Ladies and gentlemen, welcome to Futu Holdings' second quarter 2026 earnings 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 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, Michelle Lee, investor relations manager at Futu. Ma'am, please go ahead.

Thanks, operator. Thank you for joining us today to discuss our second quarter 2026 earnings results. Joining me on the call today are Mr. Li 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 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 annual report. And with that, I will now turn the call over to Liv. Liv will make his comments in Chinese and I will translate.

Thank you all for joining our earnings call today. In the second quarter, we acquired 252,000 net new funded accounts.

up 23.7% year-over-year and 12.2% quarter-over-quarter. Total funded accounts reached approximately 3.84 million, representing an increase of 33.6% year-over-year and 7% quarter-over-quarter.

This record benefits the active Hong Kong stock IPO and U.S. stock's good performance. The Hong Kong market stock market has accelerated. In the Singapore market, the number of registered users has exceeded 2 million. have further strengthened the leading position of Moomoo in the local retail investors. The average income of new customers in Hong Kong and New York has been increased by 10%. This is due to the continuous development of cross-border investor education and our constant investment in brand construction.

Sign acquisition in Hong Kong accelerated sequentially during the quarter, supported by a robust local IPO pipeline and strong performance in U.S. equities. In Singapore, registered users surpassed the 2 million milestone, further solidifying our leadership among local retail investors. The average revenue per new client in both markets improved sequentially, underpinned by our ongoing investor education initiatives across multiple asset classes, reinforced by our sustained investment in brand equities.

In Malaysia, we have implemented a targeted marketing strategy around the IPO and AI market. In Malaysia, our targeted marketing campaign centered around local IPOs and the AI-driven rally catalyzed a record quarter of client acquisitions.

leading all markets in net new funded accounts for the third consecutive quarter. In the U.S., NUMU's prediction markets garnered significant traction, driving incremental new client acquisition and helping improve overall client engagement on our platform.

NUMU's customer assets are about 1.4 trillion Hong Kong dollars, with a net growth of 43.6% and a net growth of 14.5%. The growth of assets is mainly due to the increase in market value of the customer's market share, as well as the contribution of the income. As of quarter end, total client assets still at HK$1.4 trillion, up 43.6% year-over-year and 14.5% quarter-over-quarter.

The growth was mainly attributable to higher market valuation of client stock holdings, and to a lesser extent, net asset inflow. Period-end margin financing and securities lending balance rose 31% quarter-over-quarter to HK$95.1 billion, supported by an active Hong Kong IPO market, along with broader positive market sentiment that encouraged clients to take on more leverage.

The total exchange rate increased by 54.6% in return and increased by 78.8% in the same ratio, which is about 6.42 trillion Hong Kong dollars, creating a new record. The exchange rate of each share increased by 67.2% to 5.02 trillion Hong Kong dollars, mainly due to the attention of investors to AI stocks. The exchange rate of Hong Kong stocks increased by 15.9% to 1.17 trillion Hong Kong dollars in return, mainly due to the activity of semiconductor, China-led Internet and new stock transactions.

Thanks to favorable market conditions, total trading volume rose 78.8% year-over-year and 54.6% quarter-over-quarter to HK$6.42 trillion, setting a new record high. US stock trading volume grew 67.2% sequentially to HK$5.02 trillion, driven by client interest in AI-related names. Hong Kong stock trading volume increased by 15.9%, and others, to HK$1.17 trillion, largely attributable to heightened trading activity in semiconductor, China Internet, and newly listed companies.

As the first Hong Kong-based trading company to enter the Hong Kong Stock Exchange in June, it is also the only one in Hong Kong to launch a stock exchange that suppresses the exchange of digital assets. At the same time, we are actively exploring the possibility of investing in digital assets at the same purchase rate.

In June, Putu Securities became the first and today only broker in Hong Kong to launch securities-backed margin financing for virtual assets under an upgraded Type 1 license approval from the SFC. We are also exploring extending our unified buying power framework to cover virtual asset holdings. further enhancing capital efficiency across traditional and digital asset markets.

The investors are very interested in the topic. The live live stream attracts hundreds of people to participate in the live broadcast and led to the subsequent significant purchase.

Wealth management client assets were HK$180.2 billion, up 10% year-over-year and 1% quarter-over-quarter. During the quarter, we observed a shift in client preference from money market funds toward equity funds on the back of strong equity market performance. In Hong Kong, we held our first offline fund roadshow for retail investors, centered on the commercial space theme. Amid heightened investor interest, the event drew a full on-site audience and several hundred livestream participants, translating into meaningful follow-on subscriptions.

