Jianpu Technology Inc.
Q2 2018 Earnings Call Transcript

Published: 27 Aug 2018

[Operator:]

Hello, and welcome to Jianpu Technology, Inc. Second Quarter 2018 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Qiuya Chen, Jianpu’s Investor Relations Manager. Ms. Chen, please go ahead.

[Qiuya Chen:]

Thank you, operator. Please note the discussion today will contain forward-looking statements relating to future performance of the Company. These statements are within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the Company’s control and could cause actual results to differ materially from those mentioned in today’s press release and these discussions. A general discussion of the risk factors that could affect Jianpu’s business and financial results is included in certain filings of the Company with the Securities and Exchange Commission. The Company does not undertake any obligation to update this forward-looking information except as required by law. During today’s call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP financial results, please see our second quarter 2018 earnings press release issued earlier today via Wire Services and also posted in the Investor Relations section of our Web site. As a reminder, this conference is being recorded. A live webcast and a replay of this conference call will be available on Jianpu website at ir.jianpu.ai. Joining us today on the call from Jianpu’s senior management are Mr. David Ye, Co-Founder, Chairman and Chief Executive Officer; and Mr. Oscar Chen, Chief Financial Officer. I will now turn the call over to Mr. Ye, who will provide an overview of the Company as well as performance highlights of the second quarter. Mr. Chen will then provide details on the Company’s financial results and business outlook before opening the call for your questions. Mr. Ye, please go ahead.

[David Ye:]

Thank you, Qiuya. Hello, everyone, and thank you for joining our second quarter 2018 earnings conference call today. We are pleased to report yet another solid operating and financial performance for the second quarter of 2018. We continued our strong growth momentum, recording revenue growth of 92% year-over-year and 46% quarter-over-quarter, benefitting from a healthy and steady industry recovery. And at the same time, we remained focused on enhancing our operating efficiency, evidenced by our non-GAAP adjusted net margin reduced from minus 6.6% in the second quarter of 2017 to minus 5.8% in the second quarter of 2018. Being an open platform, covering full credit spectrum and multiple financial product categories and ideally positioned to capture the changing market dynamics and drives growth across the board. We benefitted from our stronger consumer demand toward credit card, consumer and SME lending product in the second quarter. We recorded solid growth in both our small volume [ph] and credit card. Our credit card volume increased 178% to 1.63 million credit cards year-over-year and the average fee per credit card increased to RMB 99.4 from RMB 71.8 in the same period last year. Our number of loan application increased 76% to a 21.2 million quarter-over-quarter and unit price of our loan application also showed healthy increase. The strong growth in our credit card business illustrates deepening relationships with licensed credit card banks as we bring to them not only sales and marketing solutions but as well as big data risk management services. Take one of China’s top tier bank, as an example. After observing a growing multiple cardholder applications and increased delinquency rate, the bank decided to optimize growth and improve asset quality. To address this issue, we have been working with the bank and leveraging our position as a largest third-party provider of online credit card recommendation to jointly build a risk model to identify and selectively remove around 15% of the highest risk applications, which in testing has been shown to be successfully reduced the non-performing rate by 50%. The model is now in use at the bank and has been proving to be very effective. In light of the more intense competition and the evolving regulatory framework, we have seen rising demand for big data and risk management services among financial service providers. This has allowed us to rapidly expand the penetration of our big data and risk management services. We have successfully applied big data and AI technology throughout the user journey from user acquisition recommendation, fraud prevention, preunderwriting and customer services. Leveraging our big data and AI technology, will be combined application information with our own proprietary risk management system to construct the models that generate a series of comprehensive reports on a potential use of our applications. Such reports include social, geographic, demographic, economic, financial information, and other transaction information from hundreds of data associates with over 10,000 data elements. Our efforts invested in big data and AI technology drove 191% year-over-year and 99% quarter-over-quarter increase in revenue of our big data and the risk management businesses. Before I turn the call to Oscar, I’d like to briefly touch upon the recent regulatory environment and industry outlook. As I have just mentioned Jianpu’s cooperation with financial service providers is becoming more diversified with an increased depth and breadth to these collaborations. Despite the challenging and volatile marketing conditions, we see this as an opportunity to increase our investment to capture greater market share as a platform. Starting in the second half of the second quarter, there have been a few headwinds including overall credit tightening due to the macro theme of deleveraging across the financial sector. For the P2P sector, investors’ confidence was dampened due to some non-compliant companies exiting the market. In our view, the impact will be limited in the medium to long-term. The regulators have been sending positive signals to promote the healthy development of the market. For example, on August 18th, China Banking and Issuance Revenue Commission issued guidance or proposition 76 to further promote financial inclusion, promote the consumer finance and SME lending. In the P2P space, guidance issued by the regulator, financial regulator three weeks ago, that is called 108 guidance, basically clarifying the requirement for P2P platform and foreshadowing the acceleration of instruction and registration process. We strongly believe that such policies, guidance and regulations will help shape the industry into a healthier and more sustainable form in the long run. In summary, Jianpu delivered yet another solid and strong performance during the second quarter of 2018, despite what many perceived to be a turbulent operating environment in this space in China. What distinguishes us from most of the other market participants is that we are a technology-based, diversified perform, connecting transactions between consumers, SMEs and financial service providers. As enabler, we do not take on unnecessary credit risk, market risk, liquidity risk, but possess the agility to capture opportunities created by shifting market dynamics. In this regard, we are optimistic about our development prospects and expect a continued strong growth trajectory in the medium to long term. In particular, I’m pleased to announce that our Board of Directors have approved a share repurchase program which will authorize the Company to repurchase an aggregated value of up to $20 million during the next 12-month period. We believe this clearly demonstrates our confidence in our strategy of strong fundamentals and the long-term prospects as well as our commitment to maximize our shareholders value. With that, I’ll now turn the call over to our CFO, Oscar Chen, who will discuss our financial results.

