Ladies and gentlemen, thank you for standing by, and welcome to the UP Fintech Holding Limited Q3 2021 earnings conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. I must advise you that this conference is being recorded today, Tuesday, November 30, 2021. I would now like to hand the conference over to your first speaker today, Mr. Clark S. Soucy. Thank you. Please go ahead.
Thank you, operator. Hello, everyone, and thank you for joining us for the call today. UP Fintech Holding Limited's Q3 2021 earnings release was distributed earlier today and is available on our IR website at ir.itiger.com, as well as GlobeNewswire services. On the call today from UP Fintech are Mr. Wu Tianhua, Chairman and Chief Executive Officer, Mr. John Zeng, Chief Financial Officer, Mr. Huang Lei, CEO of US Tiger Securities, and Mr. Kenny Chao, our Financial Controller. Mr. Wu will give an overview of our business operations and discuss corporate highlights. Mr. Zeng will then discuss our financial results. They will both be available to answer your questions during the Q&A session that follows their remarks. Now let me cover the Safe Harbor. The statements we are about to make contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
A number of factors could cause actual results to differ materially from those contained in any forward-looking statement. For more information about factors that could cause actual results to materially differ from those in the forward-looking statements, please refer to our Form 6-K furnished today, November 30, 2021, and our annual report on Form 20-F filed on April 28, 2021. We undertake no obligation to update any forward-looking statement except as required under applicable law. It is my pleasure to now introduce our Chairman and Chief Executive Officer, Mr. Wu. Mr. Wu will make remarks in Chinese, which will be followed by an English translation. Mr. Wu, please go ahead with your remarks. Hello, everyone, and welcome to the Tiger Brokers' Q3 2021 earnings conference call. Our global expansion is progressing well.
We added 82,900 new accounts in the third quarter, of which over 80% came from outside mainland China. Total new funded accounts for the first three quarters of this year numbered 353,300, already surpassing our 350,000 annual guidance. Total customer accounts at the end of the Q3 increased by 118,000 and totaled 1.77 million, almost double year-over-year. Total funded accounts stood at 612,000, triple that of the same period of last year. Total revenue for the third quarter was $60.8 million, an increase of 60% year-over-year. Non-GAAP net income was $5.3 million, an improvement from the loss in the Q2 .
Total client assets were $20.6 billion, up 88% year-over-year, but a drop of 14% from the Q2 of this year. The quarter-over-quarter decline in total client assets is primarily due to the drop in client position values caused by subdued market conditions. The firm continued to see healthy net asset inflows from both new and existing clients. An important milestone for Tiger Brokers is that we've obtained a Hong Kong broker-dealer license last month. This license will have a big impact on Tiger's business going forward. For example, we may start acquiring users in Hong Kong. Hong Kong is a true global financial center with a substantial number of high quality investors, both retail and institutional.
With the HK license, we will be able to generate more income from margin loans, Hong Kong IPOs and commissions, among others, to improve revenue per user. We may also further improve the user trading experience for Hong Kong securities, as trade execution and clearing will be integrated into Tiger's system.
同时，公司获准纳入新加坡股票经纪商协会，并正式获得新交所清算会员、证券交易会员、衍生品交易会员等多项四类资质，成为全球率先拿下相关资质的科技券商。至此，老虎证券在中国香港、新加坡、新西兰、美国、澳洲等全球主流金融市场共持有36类46张牌照或资质，为国际化长期发展打下坚实基础。同时，我们也决定在新加坡设立全球双总部，更好地发展海外市场。
In addition to Hong Kong, the company was admitted to the Securities Association of Singapore. We also reached a notable landmark in Singapore. Tiger Brokers Singapore became the first online broker to be admitted as a trading member of Singapore Exchange Securities Trading Limited, Singapore Exchange Derivatives Trading Limited, and a clearing member of The Central Depository (Pte) Limited. In total, Tiger Brokers has obtained 46 licenses and qualifications in 36 categories in Hong Kong, Singapore, New Zealand, the United States and Australia. We also decided to set up a global dual headquarters in Singapore to expedite our international expansion.
和大家回顾一下四方面业务的最新发展。
I would now like to take this opportunity to give updates on four other key business initiatives.
