Hello, ladies and gentlemen. Welcome to Futu Holdings second quarter 2021 conference call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, there will be a Q&A 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, Daniel Yuan, Chief of Staff and Head of IR at Futu. Please go ahead, sir. Thanks, operator, and thank you for joining us today to discuss our second quarter 2021 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 beliefs regarding future events, which, by their nature, are not certain and are outside of the company's control. Forward-looking statements involve 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 will now turn the call over to Leaf. Leaf will make his comments in Chinese, and I will translate. Hello, everyone. Thank you for joining the earnings call today. We achieved the milestone of one million paying clients as of the end of second quarter, translating into a 230% year-over-year growth. Net addition was 211,000, our second-best quarter in history. Our relentless pursuit of premier user experience and brand image rewarded us with yet another quarter of rapid client base expansion, over 50% organically acquired paying clients, and a high-paying client retention rate of 97.8%. Our key growth strategies would be to defend and extend our leading position in Hong Kong, further take market share in Singapore, and drive self-clearing in the U.S. to improve monetization and operational flexibility. In the second quarter, Singapore contributed nearly half of our new paying clients. Singapore represents a blue ocean opportunity. We will leverage marketing and word-of-mouth referral to further capture user mindshare. In the U.S., our self-clearing initiative reported accelerated progress as we now have migrated about 350 U.S. stocks to our proprietary clearing system. We are targeting to self-clear 50% of U.S. stocks by the end of this year. Our total client assets were HKD 503 billion at quarter end, representing 253% growth on a year-over-year basis and 9% growth on a quarter-over-quarter basis, despite challenging mark-to-market impact. Average client assets came down sequentially to HKD 503,000 as paying client acquisition in new markets picked up and dragged average balance. Total trading volume was up 104% year-over-year to HKD 1.3 trillion, of which U.S. trading constituted approximately 64%. Trading volume came down meaningfully from the first quarter due to a much lower turnover rate across different trading markets and client cohorts. We have seen our clients stay on the sidelines amid market uncertainty, and we expect our trading volume growth in the coming quarters to be driven mostly by expansion in client counts and assets, rather than trading turnover, should current market environment persist. 尽管二季度末港股IPO的火热行情分流了部分财富管理业务资产，但富途大象财富在本季度依然实现了环比正增长。我们也预计未来几个季度财富管理资产规模将保持稳健提升。截至6月30日，超过7.4万名客户持有138亿港币的财富管理资产，资产量同比增长59%，环比增长5%。在二季度，我们和七家行业知名的资产管理机构建立了合作关系，包括高盛、瑞银和信安。富途也成为了华夏香港旗下的华夏精选大中华科技基金唯一的分销商。这只基金是目前香港唯一一只专注中国科技行业的公募基金。另外，我们也在持续优化和迭代我们的产品能力。例如，我们加入了基金投资组合再平衡功能，升级了货币市场基金的自动申赎功能。现在客户在开通了自动申赎功能之后，系统会根据客户的闲置资金和融资融券的账户余额，自动进行货币基金的申购和赎回。[Non-English Content] Our wealth management business, Money Plus, has been relatively immune to the market downturn. Although the Hong Kong IPOs at the end of the quarter took away some of the assets accumulated over the quarter, and we expect steady asset balance growth in coming quarters. As of June 30th, over 74,000 clients held wealth management positions, and total client assets in wealth management were HKD 13.8 billion, up 59% year-over-year and 5% quarter-over-quarter. Money Plus established new partnerships with seven reputable asset managers in the quarter, including Goldman Sachs, UBS and Principal. We also became the exclusive distributor of ChinaAMC Select Greater China Technology Fund, the only China technology-focused mutual fund in Hong Kong. We continue to innovate on product features. We added fund portfolio rebalancing function and upgraded the functionality of money market funds, where clients can now opt to automatically subscribe and redeem money market funds based on their idle cash and margin balance position. 本季度末，我们的企业服务富途安逸共有186家IPO和IR客户，以及263家ESOP客户，相比去年同期分别增长191%和153%。我们会进一步提升一站式ESOP服务的能力，并为企业管理层和员工提供更多的增值配套服务。我们批量处理复杂的跨区域ESOP授予的经验，将帮助我们在未来继续赢得更多大型企业客户的信任。[Non-English Content] Our enterprise business, Futu I&E, has 186 IPO and IR clients, as well as 263 ESOP solutions clients as of quarter end, representing 191% and 153% year-over-year growth, respectively. We continue to enhance the value proposition of our ESOP business by providing an end-to-end one-stop solution and various value-added services for the management team and employees for our corporate clients. Our experience in handling complicated ESOP granting at scale across different geographies helps us continue to win over large-scale corporate clients. 