We concluded the quarter with 683 IPO distribution and IR clients, up 32% year-over-year.

The Hong Kong IPO market sustained strong momentum in the second quarter, with nearly 60% of newly listed companies choosing to partner with Futu. We served as joint book runners for multiple high-profile listings, including those of Star Sports Medicine, Lightelligence, and Metis TechBio. Next, I'd like to invite our CFO, Arthur, to discuss our financial performance.

Thank you, Liv and Michelle. Please allow me to walk you through our financial performance in the second quarter. All the numbers are in Hong Kong dollars unless otherwise noted. Total revenue was $7.2 billion of 36% from $5.3 billion in the second quarter of 2025. Brokerage commission and handling charging income was $3.4 billion of 30% year-over-year and 27% QVQ. Total trading volume grew on both year-over-year and QVQ basis, while blended commission rate declined due to stronger trading activities in higher priced U.S. stocks and options during the quarter. Interest income was $3.1 billion, up 37% year-over-year and 18% QVQ. Both the year-over-year and QVQ increase was mainly driven by high interest income from margin financing, bank deposits, and security lending. Other incomes were $718 million of 61% UOV and 27% QVQ. Both UOV and QVQ increase was primarily driven by higher currency exchange income and IPO financing service income. Our total costs were $985 million of 47% compared to the second quarter of 2025. Brokerage commission and handling charge expenses were $248 million, up 54% year-over-year and 50% QVQ. Both the year-over-year and the QVQ increase was mainly due to higher trading volume. Interest expenses were $513 million, up 36% year-over-year and 24% QVQ. Both the year-over-year and the QVQ increase was mainly driven by higher interest expenses associated with our margin financing business. Processing and servicing costs were $225 million of 70% year-over-year and 32% QVQ. Both the year-over-year and the QVQ increase were primarily driven by higher product service fees. As a result, total gross profit was $6.2 billion, an increase of 34% from $4.6 billion in the second quarter of 2025. growth margin was 86.3% as compared to 87.4% in the same quarter of 2025. Operating expenses were 1.8 billion of 35% year-over-year and 11% QVQ. To break it down, R&D expenses were 501 million of 13% year-over-year and 5% QVQ. The year-over-year and QVQ increase was primarily driven by the increased investments in strategic initiatives like AI and Web3. Selling and marketing expenses were $657 million of 53% year-over-year and 18% Q-over-Q. The year-over-year Q-over-Q increase was mainly driven by the increase of new fund accounts. G&A expenses was $593 million of 40% year-over-year and 10% Q-over-Q. The year-over-year increase was primarily due to an increase in G&A personnel and the professional fees. As a result, income from operations was 4.5 billion of 34% year-over-year and 26% Q-over-Q. Operating margin of 62% is largely flat compared to the second quarter of 2025. On the income increased by 42% year-over-year to 3.6 billion. Their income margin expanded to 50.6% in the second quarter compared to 48.4% in the same quarter last year. Our effect tax rate for this quarter was 16.1%. That concludes our prepared remarks. We now would like to open the call to questions. Operator, please go ahead.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit yourself to one question, one follow up. One moment while we compile our Q&A roster. Our first question is going to come from the line of Emma Fu with B of A Securities. Your line is open. Please go ahead.

Thank you for giving me a chance to ask a question. Also, congratulations to the company for achieving a very good performance in the second quarter. I am Emma Xu from Meiyin Securities. I have two questions for you. The first question is, since the release of the new rule on May 22, have there been any obvious changes in the ratio of the number of customers with assets, AUM, and income contributions in mainland customers since the release of the new rule? Have there been any obvious losses of accounts or assets? Thank you for giving me the opportunity to ask the first question. Congratulations on the strong second quarter result. Since the release of the new regulations on May 22nd, have you seen material changes in men and client share across founded account, AUM, and revenue contribution? Have you observed meaningful outflow of account or client assets? The second question is, against the regulatory backdrop, the group delivered resilient revenue and profit in the second quarter. So could management please share an update of the overseas market development and their contribution to the group? Thank you.

Okay, thank you, Emma. The first question is for Liv. I'll answer the second question.

