Prepared remarks
Good evening, and welcome to Webull's Second Quarter 2025 Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Carlos Questell, Webull's Head of Investor Relations. Please go ahead.
Good morning, good afternoon and good evening, everyone. Welcome to Webull's Second Quarter 2025 Conference Call. Earlier today, we issued a press release detailing our second quarter financial results. A copy of the release can be found on our IR website at webullcorp.com under the Investor Relations tab. Please note that this call is being recorded and will be available for replay via our IR website. During the call, we will be making forward-looking statements about the company's performance and business outlook. These statements are based on how we see things today and contain elements of uncertainty. For additional information concerning the factors that can cause actual results to differ materially, please refer to the cautionary statement and risk factors contained in our filings with the Securities and Exchange Commission and press release, both of which can be accessed via our website.
Today's presentation will include a discussion on adjusted operating expenses, adjusted operating profit and adjusted net income, all non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to their most directly comparative GAAP measures are included in the press release that we issued today. It is important to note that although we believe that these non-GAAP measures provide useful information about our operating results, they should not be considered in isolation or construed as an alternative to their directly comparative GAAP measures. Furthermore, other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure. With me today is our Group President and U.S. CEO, Anthony Denier; and our Group CFO, H.C. Wang. We will begin with prepared remarks and then take questions at the end. With that, I'd like to now turn it over to Anthony.
Thank you, Carlos, and hello, everyone. Thank you for joining our second earnings conference call as a public company. As you all know, the market experienced extreme volatility in the second quarter, beginning with the sharp sell-off triggered by the Liberation Day tariff announcement. The S&P 500 dropped over 12% in early April, but quickly rebounded after the most severe tariffs were paused. Strong corporate earnings, tame inflation data and speculative rallies in tech and AI stocks have fueled a full recovery, with the S&P 500 reaching an all-time high by the end of the quarter. As a result, the environment for retail self-directed trading is the most favorable we have seen since February of 2021. The market is undergoing a technology-induced tectonic shift that only happens once every several years. One major shift came in the late '90s and early 2000s when trading moved from brick-and-mortar branches to online platforms.
Then almost 20 years later, the transition from PC to mobile-first trading launched the next shift, which was accelerated by the widespread acceptance of zero commission and pandemic lockdowns where trading became increasingly social. We are now in a new era spurred by a more discernible regulatory environment, one that empowers fintech innovations and broadens access to products that were once out of reach for retail investors. This evolution is opening the door to entirely new asset classes, enabling investors to trade everything from equities and bonds to crypto, prediction markets and tokenized real-world assets all within a single platform. Today's new generation of retail investors demands direct control over their financial futures, and Webull is uniquely positioned to meet that demand, not only as a trading platform offering the products they want, but also as a trusted source of market data and insights and as a community of like-minded investors seeking to learn, share and grow together.
I am happy to report that Webull is very well capitalized. Access to capital is critical to our ability to innovate and compete on the cutting edge. As you know, we completed our de-SPAC to become a public company in the second quarter, raising over $200 million from the exercise and redemption of the BULLZ incentive warrants. In addition, in July, we entered into a standby equity purchase agreement, allowing us to access up to $1 billion of capital over the next 3 years at our discretion. To date, we have raised $142.8 million through this facility. We will continue to draw on these funds strategically, deploying capital as market conditions and business opportunities warrant. This will put us in a position to continue delivering new products and enabling broader access to our differentiated platform globally. Now Slide 2 summarizes our second quarter highlights. We delivered another strong quarter for Webull shareholders with year-over-year revenue growth outpacing growth in operating expenses, allowing another quarter of solid profits.
Our total revenues grew 46% year-over-year to $131.5 million, largely attributed to an increase in customer assets, which reached an all-time high; explosive growth in equities volumes; on-time delivery of new offerings; and geographic expansion. We recorded adjusted expenses for the quarter of $108.2 million, representing a year-over-year increase of 20%. Our increase in expenses were mainly driven by higher brokerage and transaction charges attributable to growth in transaction volumes and higher marketing spend. Even so, this growth was far outpaced by our revenue expansion. Notably, a standout result and one that I'm incredibly proud to announce here today is that Webull has now achieved 3 straight quarters of operating profitability. We posted a year-over-year increase in adjusted operating profit margin of 18 percentage points, bringing our total adjusted operating profit for the second quarter to $23.3 million.