保持较低付费客户流失率的同时，我们也很高兴地继续看到强劲的用户活跃度数据。6月交易日的平均日活人数依然保持在100万以上，用户在平台上的日均活跃时间大约为30分钟。为了进一步提升用户的活跃度，我们不断吸引不同类型的人员和机构入驻平台来丰富社区内容，也在不断优化，从而实现更精准的内容推荐。截至二季度末，有超过600家公司在我们的社区平台建立了企业号，并通过企业号与零售投资者进行互动交流，这为平台的用户提供了宝贵的信息和数据来辅助他们的投资决策。[Non-English Content] Besides low paying client attrition, we're encouraged to see robust user engagement data as average DAU remained above 1 million and daily average user time spent hovered around 30 minutes on each trading day in June. In an effort to drive user engagement, we continue to enrich content in our social community by attracting different stakeholders and improve content recommendation. As of quarter end, over 600 companies have set up enterprise accounts in our social community to interact with retail investors, providing our users invaluable data to facilitate investment decision-making. 接下来请首席财务官Arthur介绍我们本季度的财务表现。[Non-English Content] Next, I'd like to invite our CFO, Arthur, to discuss our financial performance. Thanks, Leaf Li and Daniel Yuan. Please allow me to walk you through our financial performance in the second quarter. All numbers are in HKD, unless otherwise noted. Total revenue was HKD 1.78 billion, an increase of 129% from the second quarter of 2020, and a decrease of 28% sequentially. Brokerage commission and handling charge income was HKD 798 million, up 95% year-over-year, and down 14% QOQ. The QOQ decline was mainly due to a sharp drop in trading turnover amid dampened market sentiment from about six times in the first quarter to three times in the second quarter, to be specific. This was partially offset by higher client assets and a slightly sequential uptick in blended commission rate to 6.1 basis point. Interest income was HKD 610 million, an increase of 194% year-over-year, and a decrease of 7% QOQ. The year-over-year increase in interest income was mainly driven by higher margin financing balance, higher security borrowing, and the lending service income, as well as higher IPO financing income. The mild quarterly decline can be mainly attributed to a reduction in security borrowing income as the market value of U.S. stock borrowing and the borrowing rate both dropped sequentially. Other income was HKD 169 million, up 141% year-over-year, and down 24% QOQ. The year-over-year growth and the QOQ decline can both be attributed to changes in our IPO subscription service charge income and currency exchange service income as market conditions fluctuated. In terms of costs, our total cost was HKD 279 million, an increase of 81% from the same quarter last year, and a decrease of 37% from last quarter. Brokerage commission and handling charge expenses was HKD 145 million, an increase of 89% year-over-year. This increase was roughly in line with our changes of our brokerage commission and handling charge income. Interest income was HKD 80 million, up 98% year-over-year. The growth was primarily due to, number one, higher costs associated with our security borrowing and the lending business. Number two, higher margin financing interest expenses driven by higher margin financing balance, partially offset by lower cost of funding. Processing and the servicing costs were HKD 54 million, up 48% year-over-year. The increase was primarily due to an increase in cloud service fee to process higher number of concurrent trades. As a result, total gross profit was HKD 1.3 billion, an increase of 143% from HKD 534 million in the same period in 2020. Gross profit margin increased from 77.6% in the second quarter of 2020 to 82.3% this quarter, thanks to higher operating leverage as a result of our larger business scale. Total operating expenses was up 145% year-over-year and 32% QOQ to HKD 647 million, over 40% of which was related to our international initiative in Singapore and the U.S. markets. R&D expenses was HKD 173 million, an increase of 48% year-over-year, and then 26% QOQ, roughly in line with our R&D headcount increase. We continue to invest in our U.S. clearing capabilities and dedicate around 40% of our R&D personnel to product development in Singapore and in the U.S. to drive a smoother and customized product experience for local users. Selling and marketing expenses was HKD 377 million, up 292% year-over-year and 37% 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. In the second quarter of 2021, over half our selling and marketing expenses were devoted to the overseas markets. General expenses was HKD 97 million, an increase of 91% year-over-year and a 24% QOQ due to increase in headcount for general and administrative personnel. Our effective tax rate increased from 9% in the first quarter to 14.5% in the second quarter, since our total tax credit arising from accumulated loss in the mainland business has been fully utilized so far, and our net revenue derived from our U.S. stock trading declined in the second quarter. Going forward, we do expect our effective tax rate to be in the range of 12%-14%. As a result, our net income quarter-over-quarter increased by 126% year-over-year and decreased by 54% QOQ to HKD 534 million. That concludes our prepared remarks. We'd now like to open the call to questions. Operator, please go ahead. Thank you. 