customer like acquisition, customer service, like we use robots like, and the large language models, yes, for like incoming out bounding calls, like say, when we detect the customer like emotions change, it's time to switch to like a human, like, operator, we will do that. And also, the machine can interact with a customer up to the right point to switch to the human, so on. And of course, we use voice recognition technology. And also, I gave the example, our large language models used in the Philippines, right, can do a great, visual recognition algorithm because in the Philippines, like IDs personal identification, like a paper work is really paper. So, it's not very digital and it takes quite some skills to detect the risk. So, AI plays a key role there and so on. So yes, basically, we use AI extensively in our own operations and some like technologies are really welcomed by outside partners, prospects like buyers, yes, so customers. So, we will try to monetize these technologies as well. Unidentified Analyst: Okay. My second question is there is a continued rise in your R&D costs. Could you share us more color about how these costs have been used? Ning Tang: Yes. So, for our AI, large language model development. Yes, we take open source a model combined with our own data and business algorithm to develop our proprietary models, and we purchase hardware and yes, develop software and so on. And so, in the second quarter, I believe, it was about RMB56 million, yes. So, I think this is money well spent. And yes, so I think our investment in AI has been prudent. But, strategic for the future. Unidentified Analyst: Can I ask one more question about your overseas business? Ning Tang: Sure. Unidentified Analyst: Yes. Can I know what is the total loan volume facilitated overseas in second quarter 2024? I'm impressed with the growth rate achieved in the Philippines. And also, you have mentioned that you have made another progress in Mexico. And what is the driving rate achieved in Philippines? Ning Tang: Say it again, sorry the last part... Unidentified Analyst: Yes, what is driving this growth? And what's your outlook for the revenue generated from overseas business and profit in, let's say, second half 2024 or the coming 2025? Ning Tang: I see. Well, yes, the growth rate has been phenomenal largely because the base is too small. We really hope to grow the base. And so, the second quarter, loan volume was RMB63 million and we expect to do an over RMB100 million in this quarter. We hope to maintain, a relatively high growth rate, for the foreseeable future just because the base is still small. And also, you asked about the growth driver. I mean, the Philippines and some other countries in Southeast Asia and also in Latin America, they are large countries, with population of over like 100 million. And also, the target customer base is very young, which we like very much. And so, they have really strong demand for convenient credit, but the market certainly lacks such opportunities, means. So, we are there to yes leverage the capabilities we've developed in Mainland China. And so, I think this is a very, very big opportunity, frankly speaking, for us to do credit tax outside of Mainland China in these large population, young markets where digital finance is still in very early days and booming. Unidentified Analyst: Yes. Okay. Understood. May I know the current customer acquisition cost for these countries, especially in Philippines? Ning Tang: Na, you have this number? Na Mei: Yes. So, for our Philippines business due to the acquisition cost is based on our new customer acquisition strategy. And based on the current data in this quarter, about 1% is around $5 or $10 of 1-unit person. But I think in the second half year of this year, as Ning mentioned about, we hope and look for our development growth, our Philippines business and other wholesale business. So, in the second half of the year, for our business development, we will [indiscernible] to our new customer acquisition. So, we plan acquisition rate [indiscernible] will be a bit increased in third and fourth quarter, but in this quarter, it's about $5 or $10 1 person. Yes. Operator: The next question comes from Dylan Paul [indiscernible]. Please go ahead. Unidentified Analyst: Yes. Can you hear me? I'm going to switch off speaker like you recommended. Thank you, so much. This is Dylan Paul [ph] here, private investor. Myself and my friend, Dale Tiongson very sorry, he can't be here, have been following and invested in the company for a couple of quarters now along, and we want to thank you all for the strong result. And we also mentioned that we'd like to hear from any people listening to the call who are interested in sharing bidirectional insights. So please reach out to us via e-mail or social media, which is easily found online. We have two questions. The first is related to the guarantee business. And I will say that these questions actually that Dale is the one who's most talented in understanding and insights on the business. So, I won't be