Hello, ladies and gentlemen. Welcome to Futu Holdings' first quarter 2021 conference call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host for today's conference call, Mr. Daniel Yuan, Chief of Staff and Head of Investor Relation at Futu. Please go ahead, sir. Thanks, operator. Thank you for joining us today to discuss our first quarter 2021 earnings results. Joining me on the call today are Mr. Leaf Li, Chairman and Chief Executive Officer, Arthur Chen, Chief Financial Officer, 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 involving inherent risks 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 registration statement. With that, I would now turn the call over to Leaf. Leaf will make his comments in Chinese, I will translate. [Non-English content] Hello, everyone. Thank you for joining the earnings call today. We are excited to announce that we started off the year with robust growth across our operating and financial metrics. [Non-English content] Our net paying client addition was approximately 273,000, bringing the total number of paying clients to over 790,000, representing 231% YoY growth. Three months into the year, we already achieved 39% of our full-year growth target. For the first quarter, over 70% of the net additions came from Hong Kong, Singapore, and other overseas markets. Organic growth continued to contribute over 50% of our net new paying clients. Despite rapid client base expansion, our quarterly paying client churn rate remains below 2%. [Non-English content] Since our official debut in Singapore on March 8th, we have experienced significant growth in client acquisition. Our superior product experience and laser focus on client servicing, coupled with our online and offline advertising and strong word-of-mouth referrals, have helped us quickly capture the mind share of Singaporeans. Characterized by its large and affluent Chinese population, deep and mature capital markets, high penetration of financial services, and rising rate of digitalization, Singapore presents a huge market opportunity, let alone its strategic importance as an entry point into the broader ASEAN market. With the strong growth momentum trending into the second quarter, we are confident to unveil rapid growth in Singapore. [Non-English content] In terms of client assets, our average asset balance per paying client climbed to HKD 585,000, a record high since 2016. As of quarter end, total client assets reached HKD 462.2 billion, representing 368% growth on a YoY basis and 62% growth on a QoQ basis. [Non-English content] Total trading volume in the quarter was HKD 2.2 trillion, up 278% YoY. U.S. stock trading contributed about 63% of the total trading volume. In the past quarter, we launched OSE futures from the Japan Exchange Group and Singapore stock trading as part of our continued efforts to diversify trading offerings. [Non-English content] Our wealth management business, Money Plus, established new partnerships with four reputable asset managers in the quarter, including Wells Fargo, Income Partners, Aberdeen Standard, and BNY Mellon. As of quarter end, over 59,000 clients held total assets of HKD 13.1 billion in wealth management, up 189% and 108% YoY respectively. As Money Plus's distribution capabilities get increasingly recognized by asset managers, Fargo entered into an exclusive agreement with us to distribute the Hong Kong dollar-denominated retail share class of its China Small Cap Growth Fund, one of its flagship products in the region. In the first quarter, we started to offer a flagship TMT hedge fund managed by a globally renowned asset manager to our qualified investors. [Non-English content] As of quarter end, our enterprise business, Futu I&E, had 152 IPO and IR clients, as well as 200 ESOP solution clients. In the first quarter, we participated in all Chinese ADR secondary listings in Hong Kong, and we're the only online broker in the selling groups of the Hong Kong IPOs of Kuaishou, Baidu, and Didi. [Non-English content] The enterprise account function in our social community gets increasingly adopted by listed companies to engage with over 14 million retail investors interested in Hong Kong and U.S. stock trading. By the end of the first quarter, over 500 listed companies have set up enterprise accounts with us to promote their products and services, provide business updates, and live stream earnings calls. As of today, nine enterprise accounts have amassed over one million followers. Listed companies are an indispensable stakeholder in our ecosystem, and their engagement has greatly diversified our content offerings, thereby increasing user stickiness and retention. [Non-English content] Next, I'd like to invite our Chief Financial Officer, Arthur, to discuss our financial performance. Thanks, Leaf and Daniel. Please allow me to walk you through our financial performance in the first quarter. All the numbers are in Hong Kong dollars unless otherwise noted. Our total revenue was HKD 2.2 billion, an increase of 349% YoY and 86% QoQ. Brokerage commission and handling charge income was HKD 1.3 billion, an increase of 343% YoY and 84% QoQ. The growth was mainly driven by 278% YoY of our total trading volume increase. Our blended commission rate and our clients' trading velocity remained resilient compared with last quarter. Interest income was HKD 659 million, an increase of 356% YoY and 96% QoQ. The increase in margin financing interest income was mainly driven by the strong growth in daily average margin financing balance, higher IPO financing interest income due to a very active Hong Kong IPO market