[Oscar Chen:]

Thank you, David, and hello, everyone. We are happy to report that, despite the industry and the regulatory uncertainties, Jianpu has continued to experience robust growth and achieve strong financial results. For the second quarter of 2018, our total revenues increased almost 92% year-over-year and also up 46% sequentially. The RMB 490 million positive revenue was notably higher than our previous guidance of RMB 460 million. Also worth mentioning, during the quarter, 91% of our revenue generated by our top 50 institutional clients was from licensed institutions and P2Ps that are likely to be registered, which position us well in light of the trend of increasing regulatory oversight of the industry. Our overall recommendation services increased more than 86% year-over-year and 52% from the first quarter of 2018. Our credit card business once again delivered a standout performance of 356% year-over-year in revenue. This was achieved through healthy increase in both volume, which was up 238% year-over-year and average fee per credit card which increased from RMB 73.7 in the second quarter of 2017 to RMB 99.5 in the second quarter of 2018. Our loan business also continued to show steady and healthy growth with total revenue increasing 43% year-over-year, both loan application volume and average fee per loan application. So, clear growth year-over-year. The strong financial performance gives us the confidence that we are on the right business trajectory. Now, I would like to walk you through more details on our second quarter 2018 financial results. Total revenue for the second quarter of 2018 increased by 92% to RMB 490.4 million from RMB 256 million in the same period of 2017, primarily due to the increase in revenues from recommendation services. Total revenue from recommendation services increased by 86% of RMB 441 million in the second quarter of 2018 from RMB 236.9 million in the same period of 2017. Revenues from recommendation services for loans increased by 43% to RMB 291.9 million in the second quarter of 2018 from RMB 204.2 million in the same period of 2017, primarily due to the increase in number of loan applications and average fee per loan application. The number of loan applications was approximately 21.2 million in the second quarter of 2018, representing an increase of approximately 11% from the same period of 2017. The average fee per loan application increased to RMB 13.8 in the second quarter of 2018 from RMB 10.7 in the second quarter of 2017. Revenues from recommendation services for credit cards increased about 356% to RMB 149.1 million in the second quarter of 2018 from RMB 32.7 million in the second quarter of 2017 due to the increase in both credit card volume and average fee per credit card. Credit card volume for recommendation services in the second quarter of 2018 was approximately 1.5 million, representing an increase of approximately 238% from the same period of 2017. The average fee per credit card increased to RMB 99.5 in the second quarter of 2018 from RMB 73.7 in the second quarter of 2017. Revenues from advertising and marketing services and other services increased by 159% to RMB 49.4 million in the second quarter of 2018 from RMB 19.1 million in the same period of 2017, primarily due to the increase in revenues from big data and risk management solutions as well as an increase in advertising services provided to credit card issuers. Cost of revenue increased by 153% to RMB 59.1 million in the second quarter of 2018 from RMB 23.4 million in the same period of 2017. The increase was primarily attributable to the increase in traffic acquisition costs of advertising and marketing services, short message service fees, depreciation, online