Futu’s Q4’FY22 Earnings Report + Call Summary

1. Number of client growth of +17.5% to +19.5% y-o-y

2. Total trading volume declined -10.9% y-o-y, while daily average revenue trades (DARTs) declined -12.7% y-o-y. This is understandable as investor sentiment was down a lot as the global equities market declined drastically as the US Federal Reserve raised interest rates from near 0% to almost 4+% in a year. S&P 500 Index was down 20% in 2022.

3. Margin financing and securities lending balance declined -12.2% y-o-y, also signaling traders’ appetite turning from risk-ON to risk-OFF in the bear market

1. Top line (Total revenues) grew 42% y-o-y, thanks to the higher brokerage commission (they adjusted from 7bps to 9.6 bps blended), plus higher interest income from the higher interest rates

2. Interest expenses jumped a whopping +227%, also largely due to the aggressive rate hikes

3. Selling and marketing expenses declined more than -50% as they scale back in customer acquisition, hence reducing their Customer Acquisition Costs (CAC) - a pretty common phenomenon where the Return on Ads Spend (ROAS) improve when a company spend lesser on ads

4. The savings in marketing expenses offsetted with the jump from interest expenses, resulting in a flat total operating expenses for FY 2022 and FY 2021 (almost the same number)

5. EPS improved from 3.22 in FY’21 to 6.80 in FY’22 (that’s almost double!)

1. Cash and cash equivalents grew +10% y-o-y, liquid cash stands at ~US$ 645 million

2. Short-term investments amount declined -42% y-o-y, but still a rather small position of US$ 86 million

3. Long-term investments (non-current assets) increased by almost 10x, but was mostly committed in 2022 and it’s still a relatively small amount of ~US$ 31 million, plus they could be a mix of term deposits as well (not all are fixed-price bonds), hence not sufficient to raise any SVB-esque red flag

4. Current Ratio (Current Assets/Current Liabilities) stand at 1.27, a slight improvement from the 1.25 as at end of FY’21

5. Debt to Equity Ratio (Total Liabilities/Total Shareholders’ Equity) stand at 3.53, a significant improvement from the 3.84 as at end of FY’21; FYI Interactive Brokers’ DE ratio stands at 3.14

1. They have 2 new Asian markets to expand to (which shall exclude the already publicly-known Japan). More lights to be shed on Q2 this year, potential markets include South Korea, Malaysia and Philippines which have huge total addressable markets, as mentioned by their CFO.

2. They will be rolling out options trading for the US market, which in my opinion a huge plus point to their suites of financial products

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