able to ask any further follow-up, but I wanted to get them out there for his sake. The first is related to the guarantee business. It seems like this is becoming a growing part of the business, and we are interested in some additional color. Maybe you could speak towards how the guarantee contracts work in terms of sharing of credit risk and what that means for a return relative to the default rate on the underlying loans? And we also understand the accounting to be atypical for provisions. Could you maybe explain just how the accounting works or provide additional color? And would it be helpful to show progression of loss provisions to write-offs in the quarter similar to how you do for contract receivables in the 10-K. And then the final component, which again, maybe I should be separating...well, actually, let me stop right there. And then it sounds like, sorry, this is my first time doing a call before. It sounds like I can come back and ask that second question. I won't have any follow-up on the first because your answers, I won't be able to adequately process in the way Dale does when he's listening to them. So, let me just stop right there with that first question there for questions. Ning Tang: We'll try to cover that. Maybe I can suggest that, yes, we can have a follow-on call to go into some of the details with your friend. Unidentified Analyst: All right. That's fine. And then let me see then whether you have the same recommendation for the second question then, which is it's related to the parent controlling shareholder structure, which I guess we can or Dale in particular, but we have continued to be confusing for us. And I know we have asked about it before. But just wondering, is there any further color you can provide regarding CreditEase and how the relationship works with Yiren, which, again, I've been involved in that question before. And so, I know you've addressed it and then you mentioned this before that he knows there's a large transaction in 2019, and this is maybe the new part that can be addressed and nothing has happened since. But are you expecting any related party transactions coming up here, if you're able to speak to that? Thank you. Ning Tang: Not as substantial as like the one you mentioned several years ago, not even close. Yes. Unidentified Analyst: Okay. All right. Well, that's all of our questions or Dale's more specifically. And again, most importantly, thank you for that tour that you guys gave me while I was in China and answering questions at that time and all your efforts that you've done with both myself and Dale to help understand the company, and we are currently very bullish and excited about everything you guys have accomplished so far. Ning Tang: You are more than welcome to come back, see us. And so yes, we'll book a follow-up call to cover all the detail... Unidentified Analyst: And again, Dale is a technical guy, that stuff confuses me too. I can't follow him... Operator: This concludes.... Go ahead, please. Na Mei: Okay. Thank you for listening to our company, and I hope you will come in again later. Operator: And then this concludes our question-and-answer session and concludes the Yiren digital conference call. If you have any further questions, please contact the Investor Relations team at Yiren Digital. Thank you for attending today's presentation. You may now disconnect.

Earnings call: Futu Holdings sees robust client and income growth in Q2 By Investing.com

Futu Holdings (NASDAQ:FUTU), a leading tech-driven online brokerage firm, reported significant growth in the second quarter of 2024, with a notable increase in both paying clients and net income. The company hit a new high of over 2 million paying clients, marking a 29% year-over-year (YoY) growth and an 8% quarter-over-quarter (QoQ) increase. Net income rose by 8% YoY and 17% QoQ, reaching HKD1.2 billion. Furthermore, Futu Holdings raised its full-year guidance for new paying clients to 550,000, following a 168% YoY increase this quarter. In summary, Futu Holdings has demonstrated strong performance in Q2 of 2024, with significant growth in paying clients and net income. The company's expansion into new markets and product offerings, such as cryptocurrency trading and financial products in Japan, have contributed to its success. Despite not having a dividend policy, Futu Holdings is committed to reinvesting in growth opportunities, signaling a positive outlook for the future. Futu Holdings (FUTU), in its recent earnings report, showcased robust growth and a positive trajectory for 2024. To provide a deeper understanding of the company's financial health and stock performance, let's delve into some key metrics and insights from InvestingPro. InvestingPro Data shows Futu's P/E ratio stands at an attractive 15.54, indicating that the stock is trading at a reasonable price relative to its earnings over the last twelve months as of Q1 2024. This is supported by a PEG ratio of 0.9, suggesting that the company's earnings growth is priced efficiently in the market. Additionally, the company's