Futu Q2 Earnings Call Highlights
Key Points
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- Strong Q2 financial performance: Revenue rose 36% year over year to HK$7.2 billion, while net income increased 42% to HK$3.6 billion. Net margin expanded to 50.6%.
- Client and trading growth accelerated: Funded accounts reached 3.84 million, client assets rose 43.6% to HK$1.4 trillion, and trading volume hit a record HK$6.42 trillion, driven by U.S. equities, AI-related stocks and Hong Kong IPO activity.
- Overseas expansion remains central despite regulatory outflows: Mainland China and Hong Kong client-asset outflows totaled a mid-single-digit percentage, but Hong Kong retention stayed above 98%; Malaysia reached operating break-even and overseas markets continued adding clients.
Futu (NASDAQ:FUTU) reported higher second-quarter revenue and profit as trading activity, client assets and funded accounts increased, supported by strong U.S. equity interest, Hong Kong IPO activity and growth across overseas markets.
Total revenue for the second quarter rose 36% year over year to HK$7.2 billion, while net income increased 42% to HK$3.6 billion. Net income margin expanded to 50.6% from 48.4% a year earlier. income from operations grew 34% to HK$4.5 billion, with an operating margin of 62%, largely unchanged from the prior-year quarter.
Client Growth and Trading Activity
Futu added 252,000 net new funded accounts during the quarter, up 23.7% from a year earlier and 12.2% sequentially. Total funded accounts reached about 3.84 million, an increase of 33.6% year over year and 7% from the first quarter.
Chairman and Chief Executive Officer Leaf Li said client acquisition accelerated in Hong Kong, aided by a strong local initial public offering pipeline and U.S. equity performance. Singapore registered users surpassed 2 million, while Malaysia delivered a record quarter for client acquisition and led all markets in net new funded accounts for the third consecutive quarter.
Futu said Moomoo’s U.S. prediction markets product also contributed to new client acquisition and platform engagement. Total client assets reached HK$1.4 trillion at quarter-end, up 43.6% year over year and 14.5% sequentially, largely reflecting higher market values for client stock holdings and, to a lesser extent, net asset inflows.
Trading volume rose 78.8% year over year and 54.6% quarter over quarter to a record HK$6.42 trillion. U.S. stock trading volume climbed 67.2% sequentially to HK$5.02 trillion, driven by interest in artificial-intelligence-related stocks. Hong Kong stock trading volume increased 15.9% to HK$1.17 trillion, with activity concentrated in semiconductor, China internet and newly listed companies.
Period-end margin financing and securities lending balances increased 31% sequentially to HK$95.1 billion. The company attributed the increase to an active Hong Kong IPO market and broader positive market sentiment.
Revenue Growth and Expenses
Brokerage commission and handling-charge income increased 30% year over year and 27% sequentially to HK$3.4 billion. Chief Financial Officer Arthur Chen said trading volume increased on both comparisons, though the blended commission rate declined as activity shifted toward higher-priced U.S. stocks and options.
Chen said the company made no pricing changes during the quarter. Instead, the lower take rate reflected client trading behavior, including a modest decline in derivatives’ contribution and greater trading of high-priced U.S. technology and AI-related stocks and larger options contracts.
Interest income rose 37% year over year to HK$3.1 billion, driven by margin financing, bank deposits and secured lending. Other income climbed 61% to HK$718 million, primarily because of higher foreign-exchange income and IPO financing service income.
Total costs increased 47% to HK$985 million. Operating expenses rose 35% to HK$1.8 billion, including a 53% increase in selling and marketing expense to HK$657 million as the company added funded accounts. Research and development expense rose 13% to HK$501 million, which Chen said reflected investments in initiatives including AI and Web3.
Gross profit increased 34% to HK$6.2 billion, while gross margin declined to 86.3% from 87.4% a year earlier.
Regulation and Overseas Expansion
Management said it promptly implemented compliance measures following new regulations issued May 22 and remained in communication with regulators. Cumulative client asset outflows since the regulations amounted to a mid-single-digit percentage of total client assets, according to the company.
The outflows came from both mainland China and Hong Kong client bases in roughly equal measure. Management said mainland outflows were primarily compliance-related adjustments, while Hong Kong outflows were concentrated shortly after the announcement amid risk-off sentiment. It added that most mainland client outflows occurred in June and July, while client attrition began moderating in August.
Hong Kong client retention remained above 98% in the second quarter, and retention in overseas markets was stable sequentially, the company said. Management said it would continue directing resources and growth efforts toward international operations.
Average revenue per new funded account increased sequentially across multiple overseas markets. Chen said new-client average revenue grew by double digits in the U.S., Singapore and Hong Kong. Malaysia, Australia, New Zealand and Canada each posted double-digit sequential growth in funded accounts, while average client assets increased across every overseas market where Futu operates.
Malaysia and Hong Kong together accounted for more than half of second-quarter net new funded accounts, with Singapore the next-largest contributor. By the end of the quarter, Moomoo accounted for nearly 60% of total funded accounts, led by Singapore, Malaysia and the U.S., Chen said.
Singapore has been profitable for several years, with both absolute profit and margin continuing to improve, management said. Malaysia reached operating break-even during the second quarter for the first time.
New Products and Third-Quarter Trends
In June, Futu Securities became the first and, according to management, only Hong Kong broker to offer securities-backed margin financing for virtual assets under an upgraded Type 1 license approval from the Securities and Futures Commission. The company is also exploring whether to extend its unified buying-power framework to virtual asset holdings.
Futu said wealth management client assets totaled HK$180.2 billion, up 10% year over year and 1% sequentially. Management observed clients shifting from money market funds toward equity funds amid strong stock-market performance.
The company ended the quarter with 683 IPO distribution and investor-relations clients, up 32% year over year. Futu said nearly 60% of newly listed Hong Kong companies partnered with the firm during the quarter, and it served as joint bookrunner on several listings.
Looking into the third quarter, management said key operating metrics had softened modestly amid market volatility. Net additions of funded accounts were below the second-quarter level, trading volume was modestly lower sequentially, and retail sentiment had cooled. However, net asset inflows in Hong Kong and overseas markets had returned to normalized levels.
In the U.S., Moomoo launched prediction market trading for retail clients in early June after receiving an FCM license in May. Chen said more than 200 million event contracts were traded during the first month after launch. He said the product has helped acquire clients and improve engagement, with users trading event contracts also showing higher securities-trading activity.
About Futu (NASDAQ:FUTU)
Futu Holdings Ltd. is a technology-driven brokerage and wealth management company that provides online brokerage services, market data, and investment tools to retail and institutional clients. Headquartered in Hong Kong and listed on the NASDAQ under the ticker FUTU, the company operates digital trading platforms that combine order execution, real-time quotes, news, and research tools to serve active investors and wealth management customers.
The firm's product suite includes brokerage access to equities, exchange-traded funds and derivatives across major markets, margin financing, initial public offering (IPO) subscription services, wealth management products and discretionary investment solutions.
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