Ladies and gentlemen, thank you for standing by, and welcome to UP Fintech Holding Limited Second Quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by question and answer session. I must advise you that this conference is being recorded today, August 29, 2023. I'd now like to hand the conference over to your first speaker today, Mr. Aaron Lee, the Head of IR. Thank you. Please go ahead.
Thank you, operator. Hello, everyone, and thank you for joining us on the call today. UP Fintech Holding Limited second quarter 2023 earnings release was distributed earlier today and is available on our IR website at ir.itigerup.com, as well as global newswire services. On the call today from UP Fintech are Mr. Wu Tianhua, Chairman and Chief Executive Officer, Mr. John Zeng, Chief Financial Officer, Mr. Huang Lei, 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 the remarks. Now, let me cover the safe harbor.
The statements we are about to make contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement. For more information about factors that could cause actual results to materially differ from those in the forward-looking statements, please refer to our Form 6-K, furnished today, August 29, 2023, and our annual report on Form 20-F, filed on April 26, 2023.
We undertake no obligation to update any forward-looking statement, except as required under applicable law. It is my pleasure to now 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.
[Foreign language]
Hello, everyone. Thank you for joining Tiger Brokers second quarter 2023 earnings conference call.
[Foreign language]
I n the second quarter, we remain committed to the strategy of optimizing our revenue mix and expense management. Total revenue increased by 23.5% year-over-year, reaching $66 million. Our non-GAAP... our net profit attributable to UP Fintech was $13.2 million, representing a turnaround from a net loss in the same quarter last year, and an increase of 66% compared to the previous quarter. The non-GAAP net profit attributable to UP Fintech was $15.3 million, about 4.5 times the quarter last year, and a significant increase of 48% compared to the previous quarter.
Non-GAAP net profit earned this quarter has already exceeded the total non-GAAP net profit for the entire year of 2022. In the second quarter, we added 29,077 new funded accounts, bringing the total number of new funded accounts in the first half of this year to approximately 60,000.
We are confident to deliver our annual guidance of acquiring at least 100,000 new funded accounts in 2023. Total number of funded accounts at the end of the second quarter reached 840,000, representing a growth of 15% compared to the same quarter of last year. In terms of total client assets, the trend of asset inflow remains strong, with net inflow over $1.6 billion in the second quarter....
After neutralizing the impact from mark-to-market loss, total client assets in this quarter increased by 7.1% compared to the first quarter, reaching $17.3 billion. Additionally, our average CAC further decreased to $162 in the second quarter, representing a 5% decline compared to the previous quarter. This reduction highlights our success in expanding our internationalization strategy, as Tiger Brokers brand gained traction among local users in Singapore through positive word-of-mouth referrals, resulting in organic traffic and cost efficiencies.
Moving forward, we will dynamically adjust our customer acquisition strategy based on market conditions. Prioritizing user quality while steadily increasing client base and profitability. We have continued to increase our investment in research and development to enhance operational efficiency and user experience.
We are delighted to announce that our TigerGPT feature, after six months of internal testing, officially launched in July this year. It is now available for free to registered user in all the markets we entered, except Mainland China. We will continue to refine and optimize the user experience of this feature. In our Hong Kong business, following our entry in the retail market in December last year, we have successfully achieved self-clearing for the majority of Hong Kong equities in the first half of this year.
Help to bring down the total clearing expense as a proportion of commission to below 10% in the second quarter. Additionally, we introduced recurring investment feature for Hong Kong shares in the second quarter, catering to long-term investors and those with a fixed investment budget.
This makes us one of the few brokers that offer recurring investment function for both U.S. and Hong Kong equities. We also added Hong Kong futures in June to better serve our local clients. In wealth management business, following the introduction of a USD-denominated money market fund in the fourth quarter, we introduced a Hong Kong dollar-denominated money market fund in the second quarter, providing users with more options to manage idle cash during rate hiking cycles.
[Foreign language]
Our B2B business continues to perform well. In investment banking, we underwrote seven U.S. and Hong Kong IPOs in the second quarter. Notably, we served as the exclusive lead underwriter for Ispire Technology U.S. IPO.
In our ESOP business, we added 30 new clients in the second quarter, bringing the total number of ESOP clients served to 478 by the end of second quarter of 2023, increased by 31% year-over-year. Now, I'd like to invite our CFO, John, to go over our financials.
Okay, thanks, Tianhua and Aaron. Let me go through our financial performance for the second quarter. All numbers are in U.S. dollar. Total revenues were $66.1 million this quarter, flat quarter-over-quarter and increased 23.5% year-over-year, primarily due to a 146% jump in interest-related income versus the same quarter of last year. Cash equities take rate was 6.3 basis points this quarter, remain unchanged from the last quarter.