payment processing fees and bandwidth and server hosting costs. Gross profit increased by 85% to RMB 431.2 million in the second quarter of 2018 from RMB 232.7 million in same period of 2017. The increase was primarily attributable to the continuing growth in revenue. Gross margin was 88% in the second quarter of 2018. Sales and marketing expenses increased by 94% to RMB 421 million in the second quarter of 2018 from RMB 217 million in the same period of 2017. The increase was mainly due to the growth in marketing and advertising expenses and payroll-related costs. Research and development expenses increased by 122% to RMB 52.5 million in the second quarter of 2018 from RMB 23.7 million in the same period of 2017, primarily due to the increase in payroll costs and share-based compensation, mainly related to hiring to R&D staff to further enhance our service delivery, efficiency and effectiveness. General and administrative expenses increased by 397% to RMB 37.8 million in the second quarter of 2017 from RMB 7.6 million in the same period of 2017. The increase was primarily due to the recognition of share-based compensation as well as increase in payroll costs and professional fees for maintaining our listing status. Share-based compensation recognized in cost of revenues, sales and marketing expenses, research and development expenses, and general and administrative expenses in the second quarter of 2018 were RMB 32.6 million in total. Income tax benefits were RMB 11.2 million in the second quarter of 2018. Contributed by the change of cost and expenses structure, the annualized tax rate for 2018 was decreased. In addition, the Company’s domestic subsidiary completed their 2017 annual tax filings with relevant tax authorities by the end of May 2018, which resulted in a change of tax position in income tax provision and deferred tax assets recognized as of December 31, 2017. The effect of the change was RMB 12.5 million recognized in the second quarter of 2018. Net loss increased by 251% to RMB 61.1 million in the second quarter of 2018 from RMB 17.4 million in the same period of 2017. The increase was primarily due to the increase in share-based compensation expenses. Non-GAAP adjusted loss, which excluded share-based compensation expenses from net loss, was RMB 28.5 million in the second quarter of 2018, compared with RMB 16.9 million in the same period of 2017. Non-GAAP adjusted net margin improved to minus 5.8% from minus 6.6% in the same period of 2017. Non-GAAP adjusted EBITDA, which excluded share-based compensation expenses, depreciation and amortization, interest income and expenses, and income tax expenses or benefits from net loss, for the second quarter was a loss of RMB 36.3 million. As of June 30, 2018, the Company had cash and cash equivalents and short-term investment of RMB 1.34 billion and working capital of approximately RMB 1.44 billion. Now for the guidance. As a result of credit tightening across the board, we observed slowing down of lending activities in the past two months. At the same time, we noticed that the regulators have issued new policies promoting financial inclusion and consumer finance, as well as loosening trend of macroeconomic environment since the end of July. We remain confident and positive in terms of outlook in mid to long run. We currently expect our total revenues for the third quarter of 2018 to reach approximately RMB 415 million. Our quarterly progression during the year reflects our estimates based on the current market conditions and the regulatory environment and is subject to uncertainties and the change. With that, I will conclude our prepared remarks. We will now open the call to the questions. Operator, please go ahead.