Thank you. Okay. Fudu is highly focused on compliance and strict implementation of the requirements of each supervision. After the release of the new rule on May 2, we immediately followed the relevant compliance standards and maintained continuous communication with the supervision. Since the new rule, the customer's accumulated progress and Sun Yat-sen. The main impact has been fully released in the second quarter. The mainland and Hong Kong customers have had a good start. The two places are roughly equivalent. The mainland part mainly comes from some regulatory financial adjustments under the new rule. The Hong Kong part is concentrated in the new rule release. Due to the emotional fluctuation of the market, it caused a dangerous start. So, the loss of mainland customers is concentrated in June, after one of the restrictions of ABP landed. Then we see that by August, its flow rate has been significantly slowed down. The second is that the flow rate of Hong Kong customers is still higher than 98%. The flow rate of overseas markets is relatively stable. In addition, overseas new customers, have continued to grow steadily. We will continue to invest our resources and growth centers in an internationalized business. Thank you.

And I will translate for Liv. So FUTU places very strong emphasis on the compliance, and we are committed to meeting all of the applicable regulatory requirements. So following the release of the new rules, we promptly implemented the relevant compliance measures, and we have maintained ongoing communication with the regulators. As for the cumulative asset outflows since the new regulations, the outflows were about mid-single-digit percentage of our total client assets. And we believe the bulk of the impact has already been absorbed in Q2. And the outflows came from both our mainland and Hong Kong client base. And the two are roughly about the same. The mainland outflows were primarily compliance-driven adjustments under the new rules. while the Hong Kong outflows were more concentrated in the early period right after the announcement, which reflects some risk of sentiment as the market digested the news. And most of the mainland client outflows happened in June and July after we implemented the restrictions on our app. And the pace of client attrition started to moderate in August. And for Q2, Our Hong Kong client retention rate stayed above 98% and the retention across our overseas markets remained stable quarter over quarter. And we continue to see steady growth in overseas new client additions. And going forward, we'll keep directing our resources and the growth focus toward advancing our international business.

Okay, let me answer the second question. I think one is from the contribution of new customers' income. From now on, in many overseas markets, in the second quarter, the increase in the number of new real estate customers has some obvious improvements. For example, in the US, Singapore, and Hong Kong, the increase in the number of new customers in these markets is a double-digit increase. I think on the one hand, it may reflect, for example, the growth of these markets in the United States. The quality of our customers is a structural change. At the same time, such as Hong Kong, including Singapore, these are already a relatively mature market for HUTU. We can still continue to get some high-value customers, in order to support the growth of our entire company's revenue. From the perspective of the number of customers and the assets of the customers, in the second quarter, no matter if it is in Malaysia, Australia, New Zealand, or Canada, the number of customers with assets in the overseas market is a double growth. In fact, all the overseas market customer assets in the second quarter have achieved an improvement. Especially, I believe that the acquisition of the Thailand license will provide a very good contribution to the layout of Southeast Asia in the future. From the perspective of profit, we are now in a stage where different branches of overseas companies are in different stages of growth. Singapore has already been profitable, and whether it is from the perspective of the absolute number of profits, including the profit rate, it is constantly improving. We can see a positive effect of continuous growth in the Singapore market. I am also very happy to share with you that the Malaysian market is also the first time in the second quarter of this year to reach a break-even at the operating profit level. We believe that in the next few quarters, there may be more overseas markets that can gradually cross the balance point of profit and loss. We believe that the long-term profitability of overseas markets will have a very good expectation. Let me translate it. On the quality of new funder accounts, the average revenue per newly funder accounts improved sequentially across multiple markets in the overseas, in particular like US, Singapore, and Hong Kong all posted double-digit growth. We think this both reflect a structural upshift in funder account quality in growing markets like US and also continued acquisitions of higher value clients in mature markets like Hong Kong and Singapore. together supporting overall revenue growth. Then on the client asset perspective, all fund accounts in overseas markets, including Malaysia, Australia, and New Zealand, and Canada, grow double digits sequentially in second quarter. And actually, the average client assets rose Q over Q across every overseas market we have the operations, showing that we are growing not just in the number of clients, but also the world this year. Our recent secularizations of the Thailand license also give us a very additional important anchor for our ASEAN footprint down the road. In terms of profitability, our overseas markets are at different stage of maturities. For instance, Singapore has already passed the break even, you know, a couple of years ago. And the absolute level and also the net profit margin continue to expand thanks to the operating leverage benefit kicking in. and I'm also very happy to share Malaysia has recently achieved a break-even in the operation levels as well. While our other overseas markets are still building out their client and asset base, a rising average client's assets and the client retentions, we think the groundwork for long-term probabilities for the overseas market will be very likely. Thank you.

Thank you. They are very helpful.

Thank you. And one moment for our next question. Our next question will come from the line of Chiao Huong with Morgan Stanley. Your line is open. Please go ahead.