Within commission revenue, about 60% comes from cash equities, 30% from options, and the rest comes from futures and other products. Now on to cost. Interest expense was $10.4 million, increased by 195% from the same quarter of last year, as interest expense and securities lending expense both increased in line with the rate hike.
Execution and clearing expense were $2 million, decreased 47% from the same quarter of last year, primarily due to more efficiency in self-clearing for U.S. and Hong Kong securities. Employee compensation and benefits expense were $23.9 million, a decrease of 7% year-over-year due to a one-time expense we incurred last year when restructuring our ESOP business. Actual headcount increased year-over-year, as we keep adding people to support our global expansion.
Occupancy, depreciation, and amortization expense slightly increased 2% to $2.5 million, due to an increase in our China office space and relevant leasehold improvements. Communication and market data expense were $7.8 million, an increase of 8% year-over-year, due to the increase in user base. Marketing expenses were $4.7 million this quarter, decreased 44% year-over-year.
Average CAC dropped 5% quarter-over-quarter from 171 to 162, as we didn't see market condition in the second quarter was suitable for major marketing campaigns. We will dynamically adjust our marketing strategy based on the market sentiment in different regions. General and administrative expense were $4.5 million, a slight increase of 5% year-over-year.
Total operating costs were $45.5 million, decreased 12% from the same quarter of last year. As a result, both GAAP and non-GAAP bottom line increased year-over-year. GAAP net income turned positive to $13.2 million, versus a GAAP net loss of $0.9 million in the same quarter of last year. Non-GAAP net income was $15.3 million, about four times, four times, about 4.5 times higher compared to the same quarter of last year.
Now I have concluded our presentation. Operator, please open the line for Q&A. Thanks.
Thank you. We will now begin the question and answer session. To ask a question, please press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Once again, that's star one one for questions. Our first question comes from the line of Han Pu from CICC. Please ask your question.
Thanks for taking my question. This is Han from CICC. Congrats on the strong quarter results. I have two quick questions. Firstly, could you please provide the original breakdown of new funded accounts in the second quarter? Secondly, could you please give us more recent updates on the mainland regulation requirements? Thanks.
[Foreign language]
For first question, in the second quarter, around 45% of newly funded accounts came from Singapore, nearly 25% from Australia and New Zealand, about 20% from the US, and above 10% from Hong Kong.
[Foreign language]
After CSRC announcement on December 30th last year, Tiger Brokers made a prompt response and comprehensive efforts to comply with the regulatory requirements set forth by the CSRC. Subsequently, the Beijing Securities Regulatory Bureau conducted an on-site inspection for a week before the Chinese New Year. During that time, we provided the regulators with our remediation plan and related reports.
We have maintained good and direct communication with the regulatory authorities throughout the period, and have received clear guidance on certain special scenarios for PRC passport holders to open new accounts with us. For example, allowing PRC passport holders who work or live overseas to open accounts and permitting the transfer or opening of new securities accounts for users from other brokerage firms. Recently, in mid-July, we submitted the final remediation report to the CSRC in accordance with regulatory requirements.
Subsequently, in mid-July, the regulatory authorities conducted an on-site acceptance inspection based on our remediation report. Thank you.
That's very helpful. Thank you.
Thank you, Han. Our next question comes from the line of Judy Zhang from Citi. Please ask your question, Judy?
[Foreign language] I will translate my questions. Thank you for taking my questions, this is Judy Zhang from Citi. I have two questions. The first question is, after Tiger app was removed from App Store, have you seen asset outflow or losing onshore investors?
How do you think the long-term impact on the existing onshore investors trading activities and sentiment? And second question regarding on at Hong Kong market strategy, how do you think you can gain market share in the very competitive Hong Kong market? And how that's gonna impact in the company's costs like for this year and then going forward? Thank you.
[Foreign language]
OK, so I'll take your first question and our CFO John will take your second question. About your first question, to be aware of concerns in the market regarding the overall user count in mainland China with almost no incremental growth and gradual loss of existing users. However, based on our data from the first half of this year, we have confident in the retention of our clients in mainland China.
In terms of user retention, the overall retention rate for users with assets as well as the retention rate for Mainland China users in the first half of this year has remained above 99%. Regarding client cash flow, Mainland Chinese users have shown a trend of net asset inflow in both the fourth quarter and the second quarter of this year.
Besides, there has been no significant change in the trading activity of Mainland users, indicating that, our existing clients have rational understanding regarding recent events since December thirtieth of last year, and their trading velocity and trust in Tiger Brokers has not changed.