[Operator:]

We’ll now begin the question-and-answer session. [Operator Instructions] Our first question today comes from Wendy Chen [ph] with Goldman Sachs. Please go ahead.

[Unidentified Analyst:]

[Foreign Language] So, I’ll repeat my question in English. So, my first question is about our third quarter guidance. So, can management kindly share some insights about the breakdown between the credit card new as well as loan business, especially as we’ve seen the loan business and the P2P platform has been -- having some regulatory headwind in the third quarter starting from July. And then, my second question is about the user acquisition costs. Wondering if the management can give us some guidance on the total acquisition costs by different channels. Thanks very much.

[Oscar Chen:]

Thanks, Wendy. Let me take your question firstly. So, regarding to your first question of the potential decrease year-over-year of our third quarter guidance. So, I think firstly, I want to comment that the third quarter impact is across the board resulted from the tightening credit and monetary policies implemented earlier this year under the theme of deleveraging. So, we observed the slowdown of lending activities in July and August. So, it’s not just about the P2P activities. Of course, P2P is part of it, but overall we have seen the tightening credit and monetary policies. But again, we want to emphasize the policy trend turned more positive recently which I have explained in the guidance. So, regarding the revenue split, so I want to give some -- so for the third quarter guidance, we think the credit card revenue will continue to grow year-over-year and quarter-over-quarter, which may be a bit less than 50% of the total revenue. And the loans and loan recommendation and the other -- advertising, big data and risk management services will contribute another half. That’s a rough ballpark about the revenue split of the third quarter. So, about your sales and marketing expenses, you’re asking about the user acquisition cost. So, in the second quarter, so you can see we view that sales and marketing expenditure of revenue is a proxy measure of our marketing and acquisition efficiencies. In the second quarter, it was above about % of total revenue, which is in line with the same period of last year and a bit lower than the first quarter of 2018. So, as we mentioned in our previous earnings call, so online lending activities have been recovering in the second quarter this year. So, as a result of increasing activities, we saw sequential increase in quarterly traffic acquisition cost. So, back in first quarter, because it is a combination of slow season and the regulatory impact, we scaled back our marketing spending a bit, so which you can see we can keep the flexibility in terms of the marketing spending. In the second quarter, alongside with recovery of the industry, we turned back into the strategy of managing our margin to expand our user base. In the second quarter, our total number of registered users reached over 100 million. For the Q3, given the industry uncertainties, we will be more disciplined in terms of marketing spending. As such, we will expect better ROI in the third quarter.

[Operator:]

The next question comes from Richard Xu with Morgan Stanley. Please go ahead.

[Richard Xu:]

Thank you very much for taking my questions. Two questions, one is, could you talk about the fee rates that you’re able to charge, both the credit card issuers and P2P lenders? Any new trend there -- from industry you were able to raise some prices, and is that more across the board or particular platforms at the moment? Secondly, obviously the regulators have issued some guidance in terms of the pace of registrations. Are you seeing stabilization of activities, any industry trends that you’re seeing in the past in the two weeks or so? Obviously, you are giving relatively conservative guidance in the third quarter, but what’s the actual trend at the moment? Thank you very much.

[Oscar Chen:]

Okay. Thank you, Richard. I will take your question. So, firstly, about your question, about the average fee of loan -- of credit time and loans. So yes, I think given our strong position in this market, we successfully increased the fee per credit card and per loan applications in the last quarter. I think, the increase in fee in average of credit card is a combination of several factors. Firstly, in annual contracts we signed with the banks of this year, we’ve seen the average fee increase, given our larger volume contributed to the banks and also our better conversion rates and approval rates by leveraging our data and -- big data and technology to help the banks to further enhance their credit card operation efficiency and lower delinquency rate. So, David has provided some comments in one case study of how we worked with banks, not only directing traffic to them but also help them to manageable risk. So, I think, this is the volume, larger volume market position and better operating efficiency are the reasons, we can increase our price with the banks. So, for the fee per loan application as we explained before, so for the first quarter and second quarter, we are seeing more loan applications -- more loans with larger ticket size and longer duration, which was a result of the December regulation in terms of cash loans. So, all the lenders become fully compliant with the regulations and the launch with our product platform was larger ticker size and the longer duration. So, we don’t price our loan application based on the duration or the size, but there are some correlations between the price and the loan size and duration. So, you see the migration of loan duration or size, the price increase naturally.