gross profit margin impressively reached 93.09%, reflecting strong operational efficiency. An InvestingPro Tip highlights that Futu's price has experienced a large uptick over the last six months, showing a 20.0% price total return, which aligns with the company's positive performance and growth in paying clients. Moreover, analysts predict the company will be profitable this year, which is corroborated by the recent increase in net income reported for Q2 2024. For investors interested in a deeper analysis, InvestingPro offers additional tips on Futu Holdings. Currently, there are 7 more InvestingPro Tips available, which provide valuable insights for evaluating the company's stock and future potential. In summary, Futu Holdings' financial data and stock performance suggest a positive outlook, aligning with the company's strategic growth plans and expansion into new markets. Investors can find further guidance and detailed analysis on Futu Holdings by visiting https://www.investing.com/pro/FUTU. Operator: Hello, ladies and gentlemen, welcome to Futu Holdings Second Quarter 2024 Earnings Conference Call. [Operator Instructions]. I would now like to turn this conference over to your host for today's conference call, Daniel Yuan, Chief of Staff to CEO and Head of IR at Futu. Please go ahead, sir. Daniel Yuan: Thanks, operator. And thank you for joining us today to discuss our second quarter 2024 earnings results. Joining me on the call today are Mr. Leaf Li, Chairman and Chief Executive Officer; Arthur Chen, Chief Financial Officer; and Robin Xu, 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 involve inherent risk and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in 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'll now turn the call over to Leaf. Leaf will make his comments in Chinese and I will translate. Leaf Li: [Foreign Language] Thank you all for joining our earnings call today. In the second quarter, we acquired 155,000 paying clients, representing 168% year-over-year growth. By the end of the quarter, we crossed the 2 million paying client milestone translating into a 29% growth year-over-year, and 8% growth quarter-over-quarter. Six months into 2024, we have achieved over 80% of our full year new paying client guidance. Given the strong and year today momentum, we would like to raise our guidance again to 550,000 new pain clients in 2024. New paying clients in Hong Kong and Singapore, both recorded double-digit sequential growth, a mid-market rebound collectively contributing to over one third of paying client growth in the second quarter. In Japan, new paying clients grew by double-digit quarter-over-quarter as we continue to strengthen product offerings, iterate our marketing initiatives and increase our brand awareness. Meanwhile, Malaysia maintained strong momentum and contributed the highest number of new paying clients among all markets to quarters in the role despite sequential deceleration. One major product update is our recent launch of cryptocurrency trading in Hong Kong and Singapore. Compared to some other markets we operate in, we believe that the penetration of crypto in Hong Kong and Singapore helps much room for growth given their supportive regulatory environment, rising awareness of virtual assets and the emergence of more user-friendly virtual asset trading platforms. The adoption curve will not be linear and obviously highly subjective to market sentiments. But when we develop our product roadmap, we think less about short term monetization than offering a broader portfolio with asset classes with low correlation to help our clients navigate market cycles and thus drive higher client wallet share. In terms of our product roadmap for other international markets, in Japan, we are on track to launch NISA savings account, mutual funds, and U.S. margin trading in the coming months. In Malaysia, we recently rolled out ring aid and USD denominated money market funds. To help our clients capitalize on the vibrant local IPO market in Malaysia, we also launched a Malaysian stock IPO subscription services. In Canada, we just introduced cash plus product that enable clients to earn a census on their idle cash. Total client assets jumped 24% year-over-year and 12% quarter-over-quarter to a record HKD579 billion. The growth was fueled by the robust net asset inflow across markets and the market appreciation of our client stockholdings. With net asset inflow, according rapid sequential growth, we have succeeded our full year 2023 number only six months into the year. In the second quarter, our clients continue to take on more leveraged positions, submit uplift, market sentiment. As a result, margin financing and securities lending balance climb to an all-time high of HKD44 billion. Driven by robust net asset and flow into equities and money market funds, total client assets in Singapore grew by 19% quarter-over-quarter, marking the eighth consecutive quarter of double-digit growth. Average client assets in Malaysia recorded 45% sequential growth while total client