in the first quarter, and an increase in our securities borrowing and lending business. Other income was HKD 271 million, an increase of 370% YoY and 69% QoQ. The strong growth was primarily driven by the increase in our IPO subscription service charge income and the currency exchange service income. In terms of costs, our total costs were HKD 443 million, an increase of 276% YoY and 83% QoQ. Brokerage commission and handling charges expenses were HKD 214 million, an increase of 327% from HKD 50 million in the first quarter of 2020. The increase was largely in line with the growth of our brokerage commission and handling charge income. Interest expenses were HKD 168 million, an increase of 406% from HKD 33 million in the first quarter of 2020. The growth was primarily due to higher margin financing interest expenses, an increase in our security borrowing and the lending business. Processing and servicing costs were HKD 62 million, an increase of 78% from HKD 35 million in the first quarter of 2020. We continued to increase cloud service expenses and add another 300 throttle controllers connected to the trading system of The Stock Exchange of Hong Kong to execute a large number of concurrent Hong Kong stock trades. Our total gross profit was HKD 1.8 billion, an increase of 373% YoY and 87% QoQ. Gross profit margin increased from 76% in the first quarter of 2020 to near to 80% in the first quarter of this year, thanks to higher operating leverage as a result of our larger business scale. Our total operating expenses were HKD 490 million, an increase of 149% from HKD 197 million in the first quarter of 2020. To break it down, R&D expenses were HKD 137 million, an increase of 63% from HKD 84 million in the first quarter of 2020. We further invest in the R&D to support our new product offerings. Selling and marketing expenses were HKD 275 million, an increase of 321% YoY and 144% QoQ. The increase was primarily due to higher branding and marketing spending, especially in the international markets, to cultivate brand image and acquire new clients. If we compare client acquisition costs in the Hong Kong and the China areas alone, our CAC number this quarter is largely in line with that number in the last quarter. G&A expenses were HKD 78 million, an increase of 65% YoY. The increase was primarily due to the increase in the headcount for G&A personnel. As a result, our net income increased by 6.5 times to HKD 1.2 billion from HKD 155 million in the first quarter of 2020. In April, we also completed our follow-on offering with net proceeds of approximately $1.4 billion. The proceeds will be used to support a larger margin financing balance, our international market expansion, new licensing applications, potential investment and acquisition opportunities, and other general corporate purposes. That concludes our prepared remarks. We'd now like to open the call to questions. Operator, please go ahead. Certainly, sir. Ladies and gentlemen, we will now begin the question- and- answer session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. Once again, it is star one to ask a question. We have our first question coming from the line of Katherine Liu from Morgan Stanley. Please go ahead. [Non-English content] Thank you very much for giving me this opportunity to ask questions. This is Katherine from Morgan Stanley. I have two questions to raise. First is can management please give some introduction or some briefing in terms of the second quarter this year trend in terms of trading velocity, client acquisitions, growth rates, et cetera? Also in light of the first quarter strong growth, will management give guidance in terms of the full year, for example, growth in paying clients, et cetera? Second question is, could management please give some guidance or introduction in terms of the breakdown of clients by geography? Then we note that Singapore could potentially see very strong growth and could management please give some guidance in terms of the growth trend in the Singapore market? Thank you. Katherine, let me answer your second question first. I will show you our clients breakdown in the first quarter. I will leave the second quarter trend and also your questions about the guidance to Robin and Leaf. Robin will also give you some colors in terms of our client acquisitions and also the client profile in Singapore, this particular market. In the first quarter, on a collective basis, Singapore and the U.S. account for 25% of our new paying clients acquired in the first quarter. The remaining 75% was almost evenly split within Mainland China and also Hong Kong. I think slightly higher in Hong Kong. I will leave Robin and Leaf to give you a comment about your first question. [Non-English content] Although we have achieved 39% of our full year paying client growth target in the first quarter, for the time being, we will not adjust our full year target. We definitely believe that our products have very differentiated value proposition over these markets. In fact, since we entered the Singapore market officially in March, we have some very strong client growth and that momentum has continued into the second quarter. We also reckon that the brokerage business is positively correlated with the market performance, with market sentiments, with the number of IPOs. We understand that right now the market has disagreements over how the market performance will evolve for the rest of the year. We will not adjust our full year paying client growth target for now, and we may give an updated guidance during our Q2 earnings call if needed. [Non-English