Futu Holdings Limited (FUTU) Q3 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call reveals strong financial performance with significant revenue and net income growth, supported by operating leverage. The Q&A highlights robust client asset inflows and healthy customer acquisition costs. Despite some uncertainties in interest income trends, the company's expansion in cryptocurrency, AI tools, and international markets, along with strategic investments like Airstar Bank, indicate positive momentum. Overall, the optimistic outlook and strategic initiatives suggest a positive stock price movement in the short term.

Key Financial Performance

Funded Accounts 3.13 million funded accounts, marking a 43% year-over-year and 9% quarter-over-quarter increase. Reasons: Accelerated client acquisition in all markets.

Net New Funded Accounts 254,000 net new funded accounts, up 65% year-over-year and 25% sequentially. Reasons: Accelerated client acquisition in all markets.

Total Client Assets HKD 1.24 trillion, up 79% year-over-year and 27% quarter-over-quarter. Reasons: Robust net asset inflow and appreciation in client stock holdings.

Margin Financing and Securities Lending Balance HKD 63.1 billion, climbed 23% quarter-over-quarter. Reasons: Bullish sentiment on equities and a buoyant IPO market boosting financing demand.

Total Trading Volume HKD 3.9 trillion, rose 105% year-over-year and 9% quarter-over-quarter. Reasons: Favorable market dynamics and upbeat investor sentiment.

Crypto Trading Volume Surged 161% sequentially. Reasons: 90% quarter-over-quarter increase in crypto asset balance and accelerated trading velocity.

Wealth Management Assets HKD 175.6 billion, rose 8% sequentially. Reasons: Increased allocation to fixed income funds and sustained inflow into money market funds.

IPO Distribution and IR Clients 561 clients, up 22% year-over-year. Reasons: Leading role in facilitating retail participation in the Hong Kong IPO market.

Total Revenue HKD 6.4 billion, up 86% year-over-year. Reasons: Higher trading volume.

Brokerage Commission and Handling Charge Income HKD 2.9 billion, up 91% year-over-year and 13% quarter-over-quarter. Reasons: Higher trading volume.

Interest Income HKD 3 billion, up 79% year-over-year and 33% quarter-over-quarter. Reasons: Higher interest income from security borrowing, lending business, margin financing, and bank deposits.

Other Income HKD 441 million, up 111% year-over-year. Reasons: Higher currency exchange service income, fund distribution service income, and IPO subscription service charge income.

Total Cost HKD 793.7 million, up 27% year-over-year. Reasons: Increase in brokerage commission and handling charge expenses, interest expenses, and processing and servicing costs.

Gross Profit HKD 5.6 billion, up 100% year-over-year. Reasons: Strong revenue growth.

Operating Expenses HKD 1.7 billion, up 57% year-over-year and 31% quarter-over-quarter. Reasons: Greater investment in crypto and AI capabilities, higher new fund accounts, and increased general and administrative headcount.

Income from Operations HKD 3.9 billion, up 125.5% year-over-year and 17% quarter-over-quarter. Reasons: Strong top-line growth and operating leverage.

Net Income HKD 3.2 billion, up 143% year-over-year and 25% quarter-over-quarter. Reasons: Strong revenue growth and operating leverage.

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Operating Highlights

New funded accounts: 3.13 million funded accounts, marking a 43% year-over-year and 9% quarter-over-quarter increase. Acquired 254,000 net new funded accounts, up 65% from a year ago and 25% sequentially.

Product localization: Launched Bursa derivatives and SGX futures in Malaysia. Upgraded AI tools to support Malay language and local stock analysis.

Crypto trading: Crypto trading volume surged 161% sequentially. Ethereum trading volume quadrupled, overtaking Bitcoin. Solana launch in Hong Kong contributed to growth.

Wealth management: Introduced self-service request-for-quote function for structured products, allowing customization and seamless execution.

Hong Kong market: Highest quarterly net client adds since Q1 2021. Hong Kong remained the largest contributor to new funded accounts for 4 straight quarters.

Singapore market: Led peers in DAUs, solidifying position as #1 retail broker. Hosted MooFest, attracting over 28,000 investors.

Malaysia market: Continued expansion with significant runway for growth. Strengthened product localization.

U.S. market: High double-digit sequential increase in new funded accounts. Active derivatives trading activity with double-digit sequential growth.

Client assets: Total client assets reached HKD 1.24 trillion, up 79% year-over-year and 27% quarter-over-quarter. Margin financing and securities lending balance climbed 23% quarter-over-quarter to HKD 63.1 billion.

Trading volume: Total trading volume rose 105% year-over-year and 9% quarter-over-quarter to HKD 3.9 trillion. U.S. stock trading volume at HKD 2.6 trillion, Hong Kong stock trading volume at HKD 1.19 trillion.

IPO distribution: Ended the quarter with 561 IPO distribution and IR clients, up 22% year-over-year. Played a leading role in Hong Kong IPO market.

Enterprise service capabilities: Assumed role of overall coordinators for the first time in Butong Group IPO, showcasing advancement in enterprise services.

Technology investment: Increased investment in crypto and AI capabilities, driving innovation and operational efficiency.

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Risk or Challenges

Forward-looking statements: The company acknowledges that forward-looking statements involve inherent risks and uncertainties, which could cause actual results to differ materially from expectations.

IPO market dependency: The company's performance is significantly tied to the Hong Kong IPO market, which, while currently strong, is subject to fluctuations and external factors.

Margin financing and securities lending: Increased leverage positions and margin financing expose the company to higher financial risks, especially in volatile market conditions.

