FUTU(FUTU) - 2024 Q3 - Quarterly Report

Financial & Operational Highlights Futu reported strong growth in the third quarter of 2024, with total revenues increasing 29.6% year-over-year to HK$3,436.1 million and net income rising 20.9% to HK$1,319.2 million, alongside a 33.1% increase in paying clients and a 48.1% surge in total client assets Q3 2024 Key Financial Highlights (YoY) | Metric | Q3 2024 (HK$ million) | YoY Growth | | :--- | :--- | :--- | | Total Revenues | 3,436.1 | +29.6% | | Total Gross Profit | 2,811.3 | +27.0% | | Net Income | 1,319.2 | +20.9% | | Non-GAAP Adjusted Net Income | 1,398.4 | +20.8% | Q3 2024 Key Operational Highlights (YoY) | Metric | As of Sep 30, 2024 | YoY Growth | | :--- | :--- | :--- | | Paying Clients | 2,196,647 | +33.1% | | Registered Clients | 4,284,786 | +22.8% | | Total Users | 24.1 million | +14.4% | | Total Client Assets | HK$693.4 billion | +48.1% | | Total Trading Volume (Q3) | HK$1.90 trillion | +74.7% | | DARTs (Q3) | 698,811 | +68.0% | Management Commentary Management highlighted a significant 138.0% year-over-year increase in new paying clients, with full-year growth expected to exceed guidance, driven by strong performance in established markets and Malaysia as a top contributor - Acquired 154,000 paying clients in Q3, a 138.0% YoY increase, with full-year growth expected to comfortably exceed the guidance of 550,000 new paying clients[3] - Malaysia was the top contributor of new paying clients, while Hong Kong and Singapore collectively contributed over one-third[3] - Total client assets grew 48.1% YoY to HK$693.4 billion, with the majority of the quarterly growth driven by the appreciation of clients' stock holdings[6] - Total trading volume increased 74.7% YoY to HK$1.90 trillion, led by a sequential increase of 22.9% in U.S. stocks trading volume[6] - Wealth management asset balance grew 87.5% YoY to HK$97.3 billion, with 27% of paying clients holding wealth management products[6] Detailed Financial Performance Analysis In Q3 2024, Futu's revenues grew 29.6% YoY, primarily from a 51.5% rise in brokerage commissions and a 12.9% increase in interest income, leading to a 31.1% growth in income from operations despite higher expenses Revenues Total revenues for Q3 2024 increased by 29.6% year-over-year to HK$3,436.1 million, primarily fueled by a 51.5% surge in brokerage commission and handling charge income and a 12.9% rise in interest income Q3 2024 Revenue Breakdown (HK$ million) | Revenue Component | Q3 2023 (HK$ million) | Q3 2024 (HK$ million) | YoY Growth | | :--- | :--- | :--- | :--- | | Brokerage commission & handling charge | 1,008.9 | 1,528.9 | +51.5% | | Interest income | 1,504.5 | 1,698.8 | +12.9% | | Other income | 137.1 | 208.5 | +52.1% | | Total Revenues | 2,650.4 | 3,436.1 | +29.6% | - The increase in brokerage commission income was mainly due to the 74.7% YoY increase in total trading volume, although the blended commission rate declined from 9.3 bps to 8.0 bps[7] - Interest income growth was driven by higher margin financing income and increased income from the securities borrowing and lending business[8] Costs and Gross Profit Total costs rose 42.9% YoY to HK$624.9 million, driven by higher interest expenses and processing costs, resulting in a 27.0% growth in total gross profit to HK$2,811.3 million Q3 2024 Costs & Gross Profit (HK$ million) | Item | Q3 2023 (HK$ million) | Q3 2024 (HK$ million) | YoY Growth | | :--- | :--- | :--- | :--- | | Total Costs | 437.4 | 624.9 | +42.9% | | Total Gross Profit | 2,213.0 | 2,811.3 | +27.0% | - Interest expenses increased by 43.3% due to higher costs associated with the securities borrowing and lending business[10] - Gross margin was 81.8% in Q3 2024, compared to 83.5% in Q3 2023[11] Operating Expenses Total operating expenses increased by 20.9% YoY to HK$1,079.9 million, primarily due to a 48.5% jump in selling and marketing expenses driven by new client acquisition Q3 2024 Operating Expenses Breakdown (HK$ million) | Expense Component | Q3 2023 (HK$ million) | Q3 2024 (HK$ million) | YoY Growth | | :--- | :--- | :--- | :--- | | Research & development | 359.5 | 384.7 | +7.0% | | Selling & marketing | 211.7 | 314.3 | +48.5% | | General & administrative | 321.7 | 380.9 | +18.4% | | Total Operating Expenses | 892.9 | 1,079.9 | +20.9% | - The increase in selling and marketing expenses was driven by a 138.0% YoY increase in new paying clients, which was partially offset by lower client acquisition costs[13] Profitability Income from operations grew 31.1% YoY to HK$1,731.3 million, with net income increasing 20.9% to HK$1,319.2 million, despite a decline in net income margin due to foreign exchange losses Q3 2024 Profitability Metrics (HK$ million) | Metric | Q3 2023 (HK$ million) | Q3 2024 (HK$ million) | YoY Growth | | :--- | :--- | :--- | :--- | | Income from Operations | 1,320.2 | 1,731.3 | +31.1% | | Net Income | 1,091.2 | 1,319.2 | +20.9% | | Non-GAAP Adjusted Net Income | 1,158.0 | 1,398.4 | +20.8% | - Operating margin increased to 50.4% from 49.8% in Q3 2023[14] - Net income margin declined to 38.4% from 41.2% YoY, attributed to unrealized foreign exchange losses from the appreciation of the Renminbi[15] - Diluted net income per ADS was HK$9.42 (US$1.21), compared with HK$7.86 in Q3 2023[17] Special Cash Dividend Futu's board approved a special cash dividend of US$0.25 per ordinary share (US$2.00 per ADS), totaling approximately US$280 million, with a record date of December 6, 2024 - The board approved a special cash dividend of US$0.25 per ordinary share, equivalent to US$2.00 per ADS[6] - The aggregate dividend amount is approximately US$280 million, funded by surplus cash on the balance sheet[6] - The record date for the dividend is the close of business on December 6, 2024, with payment expected on or around January 10, 2025[6][18] Financial Statements The unaudited financial statements provide a detailed view of Futu's financial position and performance, including balance sheets, comprehensive income statements, and non-GAAP reconciliations Unaudited Condensed Consolidated Balance Sheets As of September 30, 2024, Futu's total assets increased to HK$143.5 billion from HK$97.1 billion at the end of 2023, driven by significant increases in client-related cash and payables Selected Balance Sheet Items (HK$ thousands) | Account | Dec 31, 2023 (HK$ thousands) | Sep 30, 2024 (HK$ thousands) | | :--- | :--- | :--- | | Total Assets | 97,135,847 | 143,462,024 | | Cash and cash equivalents | 4,937,538 | 9,048,504 | | Cash held on behalf of clients | 44,369,310 | 66,419,953 | | Total Liabilities | 72,564,116 | 115,043,807 | | Payables: Clients | 48,762,263 | 77,072,065 | | Total Equity | 24,571,731 | 28,418,217 | Unaudited Condensed Consolidated Statements of Comprehensive Income For Q3 2024, Futu generated total revenues of HK$3,436.1 million, resulting in a net income of HK$1,319.2 million and diluted earnings per ADS of HK$9.42 Q3 2024 Income Statement Summary (HK$ thousands) | Account | Q3 2023 (HK$ thousands) | Q3 2024 (HK$ thousands) | | :--- | :--- | :--- | | Total Revenues | 2,650,415 | 3,436,132 | | Total Gross Profit | 2,213,018 | 2,811,252 | | Income from Operations | 1,320,164 | 1,731,307 | | Net Income | 1,091,157 | 1,319,166 | | Diluted Net Income per ADS (HK$) | 7.86 | 9.42 | Reconciliation of Non-GAAP and GAAP Results The company provides a reconciliation of GAAP to non-GAAP results by excluding share-based compensation expenses, showing a non-GAAP adjusted net income of HK$1,398.4 million for Q3 2024 Q3 2024 Non-GAAP Reconciliation (HK$ thousands) | Item | Q3 2023 (HK$ thousands) | Q3 2024 (HK$ thousands) | | :--- | :--- | :--- | | Net income (GAAP) | 1,091,157 | 1,319,166 | | Add: Share-based compensation | 66,812 | 79,247 | | Adjusted net income (Non-GAAP) | 1,157,969 | 1,398,413 | Supplementary Information This section provides details for the earnings conference call, definitions of non-GAAP financial measures, currency exchange rates, and the safe harbor statement for forward-looking information - An earnings conference call is scheduled for Tuesday, November 19, 2024, at 7:30 AM U.S. Eastern Time[19] - Non-GAAP adjusted net income is defined as net income excluding share-based compensation expenses, which management uses to evaluate operating performance[24] - The exchange rate used for convenience translation is HK$7.7693 to US$1.00, the rate in effect on September 30, 2024[27]