Jianpu Technology Inc.
Q3 2018 Earnings Call Transcript

Published: 19 Nov 2018

[Operator:]

Hello, and welcome to Jianpu Technology, Inc’s. Third Quarter 2018 Earnings Conference Call. Today’s conference is being recorded. [Operator Instructions] At this time, I would like to turn the call over to Qiuya Chen, Jianpu’s Investor Relations Manager. 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 third quarter 2018 earnings press release issued earlier today via Wire Services and also posted in the Investor Relations section of our Website. 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 third quarter. Mr. Chen will then provide updates 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 third quarter 2018 earnings conference call today. Last Friday it was one year anniversary of Jianpu Technologies listing on the New York stock exchange. Four quarters have passed, through our continuous efforts to execute our strategy and innovate our products; our team has navigated through a turbulent operating environment, exceeding our guidance in the past four consecutive quarters. We have strengthened our position as an independent open platform, continued to add value to our users and financial service providers, fulfilling our mission to become everyone’s financial partners. Today, I’m very excited to share with you the results for another better than expected quarter and our view on the road ahead. During the third quarter, we kept our focus on capturing market dynamics through our uniquely technology driven and the diversified platform. Despite a weak sentiment of the macro front and credit tightening in July and August. We maintained a robust momentum in our credit card recommendation service by posting 197% year-over-year increase in revenue, and we also exhibited strong growth in our big data and risk management business, which achieved around 180% year-over-year revenue increase. As a result, we reported that RMB444 million exceeded our previous guidance by 7%. On November 8, we hosted our banking partner’s summit celebrating the successful partnership between Jianpu banks credit card issuers, and other financial institutions. Over 600 industry leaders, experts, professionals from banks credit card issuers, consumer finance companies, third party tax providers and media as well as other partners participated in this event. At the event, we probably announced that cumulative number of credit cards recommended on Jianpu’s cash -- and approved by bank and reached over 10 million. Furthermore, in Q3, we had increased the total number of credit card issuing banks to 24 by adding the three new banks. Through years of continuous dedication, we had developed strategic collaborations with all four large state owned banks, ten joint stock banks out of 12 [Ph] nationwide as well as the number of other rural commercial bank, city commercial banks and the foreign banks. Also on the credit card front, we are glad to report a good result of our social media and the partners initiatives, which reflect our continuous efforts in managing our diversified level of acquisition partners, that includes used fee, social network, social engine, app store commodities and the more importantly storing new channels with borrowing use reached and the higher operating use. Our continuous investment in professionally generate content particularly a variety of video, audio and the content volume [ph] incorporating socially a cautious financial elements. [Indiscernible] a 100 million viewership per month. We – large type of a traffic along with our requisition engine to reach and engage a wider range of credit card users such as newer generation wire [Indiscernible] and Chinese consumers that SME is for -- aided by these social media and the partner initiatives from a credit card applications and their works through our backlog both saw significant increase during the third quarter Starting in June, credit card volume generates that through this new initiatives, saw a financial growth and expect further growth in the fourth quarter. In the third quarter, due to the turbulent operating environment, we have opted for a more balanced type acquisition strategy between growth and of operating efficiency. Benefiting from such strategy and the use of growth driven by social media and the partnered initiatives, we achieved strong return on investment improvement for the quarter. We saw sales and the marketing expenses excluding share based compensation as a percentage of revenue was approximately 76% in the third quarter of 2018 compared with approximately 83% during the same period of 2017. This is a 6% percent decrease year-over-year. Despite the challenging marketing conditions, we maintained our strategic focus on deepening collaboration with the financial service providers. And