This achievement underscores the strength of our strategy and execution and reflects our dedication to delivering value to our shareholders. Of course, our financial performance is a function of the quality of our offerings. So let's move to Slide 3. We continue to scale our existing products while delivering against our road map for new offerings. Our resources are focused on initiatives designed to continue expanding our customer base and customer assets while increasing our wallet share. Webull Premium, our subscription-based service for active traders and long-term investors was launched in March, and to date has attracted 75,000 subscribers, well ahead of our internal target of 100,000 subscribers by year-end. We are seeing steady demand for Webull Premium with average daily trading volumes by premium subscribers up across all product categories. We also expanded our partnership with Kalshi during the second quarter to begin offering crypto hourly contract trading and Fed events trading to our prediction market customers.
Prediction markets provide an engaging and accessible way to trade, lower barriers of entry and offer precise tools for all experience levels. On the last earnings call, I mentioned that we'll be bringing back crypto trading to the Webull platform, and we have delivered on that promise. Starting this week, Webull customers in the U.S. can trade crypto again through the Webull App. We have also launched crypto trading in Brazil and Australia and are actively exploring digital asset licenses in several other markets. We are introducing crypto to meet growing customer demand amidst a clearer regulatory path in the U.S. and globally. Today's investors are more sophisticated than ever and expect flexibility, control and access to alternative investment classes. Crypto is now a vital part of that mix. By reintroducing it, we are aligning with our users' evolving needs and delivering the frictionless investing experience they expect.
Finally, we are capitalizing on our technology infrastructure to seamlessly roll out the Webull App to new geographies. Expanding access globally, we launched our Latin American Webull App in Q2, and we have begun rolling out the Webull App in the Netherlands, giving us a strong foothold across Latin America and European markets. Turning now to Slide 4. Here, you can see our registered users and funded account growth. In the second quarter, we added roughly 800,000 users, bringing the platform to a total of 24.9 million registered users, which translates to 18% year-over-year growth. Webull was originally launched as a global market data platform before evolving to become the leading digital investment platform we are today. As a result, we have a significant number of registered users in geographies where our trading platform is not yet available. We are committed to offering access to best-in-class market data and information to everyone, whether or not they currently have a brokerage account with us.
On the right side, you can see that the number of funded accounts is holding steady. Funded accounts are Webull brokerage accounts where the customer has made an initial deposit and the account balance has remained above 0 for 45 consecutive calendar days as of the record date. Similar to other platforms, we count each customer only once, regardless of the number of funded accounts they hold. We saw nearly 10% growth year-over-year, and despite the extreme market volatility in the quarter, we added roughly 144,000 new funded accounts. However, the net funded accounts only increased by about 10,000 to 4.73 million as a result of about 100,000 inactive accounts, many of which were established during the pandemic rolling off in the quarter. We are absolutely marketing to attract new customers, but we are prioritizing the quality of accounts and growing customer AUM. We believe concentrating our efforts on the long-tail customer engagement and tenure drove sophisticated retail investors to migrate to our platform and can drive margin expansion over time.
This brings us to the strong growth we saw in customer assets for the quarter. On Slide 5, you see that our customer assets grew 64% year-over-year to $15.9 billion, an all-time high for assets held in Webull brokerage accounts net of margin balances. This is a $3.3 billion jump sequentially. As I noted, this excellent performance was fueled by the market's recovery, which drove substantial growth of net deposits. Our customers made deposits of over $1.4 billion, a 37% increase year-over-year, bringing our cumulative deposit total over the last 12 months to USD 5.4 billion. Turning now to Slide 6 and our trading volumes for the quarter. We're seeing some shifts here. We reported 58% year-over-year growth in equity notional volumes of $1.61 billion. This was up roughly 26% sequentially. As I mentioned before, the market volatility in the second quarter drove strong trading volumes. Our options contract volume is holding steady.
The associated revenue is outpacing contract volume as we implemented a new pricing model in the second half of last year, and we are pleased to see the results of that initiative with a steady increase in the monetization of our options business. We are now more than midway through Q3, and we're on pace for continued growth. Our AUM has now surpassed USD 18 billion and July was our highest revenue month ever as a firm. Barring major market dislocation, we anticipate Q3 will be another solid quarter. With that, I'll pass the call over to H.C. for a closer look at our results for the quarter.