第一，国际化方向。今天，老虎证券持有美国、澳大利亚、新加坡、新西兰、香港等国家和地区的经纪业务、投资银行、资产管理等相关牌照，在这些国家都设有办公室。得益第三季度国际化的发展，当季度增量入金客户超过80%来自海外。老虎的国际化只开展了一年多时间，我们证明了自己的国际化能力，可以在比较短的时间内获得大量海外用户。我们对国际化的发展充满信心，今年已提前完成年初设定的35万入金目标，明年有信心总入金人数能突破100万人。
Tiger Brokers presently has offices and holds licenses pertaining to brokerage, investment banking, and asset management in the United States, Australia, Singapore, New Zealand, and Hong Kong. As previously stated, our firm is rapidly internationalizing, and in the third quarter, 80% of our accounts came from outside mainland China. Tiger Brokers has only been executing on our internationalization strategy for a little over a year. Being able to acquire so many international users in such a short period of time validates our capability to compete in global markets. We remain confident in our internationalization strategy. We already exceeded our 350,000 annual guidance for new funded accounts in 2021, and we expect that next year we will exceed the 1 million mark for total funded accounts.
第二，企业服务方向。今天老虎证券形成以经纪业务为核心，投行、ESOP和国际化协同并进的增长策略。
With regards to corporate and institutional services, we continue to invest in scaling our investment banking and ESOP business, which augments our brokerage business.
ESOP员工持股管理业务发展迅猛。2021年第三季度，老虎ESOP签单46家，其中A股5家，美港股及未上市41家，实现同比翻倍。前三季度累计新增客户同比增长266.7%，一共累计服务客户达262家。企业号方面，三季度新增53家公司开通老虎证券企业号。投行这一侧，第三季度我们参与了4家美股项目IPO，包括了3个SPAC IPO和1个美国本土IPO。香港这一侧，非常有幸参与到小鹏汽车香港承销当中。
ESOP remains in a rapid state of expansion. In the Q3 , we added 46 new clients, of which five were A-share companies and 41 were Hong Kong and U.S. listed companies as well as unlisted companies. The scale of our ESOP business has more than doubled in the last year, and the cumulative number of corporate clients added in the first three quarters of this year was 266.7% higher than the same period last year. Our enterprise account service in the Tiger community, which corporates use to directly connect with investors and build their brands, also added 53 new accounts in the third quarter. On the investment banking side, we participated in four U.S. IPOs, three of which were SPACs and one of which was a local American company.
We were also grateful to serve XPeng as an underwriter for its dual primary listing in Hong Kong.
第三，自我清算方向。目前全球所有的增量用户的美股都已经在用自我清算。截止到2021年第三季度，70%以上的用户美股正股在用TradeUp自我清算。
All new clients are having their U.S. cash equity trades cleared by TradeUp, formerly known as Mars Cove, a self-clearing broker we acquired in 2019. As of the end of the third quarter, 70% of our clients were using TradeUp to self-clear U.S. cash equities.
第四，虚拟货币方向。如之前沟通，我们正在美国和新加坡区域都在申请相应的牌照，以便为当地的投资者提供虚拟货币交易服务。那我也很高兴地宣布，老虎美国刚刚拿到美国新泽西州的Money Transmitter License，可以为新泽西的居民提供虚拟货币交易服务。我们期待未来会有更多的虚拟货币牌照落地。
As previously communicated, we are applying for cryptocurrency trading licenses in the U.S. and Singapore, so we may provide local residents with crypto access. I am pleased to announce U.S. Tiger Securities just received approval as a money transmitter from the State of New Jersey, which enables us to provide crypto trading from New Jersey residents. We look forward to obtaining more crypto licenses in the future. I would now like to invite our CFO, John Zeng, to go over our financials.
Hello, everyone. Thanks, Tianhua and Clark. Let me walk you through Tiger's financial performance for the Q3 . All numbers are in U.S. dollar. Commission for the third quarter was $33.5 million, increased 7.2% year-over-year, in line with the year-over-year increase in trading volume. We saw slightly lower trading volume in the third quarter versus the Q2 , but we still managed to grow commission by 8% quarter-over-quarter with more derivatives trading, such as U.S. options and more volume from Hong Kong. Take rate also increased from 3 bps in the Q2 to 3.6 bps in the third quarter. Interest-related income, which combines financing service fee and interest income, was $20.1 million, an increase of 105% year-over-year and 5% quarter-over-quarter.