Let me briefly translate. The first question is regarding Thailand. What's the strategic thinking about choosing this market? and when do we expect Futu to officially launch the business here? And do we see any synergy amount in the ASEAN market we are already in? And second question is about the commission rate, which is dropping a little bit, Q and Q. So what kind of structural changes we're seeing behind this drop? Thank you.

Okay, thank you, Qi Yao. I'll ask my colleague Robin to answer the first question. I'll answer the second question. Thank you.

Thank you for the question. First of all, Thailand is the third largest economy in Southeast Asia, and the number of local investors is relatively high. The demand for global asset configuration and digital investment tools is also constantly growing. According to the data of the Thai Stock Exchange, by the first half of 2026, Thailand has already reached 4.5 million investors through online opening. Therefore, for Moomoo, This is actually a natural extension of the market in Southeast Asia after Singapore and Malaysia. It can also form a very good coordination with some of the existing market infrastructure and user operating experience. At present, MuMu has received a type A credit card from S.E. Banfa in Thailand. In addition to our market experience in other overseas markets, the company has also been recognized by overseas regulators for its ability to regulate land and sea. And I will translate.

So Thailand is the third largest economy in Southeast Asia. And the local investors there are quite digitally savvy with growing demand for global asset allocation as well as digital investing tools. And according to the Stock Exchange of Thailand, as of the first half of 2026, over 4.5 million investors had opened accounts online. So for Moomoo, entering Thailand is really a natural next step in the Southeast Asia market after Singapore and Malaysia. And it allows us to leverage the infrastructure and the operations that we have already built in that region. So Moomoo has already obtained the Type A securities license from the Thai SEC. And combined with our licensed operations in other overseas markets, This reflects the ongoing recognition from regulators of our ability to operate compliantly across multiple jurisdictions and the overall pace of our overseas expansion remains steady. And as for the timing of the official launch, we still need to go through the regulators readiness inspection to receive final approval. So we don't really have a specific timeline to share at this point. will continue to work closely with the local regulator and make sure all the pre-launch preparations are thoroughly in place.

Okay, the second question is about the drop in the total delivery rate. Let me answer it. First of all, we don't have any price adjustment in this quarter. So the drop in the total take rate mainly reflects and many more. First, there was no any price manual change in the second quarter across all of our markets. So the take rate change Q on Q is mainly driven by our customers' behavior. Number one is the contribution from the derivative in the second quarter compared with the first quarter slightly down Q over Q. But on the absolute loot levels, the contribution is still very healthy. Secondly is both clients are trading the US stocks in the second quarter with a very high concentration on some high value AI themes and the tech leading names which let our implied commission rate down a little bit. Thank you.

Thank you and one moment for our next question. Our next question is going to come from the line of Charles Zhao with UBS. Your line is open. Please go ahead.

Hello, thank you. I'm UBS. I'm your analyst, Zhou Cheng. First of all, congratulations to the second management floor for achieving a very outstanding performance, which is also the expectation of the super market. I have two questions. First, we noticed that the cost of comprehensive goods and services is still fluctuating in the second quarter. So I want to ask what are the main factors So first of all, congrats to the management on the very excellent results and also a strong beat to the market consensus. This is Charles Zhou from UBS. I have two questions. First, can we maybe get some colors on the trajectory of your CAC CAC in the second quarter and what the key drivers were? Should we think about the CAC in the coming quarters? My second question is also could you maybe provide some breakdown on the newly added funded accounts and the period and funded accounts In particular, the contribution makes from your oversea markets. Thank you.

Okay, thank you, Charles. The first question, I will ask my colleague Michelle to answer.

I will answer the second question. In RTO, the total cost of our group of customers is about 2,600 Hong Kong dollars. In fact, it is still in the leading area of 2,500 to 3,000 Hong Kong dollars. The rise in the CAC ratio of RQ is mainly due to the influence of the supervision incident. The loss of customers led to a low increase in the number of customers with assets. At the same time, the company continues to maintain a significant amount of brand construction investment to support the long-term growth of various markets and the continued improvement of customer value. Then in July, the return cost ratio increased a certain extent. So in the second quarter, the blended CAC rose sequentially to around 2,600 Hong Kong dollars, which is still within our four-year guidance range of 2,500 to 3,000 Hong Kong dollars. And the quarter-on-quarter increase in CAC for Q2 was mainly driven by the relatively lower net new funded accounts as a result of the regulatory developments. and at the same time, we maintain a certain level of brand investment to support the long-term growth and the higher client lifetime value across our market. Additionally, the CAC trended higher in July relative to Q2.