assets more than doubled. In Australia, average client assets realized sequential growth for three consecutive quarters. The growing optimism continued into the second quarter for Hong Kong stocks and major U.S. indexes national all-time high, total trading volume grew to HKD1.62 trillion of 69% year-over-year, and 21% quarter-over-quarter. For Hong Kong stock trading, client interest persisted for technology in high dividend names. Trading velocity also rebounded sequentially amid a palpable shift to market sentiment. As a result, Hong Kong stock trading volume increased by 28% sequentially to HKD358 billion. Boosted by the continued AI mania and resurgence of mean stocks, U.S. stock trading volume grew by 19% quarter-over-quarter to HKD1.24 trillion. In the U.S. market, advanced options trading tools combined with user-friendly interface and extensive educational resources boosted our repeal among options traders. In the second quarter, the number of options traders in the U.S. increased by around 60% year-over-year, while the number of options contracts traded more than doubled compared to the year ago quarter. Wealth management recorded another quarter of exceptional growth, as our clients saw diversification and continue to part more funds in safer assets like money market funds in U.S. treasury bills. Total client assets grew by 84% year-over-year and 25% quarter-over-quarter to around HKD80 billion. As of quarter end, wealth management assets accounted for 14% of our total client assets and over 25% of paying clients help wealth management positions. We have 451 IPO distribution in our clients of 21% year-over-year. We underwrote seven of the 10 largest Hong Kong IPOs in the first half of 2024. Next, I'd like to invite our CFO, Arthur to discuss our financial performance. Arthur Chen: Thank you, Leaf 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 HKD3.1 billion, up 26% from HKD2.5 billion in the second quarter of 2023. Brokerage commission and handling charge income was HKD1.4 billion of 45% year-over-year and 27% Q-over-Q. The increase was mainly driven by a 69% year-over-year and a 21% Q-over-Q growth in total trading volume. Given our per share pricing model for U.S. stock trading, the blended commission rate increased from 8.1 basis point to 8.5 basis point. As a result, brokerage income grew at a faster rate than trading volume Q-over-Q. Interest income was HKD1.6 billion of 13% year-over-year, and 18% Q-over-Q. The year-over-year and the Q-over-Q increase was mainly driven by high end margin financing income due to an increase in daily average margin balance and the higher interest income from security borrowing and the lending business. Other income was HKD161 million of 27% year-over-year and 3% Q-over-Q, the year-over-year and the Q-over-Q increase was both primary attributable to higher funded distribution income, while the Q-over-Q increase was partially offset by the decline in underwriting fee income. Our total costs were HKD574 million increase of 53% from HKD375 million in the second quarter of 2023. Brokerage commission and the handling charge expenses were HKD87 million, up 58% year-over-year and up 45% Q-over-Q. The expenses grow by a wider margin than income sequentially, mainly due to the cap fee scheme for U.S. stock trading. Under the per share pricing model, we charge a maximum of 58 basis points of trading volume per order for U.S. stock trading. So when client trade a more low-priced [me stock], as was the case in the second quarter, there will be a mismatch between the gross rate of revenue and the expenses. Interest expenses were HKD378 million up, 71% year-over-year and the 21% Q-over-Q. The year-over-year and the Q-over-Q increase was mainly driven by high interest expenses associated with our security borrow and the lending business. Processing and the servicing cost was HKD109 million up 11% year-over-year and 13% Q-over-Q. The year over increase was largely due to higher crowd service fee and the Q-over-Q increase was mainly driven by higher market information and data fees. As a result, our total gross profit was HKD2.6 billion, an increase of 21% from HKD2.1 billion in the second quarter of 2023. Gross margin was 81.6% as compared to 84.9% in the year ago quarter. Operating expenses were up 26% year-over-year, and the 16% Q-over-Q to HKD1.1 billion. R&D expenses was HKD374 million, up 3% year-over-year. And the 12% of the Q-over-Q. The year-over-year and the Q-over-Q increase was mainly driven by increase in R&D headcount to support our new markets. Selling and marketing expenses was HKD338 million, up 93% year-over-year, and the 16% of Q-over-Q. The year-over-year increase was driven by the triple digit year-over-year growth in new paying clients partially offset by lower client acquisition cost. The Q-over-Q increase was mainly due to the sequential increase in client acquisition costs. G&A expenses was HKD362 million, up 16% year-over-year and the 20% Q-over-Q. The year-over-year and Q-over-Q increase was primary due to increase in headcount for