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. If you wish to cancel your request, please press the pound or hash key. Your first question comes from Catherine Liu of Morgan Stanley. Please ask your question. I'll translate for myself. I have two questions. First is, can the management please give us some guidance in terms of the third quarter to date results, including client acquisition pace, AUM per capita, turnover velocity, client acquisition cost, and maybe some operating expenses growth rate? Second, in light of the regulatory uncertainties regarding various structured companies and ADRs, does the company have any plans regarding Hong Kong listing? Thank you. Thank you, Catherine. This is Arthur. I will take these two questions. First of all, just quarter to date, I just want to share some color. Definitely, I think, that the market fluctuations quarter to date have some negative impact on our average client assets. So far, I think roughly, our average client assets will be down around in the range of 10%-20%, mainly attributed to the mark-to-market loss. We are very confident because even quarter to date, almost every day, we still see meaningful net asset inflows, in terms of the wealth accumulations in Futu platforms. I do think, as the market back to normal, these market loss or gain will come to the average numbers. In terms of the client trading velocity, we do expect trading velocity have some rebound in July and August. Given the market, especially high-tech stocks have meaningful setbacks. We do see some bottom fishes from the retail investors. Unlike the situation in second quarter, many investors sit on the sidelines. We do see some participations in the third quarter. If based on the current run rate, I would expect, in terms of top lines, we may see some sequential QOQ increase in the third quarter compared with the second quarter. In terms of the client acquisition cost, I think on the absolute amount levels, this marketing campaign spending will be roughly in line with what we did in the second quarter. Definitely, the client acquisition speed will slow down due to the market conditions. This will affect the denominator numbers, and we will let our CAC numbers have certain increase in the third quarter compared with the second quarter. For your second question, I think number one, our VIE structure is slightly different compared with many Chinese ADR companies, because most of our revenue now derives from the offshore. Essentially, we do not generate any revenues from our VIE structures. Even, there will be some new regulations on the VIE structure, I do not expect that it will have some meaningful impact operational wise or financial wise to our business. Definitely, we have noticed some recent trends in the capital markets, and we are actively conducting policy research and evaluation in this regard. We will make a very comprehensive assessment to ensure that decision to maximize our shareholders' best long-term interest is made. Thank you. Thank you very much. Your next question comes from Ethan Wang from CLSA. Please ask your question. Thank you, management. I have two questions surrounding the Chinese ADR delisting risk. The first one is wondering whether management can share some color on the current percentage of Chinese ADRs as a percentage of the total trading volume of the U.S. stocks on Futu. The second one is, if the risk of delisting for the Chinese ADRs really happens, then these companies may very likely to convert their Hong Kong listings into primary ones. That means they will be included in a connect scheme, which means that Chinese investor can trade those stocks through online China brokers. Does that mean a very big risk for a firm? How does management look at this? Thank you. Okay, thank you. I will take the first question and I will leave my colleagues Robin and Leaf for the second questions. In terms of our current U.S. stock tradings, essentially ADR just accounts for a very small part. If we do some back testing around 15% of our U.S. stock tradings belong to these Chinese ADRs. Robin or Leaf? 第二个问题就是，比如说在美股上市收紧之后，那中概股的公司很多应该会选择去到香港上市。那么这里中概股去回过头来到香港上市应该会成为一个结构性的趋势。其实对于富途来讲的话，对于我们在香港已经深耕了这么多年，可以把它视为是一个利好的消息。同时从我们自身的一个经营数据也能看到，港股IPO是具有非常强的一个货币化的能力，那么IPO的认购费和margin的利息都会产生不错的一个收入。另外就是就我们目前的一个客户的结构构成来说，其实港股的交易时段对于我们的客户会更为友好，也会更加有利于客户的交易。还有一个就是。