content] Well, we have seen that the market experience a level of pullback since mid-February, and we believe that our users' trading sentiment has been affected more or less, and we think that's perfectly normal. We feel like the market still gets a lot of attention right now, and kind of under the rotation from growth to value stocks, there are still a number of stocks that are performing really, really well. From the standpoint of our client assets, we have seen that from March 1st to last Friday, which is May 16th, almost on every single trading day, we see a positive net asset inflow except for a couple of trading days. It's a very positive sign that our clients are continuously putting assets into our platform. For us, paying client number, paying client retention, and client assets are our three KPIs, and we attach much more importance to these three metrics than some short-term volatilities in the clients' trading volume. Let me just add a little bit to your question about our Singapore clients profile. So far based on what we have seen, again, this is only based on about two and a half months of data that we have seen so far. Our Singapore clients' average and median age is almost identical to that of Mainland China and Hong Kong clients. In terms of their client assets, it's still less. Actually, there's a pretty big discrepancy between the average client assets of our Singapore clients and our Mainland China clients. We think that's normal, and based on our experience, when we enter a new market, it'll take some time for our clients' assets and clients' trading volume to catch up. We'll probably give more details around our client profile in the next couple of quarters. Thank you. Thank you. We have our next question. This is coming from the line of Jackie from China Renaissance. Please go ahead. [Non-English content] Congrats on the great results. I have two questions. Number one is about our competition. We actually saw some competitors, for example, in Hong Kong market increasing their marketing efforts. We also hear some Asia brokers may enter the U.S. and Hong Kong stock trading business. Regarding the potential increasing competition for our markets and customers from mainland and Hong Kong, do we concern about our customer acquisition costs and the trading commission pricing pressure? Number two is about a housekeeping question. Could you provide us a rough breakdown of our interest income and also other revenue? Thank you. Sure, Jackie. Let me answer your second question in terms of housekeeping financial numbers first. I believe the first question to my colleagues, our Chief Executive Officer Leaf. In terms of the interest income breakdowns, roughly a lot interest income arriving from the margin financing account for 60%-65% of total interest income. The remaining interest income actually derived from our clients' idle cash deposit. Also in terms of other incomes, actually, these two major parts, one is IPO subscription service charge, i.e., normally we charge HKD 50-HKD 100 per person when each participant in the Hong Kong IPOs. The other significant part is the foreign exchange service charge. Many of our clients trade both in Hong Kong and the U.S. markets, they do have the demand for the foreign exchange. These two parts, I think roughly will contribute 70%-75% of our total other income. The remaining part will belong to such as the distribution income from our wealth management products and other service offerings. Thank you. [Non-English content] From our inception, we operated in a very crowded market, and we don't think the market is going to get less competitive going forward. We indeed have seen some players offering zero commissions, but we don't think the change in the competitive landscape will have a downward pressure on our commission rates. In Hong Kong, there's the stamp duty, which is 10 basis points. For us, we offer three basis points for Hong Kong trading and the marginal benefits for our clients for lowering our commission rate beyond that three basis points is really low. [Non-English content] For some of the Asia brokers, they already have Hong Kong licensed entities. Besides, we've also seen some other online brokers that want to enter the Hong Kong local market. [Non-English content] Maybe I'll talk a little bit more about the online brokers due to the similarities in the business model. [Non-English content] First of all, we definitely welcome online brokers to enter the Hong Kong market. With more of these players entering the Hong Kong market, we can educate the market together and help the online brokerage industry as a whole gain more industry recognition. [Non-English content] There are two major types of online brokers that provide Hong Kong stock trading services. The first type are the Hong Kong brokers that are licensed by SFC and hold SFC licenses and are regulated by the SFC. Futu is an example of this first type. The second type are the online brokers that hold licenses of the third domicile and it's not regulated by the Hong Kong SFC. For example, a license from New Zealand, this is the second type, using a third-party domicile license to provide trading in Hong Kong. [Non-English content] As we all know, the SFC has more stringent regulatory requirements than some other markets and are more prudent when giving out licenses. For the second type of online brokers that we just mentioned, if they are to get a license in Hong Kong, they must solve the issue of regulatory incongruity in advance. From the regulatory standpoint, SFC will not allow the online brokers to operate