[David Ye:]

Okay. Richard, I just want to just add a few more points. This is David. So, we do see the unit sales price for both credit card and loans increased across the board. We have seen the increasing trend in last couple of years. We do expect to see this continue going forward. If we further segment the unit sales price by loan or credit card or for credit card, if we put a second by a super prime or prime cards, we do see that increased for each higher quality segments or medium quality segments. And if you look at a single issuer, credit card issuer, we do see that our contract renewed on annual basis, we were able to -- definitely able to raise the price 10%, 15%. So, we expect this trend of increase around 15% year-over-year, we will have at least for the next 12 months maybe longer. For loans, for example, we have like a mortgage lease sale for a few hundred bucks per lease, a few hundred renminbi per lease, we’ve seen increasing trend. For non-secure credit, with credit limit of 30,000, 50,000, we’ve seen that also increase RMB 60, RMB 70, RMB80 and to close to RMB 80, RMB 90. So, the primary drivers of increasing unit sales price, it’s more about quality of the lease with better conversion rates, higher approval rate and in the medium to long-term is a higher credit quality or less charge off rate. So, by applying our big data risk management solutions we were able to negotiate higher unit sales price in the month -- in the annual basis. And also second driver of the unit sales price is by the volume or the quantity. Because larger financial service providers, they want to ensure you how large volume or quantity to stay at the top corners. So, that’s why the combination of the quality of the loan or credit card and the volume, which put us in a good position to provide a better services to financial service providers and have higher unit sales price.

[Oscar Chen:]

Okay. Richard, regarding your second question about the P2P regulation. So, our observation is that we see both risks and opportunities in the recent crackdown against the P2P companies. So, starting in the second quarter, China’s overall tightened credit and the monetary policy, and I think the monetary policy and resulting liquidity crunch I think indirectly led to crackdown for certain P2P platforms. But more importantly, we view that as more important -- it’s more about the non-compliance P2P platform. The majority of the problematic P2P platforms were not P2P by definition. Instead of serving as pure information platform matching individual borrowers and lenders, these platforms were directing funds to related parties forging [ph] assets or investing in larger ticket size assets would mismatch the cash flows. So that’s where the risks are. The closing down or the crackdown of the certain P2P platform lead to shortage of investor confidence and the funding supplier, which impacted -- contributed to the part of the lending activities, particularly the online part. But, we view that this impact will be limited in the long run as we observe that financial inclusion is still encouraged by the regulators, and P2P firms will -- in the future, the P2P firms will stay away from mismatched assets and looking for smaller size and the diversified assets. So, the loan issued to the consumers and SMEs will be a perfect match. So, although the overall P2P -- the size of the overall P2P industry may shrink, but we see more focus and resources of funds will be put into the smaller size and the diversified assets, for example the individual consumption loans or the SME loans.