then continuously enhancing our user engagement; we expect to execute the current strategy in the following quarters and then consequently continue to improve our operating efficiency down the road. As the platform offer diversified financial products, cost for credit section, our collaboration with financial service providers are not limited to facilitating the law and the issuing credit cards. We increasingly focus on leveraging our big data and risk management technology to enable financial service providers to further enhance the operating efficiency and to improve their decision capability in the last quarter. In July, we launched a joint [Indiscernible] laboratory where we can currently work together with financial institutions to develop statistical models that integrate our big data and AI technology into financial service provider’s applications environment. With their efforts, we have initiated new engagements and our existing operations with banks and other licensed financial institutions in the industry. And notably our AI technology capability also [Indiscernible] a leading expert in the sale of artificial intelligence research institute as chief scientist. So that experience and expertise will be invaluable to the next phase of season growth as we further explore our series of AI knowledge such as machine learning, natural -- processing as well as image recognition and voice interaction in the financial services industry. Recently, we further enhanced our smart recommendation engine and then initiated our AI driven customer service systems. The systems are designed to improve recommendation accuracy and the commercial rates, improving the insensitivity of our customer service. Our big data and the risk management business have made a remarkable progress and so close to 180% year-over-year revenue growth in the past quarter. As we mentioned in our previous earnings call, overall lending activities slowed down in July and August, which had a negative impact in our long audit. We have observed a subsequent pickup in September coming into the fourth quarter, the long audit -- which is approximately 5.8 million in the month of September we saw 55% higher than the average of July and August numbers. On August 18, the China Bank and the Insurance Regulatory Commission or CBIRC issued a regulatory guidance intended to strengthen consumer finance role in serving the economy. This guidance include to actually develop consumer finance and enhance conception driven economy development to adopt, to address our consumption demand, to provide and upgrade depreciation of financial products and services, and to support the growth and the consumer loans and SME loans to sustain the increasing demand for better life in China. With more support and the positive -- and more better initiative applied by our government agency and by the industry, we definitely are seeing a good sign of increasing consumer lending, SME lending, financial inclusion and financial innovation. We have seen positive impact on our lending activity and the market sentiment recently. Historically, the first quarter is a seasonally strong quarter for our business. We are confident that we are in a position to further benefit from stronger consumer and the SME demand and the growth and financial service provider side as the operating environment further improves in the next quarter. In addition, we are very excited and honored to welcome Mr. Kuang-Yu Jeff Liao to our board, to serve as our independent director. Jeff has also served as the Chairman of our nomination and the corporate governance committee and as well as a member of the audit committee, compensation committee on the board. Jeff has extensive leadership experience in leading Fintech consumer finances company and online retail worldwide. Including that, he was the head Apple Pay Asia, Visa China, head of PayPal China. CEO of eBay Greater China and the General Manager at Standard Chartered Consumer Bank of China. We look forward to learning from Jeff’s business acumen and strategic vision and improving our overall corporate management and corporate governance. With that, I 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 pleased to report that Jianpu delivered a respectable financial and operational results for the third quarter of 2018 despite the micro slowdown. Total revenue for the third quarter of 2018 reached approximately RMB444 million, 7% exceeding our previous guidance. Also while continuing our efforts of improving operational efficiencies; we successfully narrowed down our adjusted net loss margin to minus 4.5% in this quarter from minus 5.8% in the last quarter. Our technology based diversified cash flow model enabled us to navigate through the challenging micro environment. Although lending activities