Thank you, Anthony, and thanks, everyone for joining us today. Let's start with Slide 7 and our revenues and expenses for the quarter. In the second quarter, Webull generated total revenues of $131.5 million, up 46% year-over-year. Adjusted expenses for the quarter came in at $108.2 million, an increase of 20% from a year ago. What's important here is that revenue growth once again outpaced expense growth by a wide margin. That reflects our disciplined execution and the operating leverage we continue to build into the business. On the following slides, I will walk through the components of revenues and expenses in more detail. Now turning to Slide 8 on profitability. We are very proud that Webull has now achieved 3 consecutive quarters of operating profitability. In Q2, adjusted operating profit was $23.3 million. Sequentially, this was down about $5.4 million, but year-over-year, it represents an 18 percentage point improvement in operating margin and a $23.6 million increase in operating profit in absolute dollar terms.
Adjusted net income for the quarter was $15.4 million. That's a 13.4 percentage point margin expansion and a $16.9 million year-over-year increase. These results show the scalability of our platform and the strength of our business model. Let's move to Slide 9 and take a closer look at trading-related revenues. Momentum from the first quarter carried through to Q2. Daily average revenue trades, or DARTs, increased 56% year-over-year and trading-related revenues rose 63%. Both volume growth and improved monetization contributed to these results. On a per trade basis, revenue increased to $1.42 from $1.34 a year ago. Turning to Slide 10 and interest-related income. This category includes interest earned on client and corporate cash, margin financing and fully paid stock lending revenues. Despite headwinds from the interest rate cycle, our business remains resilient. In the second quarter, interest rate income grew 14% year-over-year to $36.3 million, largely attributable to higher client cash balance, increased margin activity and importantly, the successful adoption of Webull Premium.
Finally, let's turn to Slide 11 for a closer look at operating expenses. Operating expenses increased both sequentially and year-over-year. The primary drivers were higher activity on the platform, including brokerage and transaction costs as well as payment fees on customer deposits made through a debit card, a new feature we introduced in the second quarter. We also stepped up our marketing spend during this period. We saw some growth in technology and development expenses as well, mainly related to head count and infrastructure investments, but this was offset by a reduction in general and administrative expenses. Overall, we remain disciplined in managing our expenses. At the same time, we're investing in innovation, customer growth and wallet share expansion, ensuring we balance near-term discipline with long-term opportunity. Thank you, everyone. With that, I'll turn the call back to Anthony before we open the line for questions.
Thanks, H.C. and thank you, everyone, for joining us today for our second quarter earnings conference call. This was Webull's best quarter ever in terms of revenues as we continue to focus on our core growth drivers, namely new product delivery, the addition of new asset classes and geographic expansion. There's real energy behind what's coming next, and our team is hyper-focused on delivering on the product road map we have shared. I'm very happy with our trajectory and want to thank the Webull team for the hard work and innovation mindset they bring to work every day. This is an exciting time for our business. We'll be at a number of industry and investor conferences this fall and look forward to engaging with you. On that note, we welcome any questions you may have, either here on the call or one-on-one.
Questions and answers
And your first question comes from Craig Siegenthaler with Bank of America.
This is Eli Abboud filling in for Craig. I was hoping you could dig a little bit deeper into your organic growth in the quarter. What were net new assets? And which geographies and demographic groups are you seeing outsized growth?
Thanks for the question. This is Anthony. So in terms of net deposits, up $1.5 billion, right? That's net deposits of fresh cash coming in. That's up 37% year-on-year. We've seen a bunch of different drivers behind that. I think I would highlight the focus on premium customers or our Webull Premium subscription customers, delivering large amounts of capital into their Webull accounts after subscribing. I would also highlight brand confidence following our Q2 public listing. And I would also like to highlight a great market backdrop. So we continue to see tailwinds in terms of new customer AUM growth. And also the focus, like we mentioned on the script, was looking towards high-quality customers and making sure that we can meet them to be long-term Webull investors. And we've been really successful in our promotion strategy of bringing over large asset transfers from traditional brokers over to Webull, which is a great new cohort of clients that we traditionally never reached. So we're really happy with that outcome. And then the second part of your question was geographics?
Yes.
We currently operate in 14 different broker-dealers. There are numerous positive developments to note. Notably, we launched our Canadian broker-dealer business in January 2024 and have quickly become recognized as one of the top trading platforms in Canada, with assets under management growing at a rapid pace, driven by increased brand awareness and asset transfers from traditional brokers in that region. Additionally, we are experiencing significant momentum in our Latin American operations. We not only serve Brazil and Mexico City, but we also have a young demographic in these areas that is showing a strong interest in trading digital assets. We are particularly pleased with the progress made since we introduced crypto in Brazil just four weeks ago, as we are seeing a growing number of local Brazilians accessing cryptocurrency through the Webull LatAm app based in São Paulo.