The year-over-year increase was in line with higher margin and security lending balance. The quarter-over-quarter increase is primarily due to a more efficient self-clearing margin operation, given lower margin balance in the Q3 versus the second quarter. Other revenue, mostly our underwriting revenue, was $7.2 million, down 19% year-over-year and 30% quarter-over-quarter due to a weaker IPO market, especially no Chinese ADR listing in the Q3 . The drop in underwriting revenue partially offset the growth in commission and interest-related income. As a result, total revenue was $60.8 million in the Q3 , increased 60% year-over-year and flat quarter-over-quarter. Now on the cost. Interest expense increased 44% year-over-year to $4.2 million, in line with user growth and increase in margin balance.
Execution and clearing expense were $9.5 million this quarter, increased 145% year-over-year and 45% quarter-over-quarter. The increase is primarily due to more custodian fees in Singapore. Before Tiger became a SGX trading and clearing member in October, we used an external custodian to custody client assets and the custodian expense grows in line with user growth. We expect such custodian expense to gradually go down as we will self-custody more assets in Singapore. Employee compensation increased 71% year-over-year to $21.8 million as we keep adding headcounts in R&D self-clearing to support our global expansion. Along with headcount increase, this quarter, occupancy expense increased 39% year-over-year to $1.66 million. SG&A increased 30% year-over-year to $5 million.
Communication and data usage also increased 116% year-over-year to 5.3 million this quarter as a result of rapid user growth. Marketing expense was $11.2 million in the third quarter, up 200% year-over-year, but down 53% quarter-over-quarter. Given the choppy market backdrop in the third quarter, we scaled back on marketing to be prudent with customer acquisition costs. That being said, we will increase marketing spending when we see the right window. Net income for third quarter was $20.5 million. Adjust for fair market value change on private CB and other non-GAAP items, our non-GAAP income for this quarter was $5.3 million. Now I have concluded our presentation. Operator, please open the line for Q&A.
Your first question comes from the line of Han Pu from CICC. Please ask your question.
好，感谢管理层给我这个提问的机会。我是来自中金的分析师韩普。我这边有两个问题想请教。第一个是可否请管理层就最近的监管环境和潜在影响做一个解读。第二个是从目前四季度的经营情况来看，此前的一些新闻报道是否对我们当前的一些获客已经产生了一定的影响，那截止当前四季度的经营情况如何？我翻译一下我的问题。Thanks for taking my question, this is Han Pu from CICC. And I have two questions. First, could the management give us more color on the current regulatory environment and the potential impact to our business. Second, could you give us some updates on the operation of Q4. Have we already seen some impact on the user acquisition given previous regulation-related news?
