Ladies and gentlemen, thank you for standing by and welcome to the UP Fintech Holding Limited fourth quarter 2019 earnings conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session. I must advise you that this conference is being recorded today, Wednesday the 25th, 2020. I would now like to hand the conference over to your first speaker today, Mr. Clark Soucy. Thank you. Please go ahead.
Thank you, Rachel. Hello, everyone, and thank you for joining us for the call today. UP Fintech Holding Limited fourth quarter 2019 earnings release was distributed earlier today and is available on our IR website at ir.itiger.com, as well as GlobeNewswire services. On the call today from UP Fintech are Mr. Wu Tianhua, Chairman and Chief Executive Officer; Mr. John Zeng, Chief Financial Officer; Mr. Lei Huang, CEO of US Tiger Securities; and Mr. Kenny Zhao, our Financial Controller. Mr. Wu will give an overview of our business operations and discuss corporate highlights. Mr. Zeng will then discuss our financial results. They will both be available to answer your questions during the Q&A session that follows their remarks. Now, let me cover the safe harbor. Today's discussion will contain forward-looking statements.
These forward-looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC. Any forward-looking statements that we make on this call are based on assumptions as of today. We do not take any obligation to update these statements except as required under applicable law. It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Wu. Mr. Wu will make remarks in Chinese, which will be followed by an English translation. Mr. Wu, please go ahead with your remarks.
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Good evening, everyone, and thank you very much for attending the Tiger Brokers 2019 fourth quarter and full year earnings conference call. Before I elaborate on our business results, I would like to make a brief comment on the virus pandemic. Since we operate an online platform, there has not been a substantial impact on our business. However, the health and safety of our employees is paramount, and our firm has taken extra precautions. At our global offices, employees are working in shifts or from home.
I will now continue with my prepared remarks. In the fourth quarter, Tiger delivered impressive financial results. Total revenue was $20 million, a new all-time high and nearly 110% increase over the same period last year. In the fourth quarter of 2019, we achieved the fastest year-over-year revenue growth of any quarter last year. In addition, I would like to highlight how we continue to optimize our revenue mix.
Interest-related income, which is interest income plus financing service fees, exceeded commission income and accounted for 38% of total revenue. 2B revenue, which includes our corporate services like IPO distribution and ESOP administration services, increased to 26% of total revenue. This is compared to 2018, when 74% of our income was derived from commissions. In the fourth quarter, we recorded our first ever Non-GAAP operating income of $0.3 million, a significant improvement from a Non-GAAP operating loss of $2.8 million in the same period of 2018, and a $1.3 million loss in the third quarter of 2019, demonstrating the improvement in Tiger's operating efficiency and earnings quality.
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We are also pleased to report that our innovative platform and differentiated services continue to drive ever more investors to choose Tiger to manage their assets. In the fourth quarter, we added approximately 11,300 new accounts with deposits, an increase of 86% from the same quarter in 2018. In addition, total client assets increased to $5.1 billion, a nearly 114% increase from the same period in 2018, and an increase of $1.3 billion from the third quarter of 2019.
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In aggregate, our 2019 financial results evidenced a solid improvement over 2018. Total revenues in 2019 were $58.7 million, a 75% increase over 2018. We also achieved consecutive Non-GAAP profit for the third and fourth quarter of 2019.
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2019 was a monumental year in the history of our company. In March, we successfully listed on the Nasdaq and embarked on a new journey in our company's history. 2019 was full of challenges, but we remained focused and continued to emphasize transparency and made positive progress on our business. I would now like to highlight four key components of our corporate strategy that we successfully implemented over the last year.
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First and foremost, we are following our strategy of shifting from relying on clearing counterparties to developing our self-clearing capabilities. Self-clearing will not only reduce our expenses and drive increased interest income, it will also limit the impact to revenue from commission volatility. This was our reason for acquiring Marsco in July. System integration is on track. We expect to gradually self-clear U.S. cash equities for the end of the second quarter of 2020.
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Second, our strategy to increase our international reach progressed nicely in 2019. Besides our New Zealand office, we now have a presence in the United States and Singapore. We are confident that our international expansion will increase our customer base and give us access to more business development opportunities.
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Third, our ESOP business and IPO underwriting delivered strong growth in 2019. In 2019, we participated in 18 U.S. IPOs, in 12 of which we served as underwriter. We were the number one IPO underwriter in terms of deal number for Chinese issuers in 2019 by a wide margin, and the scale of our IPO business greatly exceeded that of any other Chinese broker. Besides the contribution to our revenues, we view the development of our investment banking services as beneficial to our reputation and accretive to user stickiness. Our ESOP business also grew rapidly in 2019. We developed a large client base in just one year's time, and it started to yield results. I am pleased to report that in the fourth quarter, over 20% of newly funded accounts came from our ESOP customers .