[Non-English Content] Yeah, we think the return of China ADR back to Hong Kong could be a structural trend, although we don't really take a stance on how the regulations will evolve. The Hong Kong IPOs generally have very high monetization potentials. We generate a pretty sizable percentage of our revenue from the IPO subscription and margin financing interest. Also in Hong Kong, there's more friendly trading hours for our clients. Also just to add on to your other point about converting to primary listing. Well, we don't think the onshore brokers will necessarily pose a great threat to our business, because a lot of the popular Chinese companies listed on Hong Kong right now are already accessible to our mainland Chinese investors through Stock Connect, for example, Tencent. Some of these large tech companies still account for a majority of our asset balance in Hong Kong stocks. In comparison to trading through Stock Connect, trading directly in the Hong Kong market offers more flexible and more favorable trading hours and trading time. Like, if mainland China has a public holiday, it does not affect your trading hours in Hong Kong. Also there is a lot more flexibility around margin financing, and there is a wider selection of stocks that you can invest in. We don't believe that a number of Chinese companies converting from secondary listing to primary listing will change our competitive edge in this market. Sure, got it. That's good. Thank you. 关于竞争的话，那其实如果我们抛开中概股的话，我们看香港这里其实跟onshore这些券商的竞争其实是一直都存在的。那么富途其实有我们自身非常的特点，包括整个的客户群，以及说客户群所对应的特征，其实都会作为一个相对特殊独特的存在。所以我觉得并不会因为这里是不是有一些中概股回到香港来上市，会让这里产生更进一步的变化。所以富途依然会拥有它自己的一个竞争力。[Non-English Content] 好的，谢谢。[Non-English Content] We also have a very differentiated client cohort as compared to some of the onshore brokers. We don't think our competitive advantage will be diluted should this circumstance actually realizes. Your next question comes from the line of Zoey Zong from Jefferies. Please ask your question. 管理层你们好，感谢接受我的提问，我是Jefferies的Zoey。我这边有两个问题想请教一下。第一个是关于tax，因为我们注意到Q2的effective tax rate有14.5%，就是高于之前的水平。想请教一下这个背后的原因是什么，以及往后看的话应该怎么看？然后第二个问题是想请教一下，因为香港IPO结算的周期未来会从T+5缩短到T+2，当然可能是到2022年的四季度才会执行。那这个对于我们的IPO financing business的影响应该怎么看呢？[Non-English Content] Hi management, thanks for taking my question. This is Zoey from Jefferies. I have two questions. My first question is regarding the tax rate. We have noted that the effective tax rate for Q2 was 14.5%, which is much higher than the previous quarters. Wondering what's the reason for the increase and how should we estimate this number going forward? My second question is, we know that Hong Kong Exchange plans to adopt a T+2 settlement cycle instead of the current T+5, in the first quarter 2022. Wondering how should we think about the impact on our IPO financing business? Thank you. Thank you, Zoey. I will answer the first question and will leave the second question to Leaf. Actually, I mentioned this in our opening remarks. You are right, our effective tax rate increased from 9% in the 1st quarter to 14.5% in the second quarter. The reason actually comes from two folds. Number one is our tax credit arising from historical accumulated loss in the China operation has been fully utilized. This is a permanent effect. Secondly is our net revenue derived from our U.S. stock trading belong to these mainland individuals. Actually, we can make offshore claims in Hong Kong. Their U.S. stock trading volume in the second quarter declined. We have some temporary impact in the second quarter arriving from these second reasons. Going forward, we expect our effective tax rate will be in the range of 12%-14%. Thank you. 我来回答第二个问题，就是关于香港的一个公开招股的这样一个变化。那首先，IPO的融资利息在今年上半年占我们收入大概是4%左右，那么2020年占我们整个收入是6%不到。那所以假设结算周期从五个工作日变成两个工作日的话，那么从静态的角度来看，那也只会对我们营收产生大概是2%到3%左右的一个负面影响。Daniel先帮我翻译一下。[Non-English Content] Sure. The IPO financing income accounted for about 4% of our revenue in the first half of this year, and the contribution was less than 6% in 2020. If we are to assume that the settlement period goes from T+5- T+2, from a static point of view, this will have only a 2%-3% negative impact on our top line, which we think is manageable. 另外，我们其实通过这些年的这样一个运营的时间，也会看到有一些IPO，特别是一些热门的IPO，它的打新的时间是重叠的，那么其实客户能够去拿出来进行新股认购的资金是有限的，那么在这个重叠周期当中，我们可以看到，会有一部分打新需求其实是被抑制的。那么这里使用新的招股系统之后，因为它整个的一个招股的时间变短，这一部分的一个需求是会得到重新的释放。那么在行情好或者是新股多的时候，整个一个资金冻结的时间变短，反而是能够提升客户的一个资金的使用效率，会提升客户的一个打新的参与度和渗透率。另外我们也会看到整个这里的改革，它不只是把整个新股的一个招股的时间变短，我们还看到它增加了一个功能，避免了一个多股打新，也就是说在现有的系统下面，一个客户其实他是有可能通过在不同的券商去开户的话，去进行同一只股票多次的这种申购。那么在新的系统里面，他只能选择在一个券商去做这样的事情。我认为对于已经处在相对头部的富途来说，其实是有利的，因为我们有更好的体验，也有相对充裕的资金去提供，帮助他去完成新股认购。