[David Ye:]

Yes. So, Richard, I just want to paint some color on this issue. Actually in the last 2 to 3 weeks, we definitely have seen at the macro level or at the industry level, we see the tightening of credit or credit crunch is making positive term. Couple of things happened at government level. For example, on July 31st, President Xi Jinping had a meeting basically with the Central Political Bureau, which is a government decision body. One of the policies he mentioned is try to help SMEs to solve their difficulty in terms of financing and also try to reduce the cost of financing. That’s the July 31st -- or August the 7th, Vice Premier Mr. Liu He, he actually also in one of the meetings he hosted, basically wanted to make sure license to financial institutions to support the macro SME or [indiscernible]. And also I mentioned earlier in August like 18 that the China Banking and Insurance Regulatory Commission basically want to promote the consumer finance, try to solve the SME lending. So, we see now there is more liquidity, either provided by the central bank or the licensed financial institutions such as banks. And also as I mentioned earlier, the guidance, the 108 rule, basically that 108 rule is to basically help P2P companies to get registration, get self inspection and get more supervision and also basically provided more like confidence to the individual investors. So, basically what our understanding is that the central bank, the Bank Regulatory Commission and China Internet Finance Association try to make sure the top tier or the two -- marketplace lenders or P2P companies, they will have safe operations and they will just grow more steadily and healthier in the medium term, in short to medium term, long term. So, that’s what’s happening in the regulation in the industry. [Indiscernible] what could be the top credit card issuers, top marketplace lenders and working with hundreds of like micro finance companies and the consumer finance companies, we do see the business volume has been growing in the last, especially in the last two weeks. So, I just want to summarize yes, there was turning point in last two or three weeks ago, and this is gradually climbing. But, again, the guidance we are giving has been very cautious. We would say Q3 earnings [ph] will be better, next month will be definitely better than July -- end of July and July and June, but Q4 we would see a much better compared to -- Q4 will be much better than Q3. Richard, does that answer your question?

[Richard Xu:]

Yes. Thank you very much.

[Operator:]

The next question comes from Alex Yao with JP Morgan. Please go ahead.

[Alex Yao:]

Hi. I think just as it grows, I have follow-ups to - do you think - [Foreign Language]. [Foreign Language] Good evening, David. And I currently have a few follow-up questions. Number one is, how do you think about the long-term direction of online FinTech or more specifically online lending regulatory environment? Do you see the likelihood that from supply side, the online lending service provider will increasingly become a oligopoly market, i.e. the market participants will reduce the number of participants and potentially hurt our value proposition in the market as a marketplace? And then, secondly, given the current regulatory environment and the future potential developments, how do you think about the growth strategy to drive medium to longer term growth? I stop here. Thank you.

[Oscar Chen:]

Yes. Thanks, Alex for the questions. So, regarding your first question about the regulatory ne in the future, I think we always expected that the licensing requirements will continue to be in the center of the regulatory framework because the lender handle money; it’s a financing. So, worldwide all the financing activities need a license. So, P2P is going through the registration process. Although, the deadline has been postponed twice, but there has been already a very clear timeline in terms of the P2P registration in the next -- by year-end. And the final registration or licensing, I’m not sure could be something happen in the next 12 to 18 months. So, yes, of course, with the stringent regulation in this regard, there won’t be over 2,000 P2Ps down the road. So, after the P2P companies’ crackdown since mid-June to late-July, it is reported that hundreds of the P2Ps disappeared or closed down their business. So, nowadays the P2Ps, the number of P2P companies is around 1,500 to 1,600. So, I think every bank has -- you guys are smarter than us. You have the best estimate of the number of P2Ps down the road. Someone estimates 10%, 15% whatever. It could be a number between 100 to 200 P2P companies. So, again, so the P2P companies we are working with and we have the relationship with -- business relationship are all the P2P companies, not a big number. So, we have a very stringent and strict onboarding process. So, we only work with the top P2P guys, focusing on providing individual consumer loans to the consumer, not the non-compliant P2P platforms. So, we see the consolidation in the P2P. But, one thing I think everyone should keep in mind. So, the China’s financial services industry is not only P2Ps. There is a pyramid of structure of the overall financial services system including banks, consumer finance companies, microfinance companies, P2P companies and some other. There are the multiple types of the lending product providers in the market. And they’re serving the consumers of different credit spectrum. So, it’s a very diversified market. Even though, there will be some consolidation of the P2P industry, we are seeing more licensed players including, banks consumer finance companies enter into the online lending space, and they are doing -- they’re implementing their digitalization strategy. They acquire customer online, they do the KYC online and they do the risk assessment online, underwriting online. So, as a platform, definitely, we are connecting users with financial service providers. We are matching them with the financial product -- proper [ph] financial products. So, I think we are well-positioned in this market to grow our business further.