Okay, the second question is related to the breakdown of various markets. From the perspective of new real estate customers, Malaysia has already had a growth of real estate customers in our group for three consecutive weeks. The most recent is Hong Kong. Malaysia and Hong Kong have contributed more than half of their real estate in this quarter. Malaysia has led all markets in terms of new fund accounts growth for three consecutive quarters, followed by Hong Kong. Together, these two markets make up for more than 50% of net new fund accounts acquired in this quarter, with Singapore being the next largest source among the remaining markets. By the end of the second quarter, Mumu's share of total fund accounts has increased to nearly 60%, led by Singapore, Malaysia, and the US. Thank you.

Thank you and one moment for our next question. Our last question is going to come from the line of Yufan with CICC. Your line is open. Please go ahead.

Hello, thank you for giving me the opportunity to ask this question. Congratulations to the company for achieving such a brilliant performance. I am Fan Youyou, an analyst at Zhongjin. I also have two questions for you. First of all, could you please share with us the overall business trend in the past three seasons, including new customers, customers' income, traffic volume, AUM, and so on? And then my second question is about the prediction market, because we see that Momo America can also ask the management to share with us how the performance has been in the past, including how to look at the future, how to look at this prediction market business as a commercial path, including a chance for future growth. I will quickly translate it here. Thanks for taking my questions and congratulations on the outstanding results. This is Yoyo Fan from CICC and I have two questions here. Firstly, would you please share more color on our Q3 trend such as the run rate of the new funded accounts, the trade flow and also the client AUM. Secondly, since Momo has launched the prediction markets in the US, can you share more on this business trend and how to view the future monetization and growth opportunities of prediction markets are these two crossings. Thank you.

Okay, the first question, please let me answer it. I will answer the second question.

Okay. According to the run rate of 3Q's QTD, because of the fluctuation of the market, this indicator may show a trend of small-scale pressure. The number of real estate customers that have increased compared to 2Q is a little bit down. And then from the level of income, according to Q3's run rate, the income of Hong Kong and overseas markets has returned to a more normal level. And then the trading volume is a little bit down. It mainly reflects that the market mood of 3Q and QTD is a little bit lower than 2Q. So on the Q3 quarter-to-date run rate basis, our key metrics are trending modestly softer against a backdrop of market volatility. So the net addition of funded accounts moderated compared with Q2. And as for net asset inflow, so in Hong Kong and our overseas markets, net asset inflows have returned to a normalized level. and as for the trading volume so total trading volume was down modestly sequentially so this is primarily reflecting a cooling of the retail sentiment in the Q3 quarter to date relative to the previous quarter

FCM's license plate, and then at the beginning of June, MoMo America officially launched a trading service for the U.S. stock market to the U.S. stock investors. As Liv said in the opening remarks before, our entire stock market has been on the line for a month, and the total turnover has exceeded 200 million. This also reflects the strong demand of U.S. stock investors for harmonized stock market products. We believe that real estate contracts have some very good effects in terms of drawbacks and drawbacks. The entire real estate contract has some more obvious co-effects with the stock market, some opportunities to cross-sell. We can see that some users of trading real estate contracts are more active in the stock market, which means that these two types of products are not interdependent, but have a role to motivate each other. are working in the U.S. I think there are two main purposes. On the one hand, of course, we hope that we can seize the opportunity of a local prediction market to quickly develop such an industry. On the other hand, I think it may be more important to use this opportunity to accumulate some core know-how in product design, operation management, including risk control, for future corporations to have more areas to carry out the prediction market business to make appropriate preparations. We got a license in May from, you know, FCM license from CFTC and Momo US officially launched the protection market trading service for our retail clients in the US in early June. the number of the event contracts asleep mentioned in opening remarks trade exceeds 200 million within one month of the launch reflecting a very strong demand for from the US retail investors for prediction markets products and the event contrast has delivered great results in our observation in both acquiring new clients and the driving engagement with clear cross-sell synergy with our core brokerage business. For instance, users who trade event contracts are more active in security trading, showing that event contracts are not substitutes for security trading, but rather a drive of it. The purpose for our U.S. production market rollout, I think, serves two purposes. Number one is definitely to capture the near-term opportunity as production markets took off locally but more importantly let us build up the product design operational and the risk management expertise that will support our ability to bring prediction markets to other regions we have the operation down the road.

Thank you. Thank you. Thank you and I would now like to hand the conference back over to Michelle Li for closing remarks.

So that concludes our call today. And on behalf of the FUTU management team, I would like to thank you all 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.

This concludes today's conference call. Thank you for participating. And you may now disconnect. Everyone, have a great day.