[Non-English Content] Suddenly, a lot of the IPO subscription periods kind of overlap with each other. We believe some of the needs for IPO subscription have been subdued under the current kind of regulations. We think this could change after the reform. Especially when the markets are performing really well, and there are a lot of IPOs happening at the same time, having a T+2 settlement period can increase the capital efficiency of our clients, and therefore may potentially help increase their engagement in this IPO subscription process. Also, we understand that the regulations are not only regarding shortening the settlement period, but also may touch on avoiding the retail clients from subscribing to IPOs through multiple brokers. We believe that the IPO financing income makes up a very significant income for a lot of the mid to small-sized brokers. This policy could actually contribute to industry consolidation and direct a lot of these retail investors to platforms like Futu that have better user experience and more capital for them to use during the IPO. Thank you. 谢谢。[Non-English Content] Once again, if you wish to ask a question, please press star one on your telephone keypad. Once again, it is star one, if you wish to ask a question. Your next question comes from Hanyang Wang from 86Research. Please ask your question. 谢谢管理层给我这个提供的机会。我是来自86 Research的汉阳。恭喜我们又达成一个新的里程碑。我就追问一个关于IPO业务的问题。就是我们看到这个中概上市监管现在有些不确定性，以及最近港股上市有一点这个节奏上的放缓，就这些会不会对我们未来这个ESOP的业务产生影响？以及这个ESOP业务的如果产生影响的话，会影响我们在大陆地区的一个获客？[Non-English Content] I will translate my questions. Thanks management for taking my questions. Congratulations on another great quarter. I have a follow-up question on the IPO business. Will the uncertainties for China ADR IPO throughout the recent slowdown for Hong Kong IPOs impact our ESOP business? And will that also impact our acquisition in mainland China, so ESOP? Thank you. Thank you. Let me take this question. I think number one, the slowdown of Chinese companies overseas ADR IPO is just a temporary situation. We do understand that many Chinese companies are in the pipelines and that they are waiting for more clarity in terms of the regulations from China and also from the U.S. regulators down the road. I think the impact will be very short-term. Having said that, we also see, as Leaf Li mentioned before, we see more and more U.S.-listed companies and also pre-IPO companies will consider Hong Kong as their primary listing stage rather than U.S. in the past. We do have a very strong edge in Hong Kong market, given Hong Kong is our home base. We do think client acquisition through the ESOP, through the IPO will continue. Just give you some breakdowns in terms of our current client acquisition channels. Organic already accounts for over 50%. If we just calculate ESOP channel combined with this group account opening, will just account for around 10% of our total new paying clients enhanced every quarter. I think the impact is still manageable. Thank you. Very helpful. Thank you. We have another question from the line of Catherine Liu from Morgan Stanley. Please ask your question. I'll translate for myself. Just wondering, I understand that you're only in a new market. Initial monetization may be less important versus client market share. Just wondering, has the management considered increasing the monetization for the Singapore market? Whether it will be some guidance from companies or some hints from companies, or it will be a natural result as clients' assets increase on the platform. Thank you. Sure, Catherine. Let me give you some colors in terms of our client profile in Singapore. I think in terms of age and their trading velocity, this population is very similar to what we see in Hong Kong markets. The average age is around 30 years old, and that they do trade a lot, particularly, for the US markets. Now, the average account assets in Singapore is around 6,000 SGD. Of course, it is relatively low compared with the average assets, what we witnessed in China and in Hong Kong. Encouragingly, I think, if we look at a cohort basis, the new clients we acquired in March and April, their cohort assets already almost double in the past four to five months. Back to your question. I think number one, definitely we think that the nature of our business is just more like rolling a snowball. We are very happy to go along with our clients in their investment journeys. We believe as time goes by, their average assets will become bigger and bigger. Number two, definitely we will have more service offerings, more product offerings in the pipeline. Hopefully, we will launch more business in the coming two quarters. For instance, we will provide Singapore clients to participate in the Hong Kong IPO retail tranche. Not to mention, we will also expand our wealth management product offerings, currently just offering to the Mainland and the Hong Kong people, to the Singapore local residents as well. Therefore, I think as we provide more and more products and service, we will find more monetization areas to enhance our output. Thank you very much. Thank you. As there are no further questions at this time, I would now like to hand the conference back to Daniel for closing remarks. 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. Thank you. That does conclude our conference for today. Thank you for participating. You may now all disconnect.