[David Ye:]

Hey, Alex, this is David. You asked a very good question. I believe it’s $10 billion, maybe $50 billion question. My simple answer to you is, there will be no monopoly or oligopoly here in China. I’m going to answer your question in couple of fronts. The first, from the government standpoint, I’m going to read you to use the recent August 18, the CBIRC issued document number 76 or Proposition 76. Okay. Let me read this. Expedites the development of consumer finance, strengthens the impact of consumption and economic growth to add diversified products, diversified products with the different level of consumption needs to provide an improved, differentiated financial product and service to support customer finance. So, the government says diversified, different level, differentiated financial products. So, we as a platform in the last years, we have been working with 2,500 financial institutions and different players. Keep in mind, in China, we have 15,000 financial service providers. We have 4,500 banks, serving the top 30% of the more affluent, super prime people, right? We have -- micro finance company licensed. We have customer finance company, we have about 30 licenses. We have about 200 in the microfinance licenses. There are about 1,700, 1,800 P2P companies, we believe about 10% will about year maybe two years later. So, we are working with different credit spectrum, which really is the different tier of financial service providers. We are offering diversified product and service, credit card, mortgage, SME loans, consumer finance liability structure, right. We are further expanding to other products, so, different segments, credit spectrum, given the level of consumer and also different products. Keep in mind that now what we’ve been talking in China in consumption upgrade or downgrade. It’s been very controversial. We believe for the financial product, most of the Chinese consumer SMEs still want better financial products, it’s upgrading. So, that’s why we don’t want to worry about the monopoly or oligopoly at all. Even that we have the government will make sure that will not happen. I think that’s one thing. I think we actually have seen like each product or segment, keeping mind China, we have order -- our search engine is geo based in each case. We actually have fund something very interesting, each segment, each geographical region, if we have about five or six players competing seriously, we don’t worry about monopoly at all. It’s the same like U.S. I remember in the good old days in U.S., we had thousands of credit card issues, now U.S., the top issuers are less than 10, right? We have the Chase, JP Morgan Chase, Capital One, we have Bank of America and Citi, right? Those top few guys are competing. We don’t really worry about monopoly. So, that’s why I say, this is a $10 billion maybe $50 million question. So, platform in China, we always had a value to make sure the Chinese consumers SMEs have the best of values, finds the best financial product at the best price. Does that answer your question?

[Alex Yao:]

Yes, very insightful. Thank you guys. One more follow-up on the near-term momentum, if I may. During the current environment, the relatively larger, more credible, higher quality lending providers on your platform spending more to drive market share gain, awarding gain or they are also seeing pressure from liquidity or pricing, so, they also have to reduce their user acquisition efforts and consumption on your platform?

[Oscar Chen:]

So, during the near-term, I mean, back in the last two months, I think liquidity -- it’s a liquidity issue and it’s also investor confidence issue, I mean the P2P investors. So, if you ask the a credible, large sized online lender spending on platform, probably my answer would be in the past two months, we see across the board slowdown of lending activities, not only the P2P platform but also the other financial institutions. But, as David commented, in the last week and the one week before, we’re seeing the volume recovery on our platform.

[David Ye:]

Yes. The credit crunch in June or July, we see the tightening in consumer finance companies and some of the licensed, micro finance company. And you guys probably heard even like MyBank, those big banks also actually have some credit cards due to stop of ABS and regulators want them to increase the leverage ratio -- reduce the leverage ratio basically. So, that’s why Q2, Q3, early Q3, but we definitely have seen a good trend of -- in the last two weeks.

[Operator:]

The next question comes from David Guo of China Renaissance. Please go ahead.