Thanks。
谢谢。首先，在最近这段时间，的确非常多的朋友关心这个相关的一些媒体、监管上的一些内容。那老虎证券我们一直以来，其实在整个包括商业模式，包括法律合规这一侧，跟传统的香港券商，跟传统的美国券商没有本质的这样区别。我们最主要的这个创新体现在我们重视产研，做一个好这样的一个产品。那也正是因为得益于我们这样的一个优秀的产品体验，使得我们赢得了很多用户的关注和相应的支持。那整个公司自成立以来，我们一直以来也把合规当作我们整公司的这样的一个生命线。我们在包括外部律师、内部合规等各类专家的帮助之下，对整公司的各条业务线，在过去几年，包括最近我们也做了非常多的反复的自查，确保我们的业务符合相关的法律法规。那在这一次舆情走向和最近这样的情况之下，那如果未来如果行业有相关的监管细则的一些出台，那我们也相信老虎证券作为行业的头部企业，我们能够第一时间的服从监管，较好地确保我们符合最新的相关规则。当然我们也持续地关注相关的一些这个动态，确保这个满足合规性相关要求。那同时关于个保法这一侧，个人信息保护法在今年十月一号已经正式生效，强调了用户的个人信息权益。那我们对个保法的法律生效也高度重视。实际上，在个保法正式生效之前，我们作为规划的券商，已经在多个法律持牌和展业。我们已经按照各地的法律跟行业要求，制定和执行了非常高的个人信息保护和数据安全相关的政策跟流程机制。在个保法正式生效之前，我们也做了非常充分的准备。我们聘请了行业内的顶级专家和律师，对老虎的个人信息保护进行了自查，并将个保法最新规定及时和全面地反映在了老虎国际我们的各项包括数据安全政策、个人信息的这个用户协议当中，确保用户利益最大化。未来我们也会关注这一侧相应的实施细节，不断地更新和完善我们内部的各项政策、各项制度，并且保持和监管积极全面的沟通，确保合规。谢谢。
Okay. Let me just quickly translate what Wu Tianhua just mentioned regarding the latest regulatory news and those kind of news in the media. Basically our business model you know is no different than overseas brokers servicing domestic investors. We follow the same KYC, AML procedures and regulated by relevant securities regulators in different regions. Our innovation is not on business model, but more on R&D, which brings unparalleled user experience, so we can be more customers. We have always attached great importance to business compliance since our first inception, and we have conducted several rounds of self-examination on all business units and business lines with the support from external experts to ensure we are in compliance. If there will be policy coming out from the regulators, Tiger, as one of the leading players in the industry, definitely we will devote the resource to make sure we are in compliance. We definitely will keep monitoring the situation and make sure you know we will be in compliance when such policy is put into effect.
Regarding the Personal Information Protection Law. The law went into effect on November first, and actually before the law we as an international brokerage already formulated and implemented serious policies and procedures on personal information protection and data security with high standard in accordance with applicable laws and industry requirements. Besides you know we did a lot of preparation in advance before this new law. We hired top industry experts and lawyers to self-exam all the operations involving personal information and reflect the rules under this new law into our current process policies and user agreement to ensure users benefits maximized. Of course going forward we will pay close attention to the development of this new law and making sure we can properly adjust when there is new guidance from the regulator.
Regarding [Foreign language]. We saw some net outflow following the news are very small scale and now is already back to normal. For non-Chinese users we keep seeing net asset inflow. Actually you know since October, the average first timer deposit from our Singapore users actually around $5,000 or above. It's actually even more than average initial deposit of $4,000 we saw for new users acquired in the second and third quarter, which shows our brand and service are still attracting high quality international users. Thank you.
非常感谢。Thanks. Your next question comes from Allen Qian from Citi. Please ask your question.
管理层好，我这边是花旗的Julia，感谢给我这个提问的机会。我这边有两个问题。首先我们很欣喜看到前九个月的入金客户数目已经超过之前管理层的指引，那能否给我们展望未来的主要获客地区，还有增长呢？然后另外，能否给我们再多分享一下四季度的运营情况，包括客户资产还有交易量等等。好，谢谢。我这边先翻译一下。Hi management, this is Julia from Citi Research. Thank you for giving me the opportunity to raise the questions. I have two questions here. First, it's encouraging to see that, the new funded customer number in the first nine months has already surpassed the full year guidance of 350,000. Could you also share guidance about the key regions of focus in terms of customer acquisition and the future growth targets?
Also, could you give us more color in terms of the fourth quarter operational trend, including the customer assets and trading volume? Thank you.
Okay. In the Q3 , we added like 82,900 funded accounts, of which you know, over 80% came from outside of China, you know, which shows our international strategy is progressing very well. Going forward, you know, our focus right now, of course, will be in Singapore and Hong Kong. In Singapore, we just obtained a self-clearing depository license from SGX. These qualifications will help us better service Singapore local clients. We just got a license in Hong Kong, so Hong Kong is definitely another key area we will focus. Now we are developing and devoting more resources to ramp up our trading infrastructure in Hong Kong. In the U.S., we haven't really launched a big marketing yet.