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In addition, we are investing in our asset management business. Tiger's actively managed Cash Plus product has delivered good investment returns for our users since launch. We also recently launched our Fund Mall, where users may choose from over 30 investment funds. We view brokerage and asset management as complementary, as our growing range of services increases user stickiness. Over the long term, this strategy will comprehensively develop commissions, interest income, and asset management fees, diversifying our revenue and increasing customer lifetime value.
Finally, after discussion and agreement by the board of directors, we have decided to implement a share buyback program. Over the next 12 months, we will allocate a maximum of $20 million to ADS buybacks. In conclusion, we look forward to continuing to implement the four aforementioned points of our corporate strategy and growing our business.
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I would now like to invite our CFO, John Zeng, to discuss our key financial results.
Thanks, Tianhua. Thanks, Clark. Hello, everyone. Overall, a very strong fourth quarter for Tiger. Total revenue was $20 million, grew more than 100% year-over-year and 30% quarter-over-quarter. Commission income was $7.3 million, increased 4% from last year and 17% from previous quarter. Cash equity blended commission was 8 basis points this quarter versus 5 basis points the same quarter last year. Financing service fee increased 18% year-over-year to $2 million this quarter. Interest income grew more than 100 times year-over-year to $5.5 million this quarter, as we have more consolidated account customers versus last year. The growth for financing service fee and interest income also both benefited from increased margin and securities lending activity this quarter. Other revenue primarily consists revenue from corporate services, such as IPO underwriting, grew close to 700% year-over-year to $5.1 million.
We were very active in IPO underwriting last year. In terms of deal counts, far exceeded any of our competitors. It's also effective customer acquisition to develop retail and institutional business. Comparing revenue composition with first quarter last year, we are happy to see revenue mix is getting more healthy. Interest related income this quarter accounted for 38% of total revenue. Corporate services accounted for 26%, while in the fourth quarter last year, commission accounted for 74% of the total revenue. Interest expense grew to $1.5 million this quarter due to more consolidated account customers. After interest expense, net revenue was $18.5 million, a 94% increase from same quarter last year. Now switching to expense. Clearing expense increased from $0.1 million in the first quarter last year to $0.9 million this quarter, in line with our growth of consolidated accounts.
Salary expense increased 61% to $10.6 million, primarily due to a 49% headcount increase year-over-year. In 2020, we will keep adding key positions, but our headcount growth rate will moderate. Occupancy expense increased 72% to $1.1 million as we opened offices in New York and Singapore. Communication and market data expense also grew 100% year-over-year to $1.9 million as more users are using our services. Marketing expense decreased 25% year-over-year to $1.7 million this quarter as we optimized our marketing strategies, which led to higher efficiency. General and administrative expense increased 14% to $2.8 million, primarily due to business expansion and professional services. Total expense for fourth quarter was $19.1 million, an increase of 46% year-over-year. Operating loss was $0.7 million this quarter, an improvement of 80% year-over-year.
Non-GAAP operating income turned positive for the first time at $0.3 million, compared to a Non-GAAP operating loss of $2.8 million last year. Net loss for UP Fintech was $0.6 million in the fourth quarter of 2019, compared to a net loss of $2 million in the fourth quarter of 2018. Our net loss of $0.6 million this quarter was primarily due to a $1.9 million foreign currency exchange loss. We laid it out as other expenses. Let me elaborate a little bit more on this FX loss. As of now, we book majority of our revenue and client assets in New Zealand entity. Under New Zealand regulation, financial reporting needs to be in local currency, which is New Zealand dollar. While most of our revenue and asset inflows are settled in USD or Hong Kong dollar on a daily basis.
When our New Zealand entity prepares local financial reporting on a monthly or quarterly basis, there will be difference due to different exchange rate when revenue and later asset are booked and when reporting is done. In the fourth quarter, New Zealand Dollar has been gradually rising against the US dollar and Hong Kong dollar. We book this difference as a FX loss. As no FX transaction took place and no cash loss, it's just a pure accounting treatment to reconcile the difference between our consolidated book and local book. Our Non-GAAP net income was $0.3 million this quarter as compared to a U.S. $1.2 million Non-GAAP net loss in the fourth quarter of 2018. To summarize, we are satisfied with our progress in the fourth quarter. Revenue mix is more balanced.