under a more relaxed regulatory framework. This means that once the online brokers hold licenses, they will need to migrate their existing clients and their existing businesses into the new entity that is regulated by the SFC. If this issue cannot be solved very well, it's highly unlikely that they'll get a license in Hong Kong. I think that's probably why another online brokerage peer of ours have been talking about getting a license in Hong Kong soon for the past three years, still have not managed to get one, based on our understanding, under normal circumstances, there's no way that it would take so long to apply for a new Hong Kong brokerage license. [Non-English content] Secondly, we don't think that the potential entry of other online brokerage companies will have a negative impact on Futu's market share in Hong Kong. Well, the first reason is that financial services, it really takes a big decision for our clients to choose a financial services platform. There is the psychological barrier for clients to actually entrust their assets with a financial services platform. For Futu, we have very outstanding shareholder base. We have shareholders like Tencent that really instill trust into our brand. On top of that, we have spent the past eight years cultivating our brand image in Hong Kong, gaining user recognition, and capturing the mind share with the Hong Kong local users. For a financial services company that is new to Hong Kong, it will take a lot of time for them to get the same level of trust that we've been able to garner in the past eight years. [Non-English content] Secondly, for the newcomers, they can only be competitive if they can offer very differentiated value proposition. Otherwise, it will be very difficult for them to replace the existing platforms. Futu has built a very comprehensive business, has huge entry barriers, and we've invested significantly into our account opening, into our trading infrastructure, market information and services, and social community, etc. Many of our product offerings really set industry standards. The other online brokerage peers need to spend a lot of time to catch up to where we are today, let alone offering differentiated products and services. On top of that, we have never stopped innovating. [Non-English content] The third point is the regulatory congruity issue that we just mentioned. As we discussed earlier, some of the online peers have already started acquiring Hong Kong local clients without a Hong Kong license. After they acquire the license, they probably will spend a lot of time migrating their existing Hong Kong clients to the new entity that is heavily regulated by the SFC and has really stringent KYC and AML procedures. This will be a very cumbersome process, definitely with some sort of attrition. For the other parties that have not operated in Hong Kong so far, after they get the license, they still need to kind of kickstart a very stringent account opening KYC procedure under the supervision of SFC. This will take time for them to adjust to and take time for them to get familiarized with. [Non-English content] Fourthly, the margin financing business is highly contingent on the company's capital base, and the margin financing capital needs to be gradually accumulated through the long-term collaboration with the commercial banks in Hong Kong. In Hong Kong, based on SFC's regulation, the margin financing balance that a broker can support is limited to five times of its capital base. First of all, they need to inject a lot of capital into their licensed entity in Hong Kong to bolster their net assets. On top of that, they need to secure additional financing from the commercial banks in Hong Kong. From our experience, the Hong Kong commercial banks are generally very conservative, and they're only willing to offer additional credit lines after kind of a long-term communication and long-term collaboration. It's impractical for these newcomers to garner a lot of capital in a short period of time. This will definitely put constraints on the margin financing business, especially the IPO margin financing business. We realized that some of the other peers are trying to migrate their clients from the Interactive Brokers accounts to their own account system. If their own account system is under the supervision of SFC, the margin financing capital issue that we just mentioned will be further enhanced. [Non-English content] The fifth point is that the Hong Kong execution and clearing system need a lot of capital and time to invest. The R&D is a very lengthy process. Futu spent eight years to construct a highly stable and scalable execution and clearing system with a 99.96% service availability rate. This very advanced trading system has high entry barriers, and when the other brokers enter the Hong Kong market, in the short period of time, they probably need to rely on a third-party vendor to provide this execution system. Which means that the stability of the system will be outside of their control for a considerable amount of time. This may lead to trade congestion issues when there is extreme market volatility or when hot IPOs take place. In the short term, it will be very difficult for them to match the client service and quality that Futu can provide. [Non-English content] The last point I want to make is that we have never stopped innovating and progressing, and we still keep that nascent mentality when we entered into the Hong Kong market. We believe the additional competition in the Hong Kong market will push us to do better. [Non-English content] Thank you. Thank you