G&A customer. As a result, income from operation increase by 18% year-over-year and 24% Q-over-Q to 1.5 billion. Operating margin declined to 47.3% from 50.6% in the second quarter of 2023, mostly due to higher marketing expenses. Our net income increased by 8% year-over-year, and the 17% Q-over-Q to HKD1.2 billion. Net income margin declined to 38.6% in the second quarter as compared to 41.1% in the same quarter last year. Our effective tax rate for the quarter was 15.2%. That conclude our prepared remarks, we now like to open the call to questions. Operator, please go ahead. Operator: [Operator Instructions] First question comes from the line of Cindy Wang from China Renaissance. [Foreign Language] Thanks for taking my call. I have two questions. One question is related to crypto services. So recently you have launched, the crypto services in Hong Kong and Singapore. Could you provide some color on client feedback on crypto trading? And what's your client acquisition strategy? Second is, basically now is around two months for the third quarter. So can you give us some lately trend for the third quarter, including like trading volume, trading velocity, AUM and margin financing and security lending balance. Arthur Chen: [Foreign Language] For the second quarter today, we -- what we witness is still very robust client asset inflows. Despite there will be some negative impact implications from the market-to-market loss due to the challenges that we face in Hong Kong markets. And in terms of clients trading turnover velocity and also the trading volume, et cetera, we both seen that these indicators remain very strong and have a sequential Q-on-Q increase. In terms of the commission rate, given that we got some benefit in the second quarter in line that a lot more clients are trading these low-value mid-stock which give us some positive uptick in terms of the take rate. So such benefit will become normalized in the third quarter so far. Thank you very much. Daniel Yuan: [Foreign Language] We launched cryptocurrency trading in Hong Kong and Singapore on August 1 and August 12, respectively, and we now offer a limited number of mainstream trading pairs. So far, we have a number of clients that have activated their cryptocurrency trading accounts, because we offered the product not long ago. And because recently, the cryptocurrency market experienced very significant pullback and fluctuation. The clients trading volume of cryptocurrency and client assets are both pretty small in comparison to the scale of the whole business. Right now, our focus is to continue to enhance our product capabilities and continue to provide investor education and operations to further enhance our value proposition as a one-stop asset allocation platform. Thank you. Operator: And the next question comes from the line of Chiyao Huang from MS. Chiyao Huang: [Foreign Language] So I got 2 questions. One is on the -- could management provide more color on the Q-on-Q increase in client assets. How much is the inflow and how much is mark-to-market driven. And in particular, where the inflows are coming from in terms of the geographic mix in 2Q? And second question is on the Japanese client acquisition. Do we see any acceleration trend in the second quarter compared to the first quarter? And how is the trend in 3Q going so far right now. And also, what's the -- currently the [ preclient ] assets in Japan and where the clients are putting their money at in Japan. Arthur Chen: I will take your first question, and I will leave the second question to my colleagues, Daniel. [Foreign Language] Now in terms of the benefit from our total client assets increased in the second quarter, our total client assets increased by 12% Q-over-Q. And to break it down, majority of the contribution actually comes from the client asset inflows in terms of the top of their accounts on cash or stock transfer which accounts for roughly to high single-digit contribution and the remaining 2% to 3% belongs to the to market positive benefit. And Hong Kong and Singapore, both these are 2 key markets in terms of the contribution of new asset inflows, which roughly accounts for 80% of our total net asset inflow. Daniel Yuan: [Foreign Language] So overall, in the second quarter, we saw a very robust net new paying clients in Japan actually recorded a very decent quarter-over-quarter growth. And in terms of the absolute number of paying clients contributed, so Japan and Malaysia are in the first tier. So we were very happy with what we saw in Japan in the second quarter. And at the quarter end, we had close to 800,000 users, which we think is also a very healthy growth. And previously, we gave the guidance of having 1 million to 1.5 million users in Japan by year-end, and we're still very confident about that guidance. So in terms of driver for new paying client growth, 2 things. First of all, it's just to continue to roll out a new product. So in comparison to some of the mainstream players in Japan, we still lack a couple of very key financial products. And as Leaf