New accounts with deposits showed asset growth quarter-over-quarter and year-over-year, and the total client asset also grew at a fast pace. We are confident as long as we execute the strategies laid out in Tianhua's earlier remarks, we can deliver good growth for 2020. This concludes our prepared remarks. Now we can open for questions.
Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Once again, if you wish to ask a question, you may press star one on your telephone keypad. Your first question comes from the line of Leyi Liu from HSBC. Please ask your question.
Thanks, management. I have three questions today. First one is that why is our trading volume down Q on Q, but our commission income up Q on Q? Second question is about the liquidity and risk management. Could management share with us these liquidity situations and also the margin call situations recently, especially during this month? A third question is about the competitive advantage. What's the competition strategy for us as we have seen that a lot of similar internet brokers for overseas securities tradings recently have sprung up in China and also are invested by some internet companies. Quite a lot of apps are joining this competition. What do you think is our competitive advantage compared to all these competitors? Thank you.
Thanks, Leyi. I will answer your question number one and number two. Tianhua will answer your question number three. Okay. Let me answer your second question first. What's the liquidity issue or how we manage the risk? At Tiger, we have, I would say, very prudent margin policies. We do have a team of risk managers to monitor clients' positions, especially during this volatile time. To answer your question, there was no margin call or any principal losses we have experienced so far. We will keep exercising our prudent strategies going forward to make sure, with the volatile market backdrop, we're not going to suffer any losses in those spaces. To answer your first question, the trading volume difference and the blended commission. At Tiger, we do have a lot of people trading futures and also a lot of people trading equities.
If you just use the overall trading volume to calculate a blended commission, I think sometimes it's getting more volatile. It's not really a good indicative commission of how we operate our business. We give you the pure cash equity commissions, which means it's more stable. The reason it increased from 5 basis points in fourth quarter 2018 to 8 basis points in fourth quarter 2019 is because in the U.S., we charge by shares, and in fourth quarter 2019, there are people trading more low dollar amount shares, which means, even though the total value looks low, but actually there are more shares to be traded. That's why our cash equity commission has gone up from 2018 fourth quarter. Tianhua.
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Okay, let me just quickly translate. The landscape of brokers, actually brokerage business has been around for a long time. Same as the reason we started our business six years ago is we think there are a lot of areas we can improve, and there are a lot of optimization we can do. Compared to other Internet brokers, especially those new startups, first of all, Tiger has a lot of licenses. For example, in the U.S., in Australia, Singapore, New Zealand.
It will take a while for those newcomers to get all relevant license and the knowledge and knowhow how to run those broker-dealer business. That's one differentiator we have. The second differentiator is, most of those online brokers, especially China online brokers, they don't have a U.S. self-clearing license, and they cannot clear trades by themselves. That's the reason we acquire Marsco. We hope we can be able to self-clear in the U.S.
Once we become self-clear, it can create a huge barrier of entry, because we are really building the infrastructure of brokers from bottom up, and this will take a long time for the newcomers to catch up. The third thing is on the product offering is what we want to do is to enhance user experience with different type of product offering. Tiger pioneered IPO subscription for Chinese ADRs. Typically, retail investors, they most likely will get most allocation from Tiger. During the past years, we participated in those high IPOs like PDD and Zoom, and also give us a competitive edge in terms of how we offer differentiated product to retail investors.
We have those Fund Mall and Cash Plus, those wealth management products, it is also a lot of way for us to try to have a comprehensive product offering to enhance user experience. Combine those three points together, I think there will always be competition, but I think these are the differentiator factors can set us apart.
Thanks both.
Your next question comes from the line of Daphne Poon of Citi. Please ask your question.
Hi, management. Thanks for taking my question. Also three questions from my side. The first one is regarding the other revenue. There is a big jump in the fourth quarter. Understand the part of that is because of the IPO subscription. Can you just help us break down how much is from different category? How much is from the IPO underwriting related? Also how much is from the interest income on the bank deposits? Whether you see that strong other revenue would be sustainable going forward? The second question is regarding the current rate cut cycles. Have you done any sensitivity analysis on what would be the impact on your earnings and whether they will affect the pricing on your margin loans as well. The last question is regarding the recent coronavirus situation.
I'm actually wondering whether that has benefits you in terms of your new plan growth and also your turnover, because we understand that from some of your peers and also from the onshore Chinese investors, that the trading activity in the stock market actually pick up quite a bit during this virus outbreak. Just wanted to get a sense of the trend you see in Q1. Thanks.