very much. Thank you. Thank you. We have the next question. This is coming from the line of Zeyu Yao from CICC. [Non-English content] Thanks, Management. This is Zeyu Yao from CICC. First of all, congrats to our exciting results. I see our existing business are well on track, and I was wondering if there is any possibility that we will apply for new brokerage licenses to serve more customers in other areas, or launch more trading products like Bitcoin or other digital currency. Thanks. Okay, thank you Zeyu. Let me answer your first question. I will leave the second question to my colleagues, our Senior Vice President, Robin Xu, for more service and products in our pipelines. For the new license, actually, I think you're right. We are doing some preliminary studies in other international markets, in particular in the ASEAN countries. As we mentioned in the opening remarks, we do think Singapore is a very important gateway for us to enter into the ASEAN market as a whole. Now it's still in a very preliminary stage. We are doing some feasibility studies in other English language speaking countries as well. [Non-English content] We are planning to launch crypto trading to our international clients in the second half of this year. We'll plan to roll out more futures under the CME futures. Thank you. Yeah. Thank you. Thank you. We have the next question. This is coming from the line of Zoey Zong from Jefferies. Go ahead. [Non-English content] Hi management, thanks for taking my question. This is Zoey from Jefferies. Congratulations on the strong first quarter results. I have a follow-up question on the digital currency. Regarding digital currency, at this point, we have noticed that the People's Bank of China have announced to ban financial institutions and payment companies from providing services related to cryptocurrency transactions. I'm wondering what about Futu's digital currency this year, will China's regulation on virtual currency have any impact on Futu if we launch the digital currency trading? [Non-English content] We are very much aware of the different regulatory frameworks under different jurisdictions. Actually, we are in the process of applying for digital currency related licenses in U.S., Singapore and Hong Kong. What we know for sure is that we will not offer digital currency trading services to Mainland China users. Thank you. The next one comes from the line of Thomas Hu from BofA Securities. Please go ahead. [Non-English content] I have two questions. The first question is about the margin financing business. After the follow-on offerings in April, Futu further strengthened its capital base. Will you try to increase the ratio of margin financing and security loan balance as percentage of total client assets? The second question is about client acquisition. You mentioned that 50% of the new client is from organic growth. How about the other half? What's the acquisition channel for the other half of clients? Specifically, I pay more attention about the ESOP clients. How much does it contribute to the new clients? How do you record those ESOP clients? Will you record them as a new paying client when the stock is vested, or you will wait until their stock are vested? Thank you. Thank you very much. I will answer the first question. I will leave the second question to my colleagues, Robin and Daniel. Number one, I think we value our paying clients from a DCF value perspective, i.e., we more care about their lifetime values rather than the near-term P&L they can contribute in terms of our top lines or bottom lines. Therefore, I think we will not very aggressively encourage our clients to use the margin, because margin financing involves very high risks. Therefore, I think in our mentality, investment education, how to let our investors know the risk is far more important than our near-term monetizations. If you look at our margin financing balance versus our total client assets ratio, this ratio historically is in the range of 5%-7%. I think definitely after we finish our follow-on placement, we do have more sufficient capital to support our margin financing business, and in particular, our IPO subscription service in Hong Kong. We will not intentionally push up our clients' margin usage unless they know the risks. Thank you. Hi, this is Daniel. I will take your second question on client acquisition. About 50% of our new paying clients are from organic growth, about 15% are from ESOP and group account opening, the rest 35% is roughly evenly split between online and offline advertising, as well as the third-party channel partners. Definitely we think that the high-profile IPOs are conducive to our client acquisition, but it's very difficult for us to attribute certain client base to maybe one or two single IPOs. We generally kind of observe an increase, an uptick in our client acquisition before these IPOs take place. It's very difficult to ascertain which clients come specifically for the IPOs. For Kuaishou's case, like you mentioned, so for Kuaishou's employees that have stock options right now, they are not counted as our paying clients. Thank you. [Non-English content] Thank you. As we do not have any further questions, I would like to hand the conference back to our host, Mr. Daniel Yuan. Please take over. Thank you, operator. Thank you all for joining the earnings call today. On behalf of the Futu management team, I would like to thank you for joining our earnings call. If you have any additional questions, please do not hesitate to ask me or any of our investor relations representatives. Thank you and good night.