Crypto trading volatility: The company's growing focus on crypto trading introduces risks due to the highly volatile nature of cryptocurrencies.

Interest expense growth: Higher interest expenses associated with securities borrowing and lending, as well as margin financing, could impact profitability.

R&D and marketing expenses: Significant increases in R&D and marketing expenses, while aimed at growth, could strain financial resources if not managed effectively.

Regulatory risks: The company operates in multiple jurisdictions, exposing it to varying regulatory requirements and potential compliance challenges.

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Guidance & Outlook

Client Growth in Malaysia: The company sees a huge runway for future client growth in Malaysia as equity ownership continues to increase. They have strengthened product localization by launching Bursa derivatives and SGX futures and upgraded AI tools to support Malay language and local stock analysis.

Crypto Trading Expansion: The company plans to broaden coin selection, strengthen product capabilities, and deepen investor education to further drive crypto trading penetration among its client base.

Wealth Management Enhancements: To better serve professional investors, the company introduced a self-service request-for-quote function for structured products, allowing clients to customize products, access and compare quotes, and execute trades seamlessly.

IPO Market Participation: The company continues to play a leading role in facilitating retail participation in the Hong Kong IPO market and plans to further advance its enterprise service capabilities.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Could you break down the client assets' performance in Q3 by mark-to-market gains and net asset inflows? What is the current run rate for net asset inflow in Q4?

A:Around 1/3 of the asset movement in Q3 came from net client asset inflow, and the remaining 2/3 came from mark-to-market fluctuations. In Q4, quarter-to-date, mark-to-market implications were negative, but net asset inflows remained robust with no slowdown compared to Q2 or Q3.

Q:Customer acquisition cost in Q3 was higher than Q2 but still lower than the early full-year guidance. What is the recent customer acquisition trend, and what do you expect for Q4?

A:The average customer acquisition cost (CAC) in Q3 was around HKD 2,300, slightly up quarter-on-quarter but still within the full-year target range of HKD 2,500 to HKD 3,000. In Q4, both client acquisition momentum and cost remain healthy, and management is optimistic about achieving the full-year CAC objective.

Q:What were the driving forces behind the strong sequential growth in Q3 interest income? Can you break down the quarterly interest income into key items?

A:Interest income in Q3 was evenly distributed among three sources: client idle cash, margin financing, and security borrowing and lending. The strong momentum in security borrowing and lending was mainly market-driven, particularly due to increased utilization of hard-to-borrow stocks.

Q:What is the latest contribution of the crypto business to revenue in Q3, and what are the driving forces for its expansion?

A:Crypto contributed a small percentage to revenue in Q3 but showed exponential growth across Hong Kong, Singapore, and the U.S. Key drivers included triple-digit growth in crypto AUM and trading volume, new functions like market orders, and the addition of new coins. Future growth will depend on token offering expansion, derivatives, and regulatory approvals.

Q:What is the Q4 trend for interest income, particularly for the security borrowing business?

A:Management does not have high-frequency data for Q4 interest income trends, especially for the security borrowing business, but will provide updates during the Q4 results.

Q:What is the sensitivity analysis to the Fed rate cut, and what are the plans for R&D and G&A cost investments?

A:For every 25 basis point Fed rate cut, monthly pretax profit is negatively impacted by around HKD 3-7 million. However, trading velocity and client asset inflows may offset this. R&D and G&A costs increased due to investments in crypto systems, AI capabilities, and preparation for new market entries.

Q:What is the regional breakdown of existing and net new paying clients, and what is the strategy for the U.S. market?

A:In Q3, Hong Kong and Malaysia contributed around 50% of new funded accounts. Greater China clients accounted for 46% of total accounts, with overseas markets contributing 54%. In the U.S., the focus is on sophisticated active traders, supported by branding campaigns and superior product experience.

Q:What investments have been made in Airstar Bank, and what is its strategic role within Futu's business?

A:Futu increased its stake in Airstar Bank to 68.4%, becoming the controlling shareholder. Short-term focus is on improving customer experience and integrating banking with brokerage. Long-term, the bank aims to enhance client stickiness and wallet share, offering a one-stop financial services platform.

Q:What is the regional mix of client AUM net inflow, and is there a rising share from high-net-worth clients?

A:Hong Kong's contribution to net asset inflows slightly decreased due to strong inflows from overseas markets like Singapore and Malaysia. There is a growing contribution from high-net-worth clients in Hong Kong, a trend expected to continue.

Q:What is the product pipeline for crypto and tokenization, and are there plans for M&A in the crypto space?

A:The product pipeline for crypto and tokenization is under preparation but depends on regulatory approvals. Management is open to M&A in the crypto space to accelerate capability building.

Q:What is the profile of new customers in Hong Kong, and what is the gross margin trend in markets outside Hong Kong?

A:New clients in Hong Kong show an upward trend in average client assets, with robust net asset inflows. Trading behavior is market-driven. Gross margins are healthy across markets, with Singapore's operating margin consistently above 60% due to strong operating leverage.

Q:Review of Unclear Management Responses

A:Management avoided providing a direct answer to the Q4 interest income trend, particularly for the security borrowing business, citing a lack of high-frequency data. They deferred the update to the Q4 results.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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The earnings call reveals strong financial performance with significant increases in net income, operating margin, and client acquisition. Despite concerns about a decrease in new accounts, the company remains confident in achieving its client growth targets. The positive outlook for asset inflows and expansion into new markets like New Zealand further boosts sentiment. However, uncertainties in crypto trading and management's evasive responses on certain issues slightly temper enthusiasm. Overall, the positive financial metrics and growth prospects outweigh the negatives, suggesting a positive stock price movement.

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