mentioned in his opening remarks, we have a plan to offer those products in the next couple of months. And secondly, brand building is also important, as we've realized, and a lot of investors are aware right now, Japan users usually take a bit more time to trust the brand, especially a brand from overseas. So that's why we'll continue to invest in our brand, and that's also why we did a power lounge and had a brand ambassador in the second quarter, these all contributed to a higher brand equity, and we'll continue to invest in brand building. And in terms of average client assets right now, it's a couple of thousand U.S. dollars and mostly clients still allocated into U.S. stocks. Although the percentage of assets in Japan stock and the percentage of trading volume from Japan stock have been increasing, and we believe that as we continue to enhance our Japan stock product offering, these percentage contribution will continue to go up closer to the market level. Thank you. Operator: And the next question comes from the line of You Fan from CICC. You Fan: [Foreign Language] I've got 2 questions. The first question was our plan for new product offerings, any product pipeline, especially in new markets like Japan and Malaysia. And the second question, what's our progress of the share repurchase program. Daniel Yuan: [Foreign Language] So in terms of the product pipeline for Japan, as Leaf mentioned earlier, a couple of very important financial products for us and also what we intend to roll out in the next couple of months, include number one, the NISA savings accounts; and number two, mutual funds; and thirdly, U.S. margin financing. And for Malaysia, I think we've kept a very nice pace of new product rollout. And in the third quarter, quarter-to-date, we've actually rolled out Malaysian stock IPO subscription services and also the cash plus product, which is a money market product. And from our experience, when the IPO market is very hot, usually IPO subscription service can be a good contributor of new client growth. And during the high rate environment, money market products can help increase client assets. And in terms of future product pipeline in Malaysia, we plan to roll out this quarter, the stock transfer for Malaysian stocks so that we can attract existing clients and other brokers in Malaysia. Arthur Chen: [Foreign Language] Our existing share repurchase program actually will cover 2024 and also 2025. So far, we have not exercised this program yet. We will keep you and also other analysts and investors, our shareholders on post if we exercise any of -- if we exercise any of them. Operator: The next question comes from the line of Zoey Zong from Jefferies. Zoey Zong: [Foreign Language] I have 2 questions. First, what's the business model of your crypto series? And second, we have seen that interest expenses increased by 21% sequentially in Q2. Wondering what's the reason behind? And how should we think about the trend going forward? Arthur Chen: [Foreign Language] In terms of the interest expenses increase in the second quarter, which I think is mainly associated with our clients, margin financing and the stock borrowing. In particular, in terms of stock borrowing the pricing -- the implied interest rate is more relied on the market driven demand and the supply situation which is very hard to give a precise estimation and very difficult to project. And if I just assume the status -- as the status quote, if our penetration rate of our retail clients to continue in con in the store borrowing universe I think the expenses associated with such activities, revenue on the top line will both further increase. Daniel Yuan: [Foreign Language] So for cryptocurrency trading since we now only offer the trading services, the business model is very straightforward as we charge a commission. And when we designed our pricing scheme, we want to balance our market competitiveness and monetization potential. So right now in Hong Kong and Singapore, we both work with an upstream provider to offer cryptocurrency trading. And under our current pricing model, taking into consideration the upstream cost, we still enjoy pretty good gross profit margin. So the net take rate of cryptocurrency trading is higher than the net take rate for Hong Kong and U.S. stock trading. Thank you. Operator: And the next question comes from the line of Emma Xu from Bank of America (NYSE:BAC) Securities. Emma Xu: [Foreign Language] So I have 2 questions. The first question is about the client acquisition. You just raised your full year new paying client target to 550,000, which means you need to acquire around 108,000 new paying client per quarter. And usually your client acquisition is seasonally low in fourth quarter. That implies your first quarter client acquisition is still quite strong. So could you tell us which markets are driving your client growth in third quarter? And the second question is about -- is that given the rising expectations of red cards and then the recent wild volatilities in the AI stock. So do you see the changes