slowed down in July and August due to the liquidity and the credit tightening across the retail financial services sector. Our credit card recommendation service continue to grow 197% year-over-year and achieve RMB184 millions of recommendation revenue. Combining the credit card business from both recommendation services and our advertising, we recorded the credit card volume of approximately RMB2 million in the third quarter of 2018 representing our year-over-year increase of approximately 82%. The revenue growth is also driven by the increase of the average fee per credit card, which is RMB103.6 in the third quarter of 2018, representing a 48% increase year-over-year. As applicable to the micro downside in the third quarter, revenues from the loan recommendation decreased by 49% year-over-year to RMB193 million in the third quarter of 2018. The liquidity and the product tightening in July and August resulted in a slowdown of lending activities and a number of loan applications on our platform was negatively impacted down to 13.3% up, RMB13.3 million in the third quarter of 2018. However, such tightening had limited impact on our pricing. Our average fee per loan application continued to grow with increase RMB14.5 in the third quarter of 2018 from RMB13.4 in the third quarter of 2017 and RMB13.8 in the last quarter. As David mentioned previously, we have observed the lending activities resumed the growth in September and we are confident such growth will continue into the next quarter and onwards. During the third quarter of 2018, our revenues from credit cards and loans accounted for 46% and 44% of total revenue respectively. Also our big data and the risk management services achieved 180% year-over-year growth contributing approximately 70% of total revenue. The current revenue structure demonstrates the robustness of our platform model that is well positioned to capture the dynamics of retail finance markets. Responding to the changing environment, we fine-tuned our strategy to be more balanced between growth and efficiency. Some used [ph] initiative apps have also contributed to the efficiency gains in the third quarter. As a result, our gross margin improved to 89% in third quarter of 2013 from 88% in the last quarter. Also, sales and marketing expenses excluding share based compensation as a percentage of revenues was significantly improved to 76% in the third quarter of 2018, representing approximately 7 and 9 percentage points down year-over-year and quarter-over-quarter respectively. At the same time, we continued our pacing [ph] in respect of R&D investments, which we believe will benefit our business in the long run in order to further optimize our technological infrastructure. We have continued to invest heavily in talent acquisition in the big data, AI and machine learning space, driving our R&D expense increase in absolute amounts by 69% year-over-year as well as R&D expenses excluding share based compensation as a percentage of revenue upto 13% in the third quarter of 2018. From what has been discussed above, finally has come down to the improvement of net loss and the corresponding margins quarter-over-quarter. Non-GAAP adjusted net loss was RMB20 million in the third quarter of 2018, improved from adjusted net loss of RMB29 million in the second quarter of 2018. Non-GAAP adjusted net margin improved to minus 4.5% from minus 5.8% quarter-over-quarter. Net loss was RMB54 million in the third quarter of 2018 improved from net loss of RMB61 million in the second quarter of 2018. As of September 30, 2018 the company had a strong balance sheet with cash and the cash equivalent, restricted time deposits and short term investment of RMB1379 million, and working capital of approximately RMB1453 million. Next, we want to give a quick update on the share repurchase plan. We announced during the last quarter earnings call that our board has approved a share repurchase program which is authorizing the company to repurchase an aggregate value of upto US$20 million during the next 12-month period. As of November 16, 2018, the company had purchased approximately US$500 million of shares under this program, and we will continue our share repurchase efforts during the next three quarters. We maintain our utmost confidence in our business strategy, strong fundamentals and the long term growth prospects as well as our commitment to maximize shareholder value. Now for the guidance, based on the company’s current estimate, total revenue for the fourth quarter of 2018 are expected to be approximately RMB680 million representing an increase of approximately 53% on a quarter-over-quarter basis and a 16% on a year-over-year basis. With that, I will conclude our prepared remarks. We will now open the call to questions. Operator, please kindly go ahead.