All right. Thanks, Daphne. Let me answer your question two first, then Tianhua will answer question three. For number one, Tianhua and I will split, because I think that's two questions actually in question number one. In terms of the rate cuts, I think your question is how is that going to affect our business, right? The rate cut on the liability side, because we don't have much debt or loan, so it doesn't help us to reduce any funding costs. Going forward, we were looking at opportunities to put on debt because right now, if the liquidity is cheap, as long as we can generate decent return and spread on that's something we will consider. On the asset side, for the first quarter, I think it's still okay interest income. Starting from second quarter, we will wait and see.
Right now, a lot of banks, they lower their interest rate to zero, and also our partners, our clearing brokers partners, they also lower their interest rate to zero. If you just look at the second quarter, it could have an impact on our interest generating income. How big is that impact is yet to see, because we just started the zero interest rate cycle. Still, we still have some bank competitors offer interest rates above zero, so we will efficiently allocate our cash or our client asset to make sure we can generate returns out of the idle cash.
To your first question, in the other revenue section, I would say IPO related is more than 80%. I would say 85% of the composition. The rest of the 10%-15% is from interest income of the bank deposits. I will let Tianhua answer your third question about the coronavirus, how does that impact our trading volumes?
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The other revenue, where is sustainable first. What Tianhua mentioned is, still right now the pipeline is very strong. Even some of those potential issuers, listed is still very strong and we are working with a lot of them to help them with preparation. Because we are a fintech company, right now we do a lot of online NDR and roadshow for those guys. The pipeline is very strong, and we still think the business going forward can generate decent returns.
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Okay. Just briefly recap what Tianhua mentioned is, right now the coronavirus caused a lot of volatility in the market, especially in the U.S. market. The volatility first of all got more people are interested and got their attention to investing in the U.S. market, and give people the two-way opportunities, they can short and they can long. Given Tiger's reputation in U.S. market, it actually does help us to generate more accounts with deposits that also help us to generate more customer trading volume. In short, it does help our trading patterns and with our brokerage business.
Okay. That's very helpful. Thank you.
Thank you.
Your next question comes from the line of Han Pu of CICC. Please ask your question.
Hi, management. Thanks for taking my question. First, congratulations on the strong quarter. I have two questions. First is about the Fund Mall. Could you introduce more on the new business and what kind of ways would we plan to charge the investors, as well as the fund companies, maybe the possible fee rates compared to the peers? The second one is about the customer acquisition. We have 11,000 new customers with deposits in the fourth quarter. How many of them were from the Mainland China and the other from overseas regions? Do we have any guidance on the customer acquisition in the coming year as well as the region or location, as we try to do more international business? Thanks.
To answer your first question for Han, regarding the Fund Mall. The rationale we are doing Fund Mall is traditionally, Tiger has a lot of customer, they like to trade by themselves, but we also have a lot of customers who don't really know what to buy. We want to have Fund Mall, those mutual fund products on our platform to give people more choice, and we also diversify our product offering from active trading to passive trading so we can capture all the needs of our customers. How we're going to make money is we're going to work with our partners on selling and also on fund administration fees.
In terms of customer acquisition, Going forward, once our operation is fully on the ground in Singapore, U.S., Australia, we target to have on a quarter-over-year by end of this year, at least 10% of our new accounts that come from international new clients. Also one thing to mention is we hope our ESOP also can account for about 20% of the new clients on a yearly basis.
May I have a follow-on question on the AUM of our Cash Plus product currently?
Right. Okay. Our Cash Plus AUM right now is still relatively small. It's about $25 million at this moment. Recently, it has been growing pretty decent because the seven days return, given the volatility, has been pretty attractive lately. That's one product managed by our in-house asset management team.
Got it. Thanks very much.
Your next question comes from Leyi Liu from HSBC. Please ask your question.
Hi. Just a follow-up question on the Cash Plus product. It's now the extremely low-rate environment. Are we seeing any margin pressure for this product? Just wondering the latest update of the Hong Kong license. What's the obstacles that we are facing for applying for that? Thanks.
To answer your first question on the Cash Plus, we don't have any margin pressure because first of all, it's not levered. Also, we invest in very liquid products like T-bills and other fixed income. So far, we don't have any margin pressure. Then your question regarding the license, we don't really comment on the license, but I think you can follow our release once we have something to publish.
There are no more further questions at this time. I would now like to hand the conference back to today's presenters. Please continue.
Hello, this is Clark. I would like to thank everyone for joining our call today. I am now closing the call on behalf of the management team here at UP Fintech. We do appreciate your participation in today's call. If you have any further questions or concerns, please reach out to our investor relations team. This concludes the call, and thank you very much for your time.
Ladies and gentlemen, this concludes our conference for today. Thank you for participating. You may now all disconnect.