in client asset allocation say, between the stocks, the bones and the options, et cetera? And then in terms of the allocation within the stock say from the AI growth stock to value stock? And how will this changing behaviors impact your take rate and correspondingly, given the rising expectation of record, how will it impact your interest income? I know it could probably have limited impact on your interest income this year, but what would be, say, the 25 bps RevPAR impact on your interest income next year? Arthur Chen: [Foreign Language] In terms of the guidance for new client acquisition, as Leaf mentioned in the opening remarks, we have already revised our targets to 550,000 new paying clients for the whole year. And in the second quarter, major contributions for the new clients acquired is number one is the Hong Kong and Singapore, which contribute over 1/3 of our new paying clients acquired in the second quarter. And the combined Japan and Malaysia, which accounts for roughly 40% for the whole pie. And based on the quarter-to-date situations, we are still very confident we can achieve the guidance we mentioned before despite there can be some uncertainties coming -- arising the U.S. election in the fourth quarter. And we do expect contribution breakdown from the -- from these markets should be similar to what we have witnessed in the first half of this year. And of course, for the second question, of course, we got some negative implications from the rate cut. We have some preliminary sensitivity estimations. Every 25 basis point rate cut, our pretax profit, operating profit will be impacted by HKD5 million to HKD8 million, if we did not account any positive -- potential positive implications from the market trading volume increase because of the rate hike and also the benefit from the new client acquisitions for these implications. And so far, we have not witnessed a very significant client asset allocation changes arising from your observations. But in the wealth management universe, we do witness there will be more asset allocations by our clients on the fixed income products, including the treasuries and also fixed short duration fixed further, et cetera. Operator: And the next question comes from the line of Charles Zhou from UBS. Cheng Zhou: [Foreign Language] So first of all, congratulations to the management team. I think it's a very strong set of results and also above the consensus. So my question is regarding to the client acquisition costs because I think this is very well managed. So do we -- so do we have any updates for the 2024 for the full year guidance? And if you don't have any new guidance or any updates, we believe there's also a decent huge upside from here as well. So could you please also share your marketing and also client acquisition strategy in several of the key markets in the second half? My second question is related to the interest income. Our understanding there are 3 major components: idle cash interest income, margin financing and stock lending interest income as well as the IPO financing income. So could you please just help us to split the interest income from these 3 components for the second quarter? Arthur Chen: [Foreign Language] For your 2 questions. Number 1 is about the CAC guidance, any update. In the second quarter, our CAC is around HKD2,200, which have 30% Q-over-Q increase versus Q1, which has a very -- relatively very low base because of the significant contribution of new clients acquired in Malaysia. We think the situation just be normalized in the second quarter. And for the third quarter for today, I think in terms of CAC, we still maintain it's -- in a relatively low level, which is below our guidance range HKD2,500 to HKD3,000 for the whole year. On relatively speaking, I will become more constructive in terms of the CAC guidance. Based on the current run rate, I think it will be very likely locate in the low end of our range or even lower than this range for the whole year. Then the breakdown of the interest income because of the market changes in Hong Kong and in the U.S., the interest income deriving from the IPO financing both in Hong Kong and in the U.S. is not material and clients idle cash and also the margin financing almost contribute equally in terms of the interest income breakdown despite I feeling -- my feeling is the interest income from idle cash were slightly higher than the second half. Thank you very much. Operator: And the next question comes from the line of Peter Zhang from JPMorgan (NYSE:JPM). Peter Zhang: [Foreign Language] Let me do the translation. Many thanks for management giving me the opportunity to ask the questions. This is Peter from JPMorgan. I have 2 questions. My first question is on Malaysia business which management could give us more details on the progress of the Malaysia business. For example, the client asset inflow, average current asset current profile and current trading turnover? And what's the outlook of the Malaysian business. And my second question is about the Airstar Bank. I understand