And your next question comes from Mike Grondahl with Northland Securities.
And maybe just following up on the crypto trading that was started in Brazil, U.S. and Australia. Anthony, how is that going so far? And can you talk about the incremental opportunity you see there?
I've mentioned this several times before, but the potential for growth is nearly limitless at this stage. As we stated earlier, we are experiencing a significant transformation in the products we can offer to retail customers in both the U.S. and internationally, driven by Web3 technology. We are fully committed to innovating and providing these products directly to our clients. Looking at our U.S. launch, which just started on Monday, we’re only four days in. Our Brazilian launch is also quite recent, just under a month, and we launched in Australia only two days ago. This is just the beginning for us; this is the low-hanging fruit. We are re-entering the crypto space, which we previously had a strong business in before attempting to go public years ago, when regulatory conditions prompted us to shift away from crypto. Now, however, the environment is different. Regulators are more supportive, and a solid framework is emerging both in the U.S. and worldwide.
We're taking advantage of this to introduce innovative solutions for our clients globally. Although it's still early regarding the growth we've observed, we have high expectations because our customer demographic anticipates trading crypto and engaging with digital assets alongside equities, options, futures, and fixed income. It has almost become an expectation. It has been frustrating over the years not to pursue this due to regulatory hurdles. This presents a significant opportunity not just for Webull, but for the entire industry to take the lead and develop innovative products that I believe retail customers will truly appreciate.
Got it. Over the past couple of years, your marketing strategy has changed. A few years ago, it was about opening an account and getting a share, or funding an account and getting a share. Now, it has shifted to more of a matching rewards-based approach. Can you discuss that evolution and how it is progressing?
Yes. So I think the AUM kind of speaks for the success of the evolution of that strategy. But I would like to point out that out of the 14 broker-dealers we operate around the world, each broker-dealer has their own individual strategy. And we still utilize a lot of the open an account, get free share promotions outside of the U.S. We have matured as a platform along with our clientele in the U.S. So it makes sense for us given the market backdrop, given the tailwind environment we're in as retail investors are excited about the market. And it's been working very, very well for us in the U.S., and we see great success in building a large account base and outside of the U.S. that doesn't utilize the promotions that we use in the U.S., that reward balance transfers.
Got it. And then maybe just lastly, some of the new products from earlier in the year, the Kalshi offering, Premium, the BlackRock models, anything else to call out with those or anything else related to those?
Kalshi and predictive markets offer a chance to engage various sectors of our economy. We have taken a very cautious approach with the products we provide through our partnership with Kalshi in the predictive market area. We will continue to innovate, seek opportunities based on customer feedback, and expand our business as the overall industry develops, which is still quite new. So far this year, we have experienced numerous successful outcomes and I believe even more victories are ahead. While I won’t disclose specific details at this moment, we have many exciting initiatives in the pipeline. This is a transformative period for our industry, where it is often more feasible to seek forgiveness rather than permission. Additionally, our extensive geographic reach enables us to deploy these products globally. In my view, the U.S. retail trading experience is the most convenient, user-friendly, and cost-effective entry point anywhere in the world. We are leveraging our market share and success in the U.S. to expand this experience globally. As a result, more products will continue to be introduced, and I am eager about what the remainder of the year holds.
And your next question comes from Chris Brendler with Rosenblatt Securities.
Congrats on the results. I wanted to start with a follow-up on the crypto side. Any way to dimensionalize the impact there? I'm not looking for guidance, but just how big that business currently is or could be? And any way to think about the impact on the outlook from crypto being relaunched in the U.S.?
I believe our crypto business is well-positioned to quickly add to our top line. Many of our Webull customers in the U.S. have previously traded crypto on our platform and continue to be our clients even after we suspended crypto trading. The reintroduction of digital asset trading alongside our securities products is likely to be a smooth transition for our clients. While I'm trying to remain cautious and not overestimate, I can't help but feel excited about bringing it back. When we removed crypto from the Webull Financial platform in September 2023, it represented a significant part of our business. We anticipate a rapid increase in crypto accounts, an uptick in crypto assets under management, and we believe that the trading revenue from clients using Webull for their digital assets will quickly benefit us.