Focus now is still on the infrastructure of self-clearing. We believe this will give us a more competitive advantage over our peers in the U.S. market. Of course, you know, as Wu Tianhua mentioned earlier, you know, we just got the money transmitter license in New Jersey. We feel this could be a great tool for us to tap into the U.S. market when we officially launch our marketing in the States. Of course, outside of those areas, we are also evaluating other markets. We will do a comprehensive analysis before entering new market. We will review its TAM competitive landscape, what value we can bring, and what kind of UE we can generate. Based on our experience in Singapore, we are confident our user experience R&D capability will give us an edge when entering new markets, and we are optimistic of our internationalization growth outlook.
Regarding fourth quarter outlook, right now, you know, we still monitor the market condition to decide how much marketing we will spend on user acquisition. When we evaluate our user acquisition strategy, you know, we will of course, you know, monitor the CAC, monitor the payback. As of right now, given the market backdrop, we are still relatively scaled back, and waiting for the right opportunity to ramp up our marketing. Trading volume so far is similar to third quarter. Total volume might be smaller than Q3, given more holidays in the fourth quarter. Higher UE product like cash equity options, we see similar volume versus Q3. For Q4, you know, our focus is on R&D, so we will spend more resources in R&D to beef up our infrastructure in Hong Kong and Singapore, to make sure we can provide better trading experience for our users. Thank you.
Your next question comes from the line of Hanyang Wang from 86Research. Please ask your question.
管理层晚上好，我是来自86Research的分析师王汉阳，感谢给我这个提问的机会。那我这边主要是有两个问题，第一个问题是关于香港展业的，就是我们这个季度取得了香港牌照，我们知道香港地区的竞争也是非常激烈，那么公司会采取一个什么样的策略在香港获客呢？以及香港未来这个市场可以给我们公司贡献多少的新增用户。第二个问题是想请教一下公司对这个投行业务未来的一个看法，就我们看到近期香港的IPO有所恢复，但是这个美股的中概上市还是存在一些的不确定性的，那么对于投行业务来说，未来公司会去做一个怎样的规划呢？好，谢谢。我简单翻译一下我的问题。Thanks management for taking my questions. So I have two questions. The first one is regarding the business expansion in Hong Kong. The company obtained the Hong Kong broker license through acquiring Ocean Joy Securities this quarter. So we know the competition is quite intense in Hong Kong. So what will be the strategy for your user acquisition in Hong Kong?
How shall we expect the incremental new users come from, Hong Kong going forward? Second question is about the IPO related business. We observed that the tech IPO started to resume in Hong Kong this quarter, so while the listing of the Chinese ADRs still face uncertainties. What's your view on the development of the underwriting business? Thank you.
谢谢。香港牌照对我们来讲至关重要，既能够提升我们的入金人数，多一个区域，又能够提升单用户价值。总来说这个香港牌照的使用，我们大致来讲可以认为按照时间的顺序可以有三个这样的步骤。第一步就是最近的，包括像香港 IPO 的这种投行业务，包括过去一些港股上市的 IPO 过程中的一些竞争，包括香港一些机构业务，这些是我们第一步可以立刻开始进行的，可以享受这样的有牌照之后的红利。第二步是我们今天这个美股、港股的交易是通过 IB 来进行清算的，所以使得我们的清算成本很高，港股这个很多钱是赚不到的。
那我们这个希望能够让现有的港股的业务能够提供这样的一个自清算，而不是通过这个IB来进行清算。那这件事情，我们有望在相对可控的一个时间之内完成。那第三步，这个明年的某个节点，我们开始也是这个大家最为关注的这样的一个香港地区的零售业务。那这个过程中，因为有一些，包括交易所的连接测试，这个需要若干个月的这样的一个时间。那总的来说，我们觉得这个香港市场不会拒绝任何一个好用的产品，我们在产品上一直以来可以做出一些差异化的一些价值。另外也得益于这个领域里面，包括像打新杠杆这样的一些反规模效应的一些地方，我们觉得还是有很多增量价值可以创造的产品和服务的一些空间。我们对于我们在香港市场获得一定市场份额充满信心。那第二部分。
Yeah, let me translate first.
Okay, first of all, you know, as everybody know, Hong Kong license is very important to us. With the Hong Kong license, on the one side we have, you know, we can tap into the Hong Kong local residents, which we're missing out from the Tiger's user base before. On the other hand, we will be able to increase ARPU, from our, you know, user base. Our plan for Hong Kong, basically will be three steps. First of all is, you know, on the institutional business, no matter is for serving the institutional investors or ESOP or Hong Kong IPO underwriting. With the Hong Kong license, we will definitely be more aggressive, you know, and more active in the institutional business space.