[Foreign language]
OK, Hello, Judy. So, let me answer the question about Hong Kong. First, let me break down our Hong So from a user acquisition perspective, Hong Kong accounts for more than 10% of the newly acquired users in the second quarter, up from low single digit in the first quarter.
We will keep investing in branding to build our corporate image in Hong Kong, so we can reach out to more potential Hong Kong users. From product perspective, first of all, we offer one of the most competitive pricing. We don't charge commission and platform fee for Hong Kong trading, and we don't charge commission for U.S. equities and options either. We are also one of the first, one of the few brokers that offer recurring investment for both U.S. and Hong Kong trading, and have USD and Hong Kong dollar money market funds to help our users manage their liquidity.
...In terms of infrastructure, we are fully self-clearing for Hong Kong equities, which brings down the group's total clearing expense to below 10%. Our proprietary system also allows us to offer differentiated services such as fractional share and offer portfolio buying power for U.S. and Hong Kong trading. Thanks.
Thanks.
Thank you, Judy. Next question comes from the line of Cindy Wang from China Renaissance. Please go ahead, Cindy.
[Foreign language]
Thanks management for taking my question, this is Cindy from China Renaissance. So I have two questions. First question is related to customer acquisition costs. So customer acquisition costs in second quarter was $162, which is at a relatively low level. How do you lower customer acquisition costs? And what's the strategy for customer acquisition cost to customer acquisition strategy to going forward?
The second question is the Tiger's non-GAAP net profit has turned positive for the five consecutive quarters. So together with high interest rate environment, the non-GAAP profit margin is also expanding. Does that mean Tiger has reached the inflection point from breakeven to profitability? Thank you.
Okay, your first question about the CAC. In the second quarter, the average CAC was $162, which was further decreased compared to $171 in the first quarter, reaching historically low level. In the second quarter, we pay very close attention to client quality and payback period and will not just jeopardize our client quality and reasonable ROI ratio merely for the number of funded accounts. With the underperformance of Chinese ADRs and Hong Kong technology names in the second quarter, our clients experienced some Mark-to-Market losses.
However, strong net asset inflows still led to a 7.1% increase in total client assets compared to the previous quarter. This indicates that we have maintained good customer quality while reducing the average CAC. Furthermore, if we look at the average CAC from newly acquired clients through advertising channels in the second quarter, their average CAC is more than twice the overall average CAC. This demonstrates that we have gradually gained more organic traffic from overseas regions and could save us some customer acquisition costs. Thank you.
[Foreign language]
I'm glad to see our non-GAAP net profit reached $50 million in the second quarter, which is the highest quarterly net non-GAAP profit in the past two years. Looking back at the early stage of the interest rate hike cycle during reduced market activities, we experienced some quarterly losses. However, through optimizing interest income and prudent capital deployment, we gradually improved our profitability. Over the past two quarters, our net profit margin has been expanding, indicating a robust and healthy business model for the company.
Given most of our costs are relatively fixed and tied to market activities, we believe that if we can better penetrate in Hong Kong or Australia, New Zealand markets, or if there is an overall improvement in the market backdrop, we can enjoy more operating leverage, which leads to more stable profit margins. So to answer your question, assuming there is no extreme market swings, we should be in the black in terms of profitability. Thank you.
Right. Thank you, Cindy. Our next question comes from the line of Ling Tan from Daiwa Capital Markets. Please ask your question, Ling.
Thank you, management, for taking my question. This is Ling from Daiwa. I notice that there's a $7.8 billion other than operating income under the P&L. Can management provide more color in terms of the breakdown of their non-operating income, and is it sustainable in the next two quarters? Thank you。
[Foreign language]
So, about half of the other income comes from FX gain due to U.S. dollar appreciation against other currencies this quarter, so this part is pure accounting item. The other part of the other income actually comes from our treasury management. As you can see from our balance sheet, our financial instrument balance has increased quarter-over-quarter, so we are doing treasury management. We are investing some of those monies into U.S. short term bonds, so we think this kind of interest income will be sustainable for the next few quarters. Thanks.
right. Thank you. I'm showing no further questions. Thank you very much for all your questions. I'll now turn the conference back to Mr. Aaron Lee for closing comments.
Thank you, Operator. I would like to thank everyone for joining our call today. I'm now closing the call on behalf of the management team here at Tiger. We do appreciate your participation to this call. If you have any further questions, please reach out to our Investor Relations team. This concludes the call, and thank you very much for your time.
This concludes today's conference call. Thank you for participating. You may now disconnect.