Yes. I can tell you, it's pretty exciting stuff. I guess we'll have to wait and see how meaningful it is in this year and then obviously, probably a lot bigger next year. That sounds great. Another question on the core business and the results. Looking at DARTs per account or per funded account, it's gone up substantially just on a year-over-year basis. Can you give us any insight on to what's driving your increased traction with your existing customer base? I mean I feel like it's probably you're turning over that customer base, as you mentioned, getting more active users on the platform. But any other color would be great on just how you're driving engagement.
The main reasons for the increased traction with our existing customer base are the significant market volatility and the very favorable conditions for retail investors at this time. In the long term, we attribute this growth to the adoption of Webull Premium, which offers some of the lowest margin financing rates available. As a result, active traders are either transferring more funds to Webull and increasing their trading activity on our platform, or they are exclusively using Webull due to these competitive margin rates. Additionally, we've seen a substantial increase in assets under management, growing over 70% year-over-year, which correlates with increased trading activity. Currently, we have over $18 billion in assets under management, and we do not see any signs of this momentum slowing down.
Great. And then I guess another follow-up actually for me would be on the marketing side. I certainly appreciate the change in strategy there. The marketing expenses were a little higher second quarter versus first quarter, but still down year-over-year. So how do I think about the effectiveness of your new marketing? And is this $30 million level a good run rate? Or do you expect to continue to lean into the opportunity from here?
I mean we're planning on leaning into this opportunity. We are taking a significant amount of AUM. Yes, our marketing costs were higher this quarter when they were in Q1, but that's simply because of the uptake of clients utilizing these promotions to move assets from a lot of our traditional broker-dealer counterparts. Now that we have, obviously, access to capital, and we've raised quite a bit capital with the BULLZ warrants. We've raised some capital with the SEPA program, we are extremely well capitalized to continue to take AUM and continue to grow our market share in the U.S.
And the next question comes from Edward Engel with Compass Point.
Congrats on all the updates. A couple of questions on the crypto side. Can you talk about the strategy outside the U.S.? I recognize that you just launched it in the U.S. and recently in Brazil. But curious if you see the product getting launched into most of the jurisdictions you're in. And I guess on top of that, quite a bit of cash in the balance sheet, especially after some of the recent actions in the second quarter. Curious how you guys are thinking about M&A, whether it's for international expansion or product expansion.
Yes. No, great questions. So in terms of crypto, crypto take-up outside of the U.S., we are dedicated to making sure that we have the ability for clients at every Webull platform around the world to be able to get access to digital products. That is a standing statement where different regulatory regimes in different countries have different qualifications, different requirements and different time horizons to get approval. And we are working with every regulatory body where we have a current broker-dealer, making sure that we do so legally and responsibly. But absolutely, we will be looking to add crypto and digital asset trading to our outside of U.S. broker-dealers. We had Brazil as the first release. U.S. came in a close second and Australia right thereafter. We will be having more announcements as we go through the year.
And on your second question about the cash on our balance sheet and the potential M&A opportunities, I just wanted to mention that we are operational in 14 different markets. And actually, our markets outside of the U.S. have only just begun operations in the last 2 to 3 years. There are still significant organic opportunities for us to continue to grow customers and AUM, both in the U.S. as well as outside of the U.S. So for the near term, we'll continue to focus on acquiring customers, acquiring assets organically. But having said that, there are good inorganic opportunities that come along, we'll always be opportunistic and we'll always evaluate the risk-reward of such acquisitions.
And your next question comes from Bill Katz with TD Cowen.
This is Robin Holby on for Bill Katz. We were wondering if you could maybe expand a little bit on the crypto offering in terms of number of crypto assets that you'll be offering when the offering does go live? And will you allow staking? And any other key differentiators on the crypto strategy over the near to medium term?
Yes, crypto is a popular topic today, and I appreciate the question. Each region will conduct its own assessment regarding which digital assets are classified as securities. In Brazil, we launched 240 coins, while in the U.S., we started our launch earlier this week with 50 digital asset coins available for trading. This number will increase. You inquired about other products like staking and features such as coin in and coin out, along with various other opportunities for our customers. The straightforward answer is yes, we are significantly investing in digital assets at Webull. The U.S. launch on Monday is just the first phase of what will be multiple phases aimed at providing the best crypto trading experience globally. That is our objective, and we believe our platform is well-suited for this. Our customer base is ideal for long-term crypto investment and trading, especially as we offer some of the tightest spreads in the market. We’ve successfully attracted more active crypto traders with our Webull Premium product, which we plan to expand.
This concludes our question-and-answer session and today's conference call. Thank you for attending today's presentation. You may now disconnect.