Futu to invest 40% shares into the Airstar Bank in June. We wish to understand what the rationale behind this investment and going forward what Futu's strategy to cooperate with this virtual bank in Hong Kong. Arthur Chen: [Foreign Language] Now I think the key -- we think the key motivations for the reason for we to consider to do these investments. Number one is we continue to get a lot of requests or suggestion from our users and the clients. In the past several years in Hong Kong, given more and more our [ hotlines], met a lot of pinpoints in terms of the fund transfer to the brokerage accounts. And secondly, of course, we do think in terms of our future strategic direction, there will be a lot of synergy and also same scenarios between the brokerage business, wealth management business in Futu and also the retail banking business and also high net worth wealth management business normally provide by the bank. So far, the deal was just completed in the second quarter. We work strive very hard and work very closely with the local management of the Airstar Bank alongside with Xiaomi (OTC:XIACF) and other shareholders, Airstar to align our long-term strategy. Having said that, I think the near-term focus will be more on Futu itself, especially how to contribute our R&D capabilities and the technology capabilities to further [indiscernible] and enhance the infrastructure of the commercial -- of Airstar Bank's products. Daniel Yuan: [Foreign Language] So in terms of our client profile, given our value proposition as a one-stop trading platform for Malaysia and the U.S. stocks, so far, the clients we have attracted have some level of investment experience, and most of them are young Asian mails and have a higher income level than the country [indiscernible]. And also, we've seen that the trading turnover of our Malaysian clients are meaningfully higher than the group average. So given the ARPU and CAC numbers we have seen in the second quarter, we think the payback period of Malaysia is better than when we first launched in Singapore. As of the end of the second quarter across our different cohorts in Malaysia, net asset inflow, average client assets all were trending month-over-month and average client assets was actually up 45% Q-on-Q. And as our average client assets in Malaysia continue to increase, we believe the unit economics will continue to improve. So in terms of the second quarter client acquisition in the third quarter, quarter-to-date trend, so the second quarter net new paying clients was down a bit sequentially, mostly because of a high base in the first quarter. That's when we were able to convert a large number of our existing users into paying clients. But apart from that, the second quarter growth was very steady Q-on-Q. And we believe the strong momentum is partially due to the spillover of our brand equity accumulated in Singapore and also because of our leading product capabilities as a one-stop platform for Malaysian U.S. stocks and also the strong market sentiment in the second quarter also helped with client acquisition. In the second quarter, we launched Malaysian stock IPO subscription and also automatic investment schemes for U.S. stocks and fractional shares for U.S. stocks. And for the third quarter, quarter-to-date, we launched money market funds and also stock transfer from Malaysian stocks. And for the third quarter, we expect a steady quarter-over-quarter new paying clients growth in Malaysia. Operator: And the next question comes from the line of Hu Shen from CLSA. Hu Shen: [Foreign Language] What is the share of trading and media in trading total U.S. trading volume? How did this single factor influence the commission rate in second quarter? How big was the influence from mid-cap stock trading? What is a good indicator to track the change in U.S. stock trading commission rate change? And what is the fee rate in the distribution of phone, [indiscernible]. And what could be a good timing for considering issuing dividends. Arthur Chen: [Foreign Language] In terms of your first question, [indiscernible] roughly accounts for our 20% to 30% of our clients' U.S. stock trading volumes in the second quarter. And for your second question, so far, we do not have any concrete dividend policy. The key reason is we think still there were huge growth potential areas which we can further deploy our capital. And we are very confident these investments will generate more higher returns which then -- which is higher than our cost of capital. And in terms of the economics of the fund distribution or treasury trading, et cetera, which I think to some extent related to some confidentiality commercial arrangement. But the only thing I can -- but the thing I can share is the arrangement is very typical, similar to the industry distribution model. Thank you. Operator: Due to time constraints, I would now hand back to Daniel Yuan for any closing remarks. Please go ahead. Daniel Yuan: 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: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.