The second step will be gradually, to move from IB clearing for Hong Kong securities to our own, self-clearing in Hong Kong. As a lot of you know, you know, traditionally we use IB to clear Hong Kong trades, and the clearing expenses were expensive, so our UE for Hong Kong product was really low before. This will be, gradually changed, you know, once we switching from IB clearing in Hong Kong to our own clearing in Hong Kong. The third step will be, you know, launch our retail marketing in Hong Kong. We know we have a lot of peers in Hong Kong, and we give them a lot of credit for what they have done, very good companies and apps.
We feel, you know, Tiger, you know, has our own, you know, competitive advantage, and especially a lot of Hong Kong product, for example, like Hong Kong IPO subscription, naturally, you know, will give us a chance to tap into more users. We feel pretty confident we can grab a good market share in Hong Kong.
回到投行这一侧。第三季度我们的确受制于当前大环境的影响。中概股美上市目前处于一个暂停的状态，所以我们的承销收入在今年第三季度有非常明显的下降。但是展望未来，我们认为点滴的监管应该是有望能够达成共识，我们相信中概股美上市并不会未来处于一个完全没有的状态，我们认为明年也许能够看到一些案子出来。同时也随着我们上个月香港牌照这边落地，我们能够比以前更好地参与到香港的IPO承销当中，这个对我们来讲是一个承销收入比较好的补充。过去我们已经参与了一系列知名的TMT明星公司的香港上市的项目。在这里也借这个机会介绍一下老虎投行定位。我们投行业务的目的不仅仅是为了获得承销费用。在我们看待老虎的业务里面，我们把经纪业务当作我们高频的内核，而把包括投行业务在内的投行、ESOP等财务管理等相关的业务当作围绕我们这个内核业务互相赋能、互相起到补充作用的业务结合。投行业务能够非常好地跟我们的企业服务相关的像员工股权管理ESOP业务有很好的互动，跟我们的经纪业务本身，跟我们的社区产品这方面有比较好的联动，提升我们的用户粘性，获得更多的包括ESOP这侧的客户，包括机构客户，包括一些优质的这些IPO公司的零售用户。所以我们做好投行业务是希望能够跟我们既有的业务产生一加一大于二这样的效果。所以虽然短期内可能承销业务受大环境可能会有一些相关的影响，但是我们依然坚定地做好有老虎特色的投行业务，我们也相信未来这一侧能够发挥越来越大的价值。谢谢。
Let me quickly translate. From financial perspective, yes, you know, given the recent Sino-U.S. relationship, we do see a drop in underwriting revenue for third quarter. We don't know when the, you know, the Chinese ADR IPO will resume, but we do believe, you know, both sides could reach an agreement. Hopefully, you know, by sometime next year, you know, we will see more Chinese ADR back to the market. In the meantime, you know, given now we have Hong Kong license, we can be more active in Hong Kong IPO underwriting to drive underwriting revenue to compensate the potential loss from the U.S.
Underwriting market. I just want to reiterate, you know, how we see the Tiger investment banking business. Our underwriting business is different from traditional investment bank. Underwriting fee, of course, is important, but more important to us is the synergy generated by underwriting business with ESOP and the brokerage business, so we can provide more value-added service to our corporate and retail clients, and in turn increase user stickiness and ARPU. In short, you know, we understand in the short term there might be some headwind for our underwriting business, but we are committed to, you know, putting resources into Tiger underwriting business to make sure, you know, we can provide more synergy to our other business units and provide more values to our corporate and retail users. Thank you.
Thank you, Mr. Wu Tianhua. Thank you, Mr. John Zeng. Very clear and helpful.
At this point, I would now like to hand the call back to Mr. Clark S. Soucy for the closing remark.
I would like to thank everyone for joining our call today. I am now closing the call on behalf of the management team here at Tiger. We do appreciate your participation in today's call. If you have any further questions, please reach out to our investor relations team. This concludes the call, and thank you very much for your time.
Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now all disconnect.