[David Guo:]

I’m representing Bo Pang from China Renaissance. It’s actually a follow-up question, as management mentioned, we have really diversified product. So, I want to understand, what the share structure of our -- that and consumer finance SME loans in our operations? That’s my first question. And then, the second one is we really have a good start of the credit card business, start from last year, and that’s mainly because the banks are aggressively shifting to retail finance. So, we want to understand what is the characteristics of our top customers and do we have any, like strategy to try or collect data and engage with the borrowers on a timely basis, so that we can evolve some of the cross selling opportunities in the future? Thanks.

[Oscar Chen:]

Okay. Thank you, David. So, regarding your first question, the structure of the financial products on our platform, so, we may not be able to provide the detailed data regarding the SME loans or some other loan products. But a ballpark number I can share with you is about -- because we mentioned earlier that we are seeing the loan size and duration shifting on our platform, so as of the second quarter this year, so, we have seen that the loan size within 10,000 to 50,000 loans, the number of applications of such loans accounts for around 60% of our total loan applications. And loan size less than RMB 10,000 is around one-fourth of our total loan applications. And the remaining are the loans with the size larger than RMB 50,000. So, that’s a breakdown, we shared with investors in the first quarter and also we’re willing to share that with, in the second quarter.

[David Ye:]

So, David, I will give you couple of maybe flavors in terms of the profile of our products or customers. So, mostly a consumer play, 90% consumer-related loans or credit cards, 10% SME loss. Of course, there is some overlap. Some of the SMEs actually came to our -- come to our platform, apply mortgage or even a large percent of non-secure credit as individuals. So, it’s 90% consumer play, and also I mentioned the loans below 100,000, for consumer loan, that’s majority. So, macro loan -- for credit card, we cover more than 23 of the largest Chinese credit card banks in China, we have over 4000 products. Basically that covers a full credit spectrum. That’s super prime cards, prime cards, lifestyle card and some of the newly issued card, recently there are new lifestyle cards. And geographically, we cover 380 cities, as I mentioned earlier, in China lending, in credit card issuance really to -- constrained by geographic regions. Of course with the internet, we pretty much cover most of the online applicants. So, there is no such a thing as a typical user profile because we are positioned as a platform. So, I would say, demographic wise, age wise, 22 years old or above, we see a higher concentration between 25 to 30, and 34 to 40, and there is a bell curve. It’s less like risk profile of a platform.

[Oscar Chen:]

So, regarding your second question, David, so our credit card customers. So, we are now working with 21 nationwide banks in terms of credit card online issuance. So, among that, 3 out of 4 state owned banks, and almost all the joint stock banks, and a few city and rural commercial banks working with us on the online credit card issuance. So, our top revenue contributors in terms of credit cards are joint stock banks. They are more advanced in terms of online acquisition and online positioning. If the banks want to do online credit card issuance, the most important capability for them is to -- they can do online designation in a very short timeframe. And also, you asked about the question about user data and whether we can deal more cross-selling opportunities. I would like to give you an example. So, one of the credit card issuers now is working with us on the incomplete applications, which means that the credit card issuers will give us -- following the compliance rules, they will give us the incomplete -- online applications for us to follow-up and to cross sell some other products. So, originally we already have the cross selling opportunities between our loan and the credit card business which is around a bit more than 20% users. They both are credit card and loan applicants. So, there is already some cross-selling opportunities on our platform. Given we have the data, we own the process of the application. We further develop our relationship with financial institutions. We believe with our advantage, we will have more cross-selling opportunities down the road.

[Operator:]

And that concludes the question-and-answer session. I would like to turn the conference back over to management for any additional or closing comments.

[Qiuya Chen:]

Thank you once again for joining us today. If you have any further questions, please contact us at [e-mail] or TPG Investor Relations at [e-mail]. Thank you for your attention. And we hope you have a wonderful day.

[David Ye:]

Thank you.

[Oscar Chen:]

Thank you.

[Operator:]

This conference has not concluded. Thank you for attending today’s presentation. You may now disconnect.