[Operator:]

We’ll now begin the question-and-answer session. [Operator Instructions] The first question comes from Richard Xu of Morgan Stanley. Please go ahead.

[Richard Xu:]

Thanks David and Oscar. A quick question on the guidance actually. You mentioned basically you’re seeing some rebound in loan activity. So obviously there’s some seasonality for fourth quarter as well. So in the guidance what are the key assumptions for credit cards and loan business? Is that largely driven by rebound in the loan facilitation business? Or you think the credit card business will accelerate further in fourth quarter? Thank you very much.

[Oscar Chen:]

Thanks, David [ph]. I think, Richard, let me firstly answer your question regarding our guidance into the fourth quarter. Yes, fourth quarter is historically our peak season for both loan and the credit cards Because of -- we will -- we expected to see higher credit demand from users as well as higher supplies from the financial service providers. Because approaching to year-end users normally want to take on credit for consumptions and probably for some other purposes. And for the banks, loan bank financial institutions and other tech-enabled lender, normally they will have some year -- annual target to meet. So there will be some – they will have incentive to speed-up their customer and the revenue growth into the fourth quarter. So, this is why historically fourth quarter is normally the peak season for both loan and the credit cards. And for this fourth quarter not only the seasonality, we’re also seeing the easing of the tightening policy and also more stabilized regulatory outlook will also contribute to our fourth quarter [ph] loan volume, credit volume and as a result the revenue. So, as David just mentioned, so while we looking to the September we saw a nice – resumed the growth of our loan volume, so we’ve recorded around RMB6 million loan application volume on our platform. So entering into the October, we even see -- we also see a month-over-month sequential loan volume growth. That’s – I think that’s ease of the credit tightening in July and August. So from that we have more confidence when our business entering into the fourth quarter. And lastly, we will see -- with stronger demand from user side and resume the growth at the supply side, as the financial service provider side, so our improve matching capabilities driven by the big data and AI technology will play an important role matching the users demand and the financial service providers appliance. I think that’s a peak season, the changing environment and also our core capability all contribute our confidence of the guidance into the fourth quarter. I may want to give some more color regarding the fourth quarter revenue composition of the 680 million. So in the third quarter we saw our loan recommendation, our loan recommendation revenue contribute around the 44% of total revenue and our credit cards in total combining recommendation and advertising [ph] contributed 46% of our total revenue and big data and recommendation service contributed around 7% of total revenue. Looking to the fourth quarter, we would expect sequentially – credit card will continue to grow and the resumed growth of the lending activities will lead to higher growth rate for loans. So, among the 680 million revenues we would expect around 75 to – sorry, 45% to 48% from the loan recommendation and 40% to 45% from the credit card recommendation and also advertising for credit cards. And big data and the risk management will also achieve high single digit percent in terms of the revenue contribution. Richard, does that answer your questions?

[Richard Xu:]

Sure, yes. Thank you very much.

[Oscar Chen:]

Yes. Thank you, Richard.

[Operator:]

The next question comes from Piyush Mubayi of Goldman Sachs. Please go ahead.

[Piyush Mubayi:]

Thank you. Thank you for that guidance. You talked about encouraging trends coming through in the month of September. Could you just comment through for the next two months of 2000 -- the last two months of 2018? And one of the challenges with 2018 4Q is very high base, what we have in fourth quarter 2017. So wonder if you could talk through the growth outlook for the two different businesses in 2019 as we stand today? Thank you.

[Oscar Chen:]

Okay. Thank you, Piyush. Yes. So, as I’ve just mentioned in October we have seen the sequential growth of the loan volumes around 10% month-over-month in to the – I’m talking about last two months, as we said before we are seeing an overall environment with more liquidity injected into the economy and also more stabilized regulatory outlook. So I think that will benefit all the participants in the industry including banks, loan bank licensed financial institution and also checking tech-enabled lenders. Because we have seen our loan volume increased across all these financial service provider – all these type of financial service providers. Credit card is also – I think for the fourth quarter the credit cards -- the growth in credit cards were driven by both volume and the unit price. I think this year is a very good year for the credit card online issuance. For every quarter we almost achieved triple digit year-over-year growth for the credit card. So, entering into the fourth quarter we would expect that momentum will continue and also in the fourth quarter because as I just mentioned, the banks are more – would be been more incentive to achieve the year target. So they will – I think we will be given more volume based year-end incentive for the -- for help them achieving the annual credit card issuance target. So, yes, as you mentioned your second half question is about last year we have seen – we had a 100 basis [ph] -- if I remember correctly, that’s RMB584 million revenue was recorded. So, our guidance was year-over-year wise was 15%, 16% increase. I think partially last – for the last fourth quarter the low lying cash loans reached its peak, but in last December there are more stringent regulation came out. So I think if we take that part aside or we get some so call normalized growth rate, I think that growth rate would be pretty much like the growth rate we achieved in the first nine months of this year, that’s around 45% to 50% growth. That’s -- we exclude the impact from the loan volume before the cash flow regulation.

[David Ye:]

Okay. Piyush, this is David. I will just add a few more data points. We know in China’s retail financial service sector, its high growth. We expect the growth for the next two to three, five years will be around 20%, 25%. In 2020 – in the year 2020 China will become the largest retail financial services market in world. We exceed the U.S., as the market grow 20%, 25% that’s one of driver. Second driver we see the digitalization of financial service reach more loan, credit cards, wealth management and auto loan growth where we acquired, we are -- we are managing the service online. And that’s the macro trend. So retailed to our data, Oscar mentioned that in Q4 that we are going to grow around 53% and that’s from Q3 to Q4, right, and that’s 16% [ph] compared to Q4 last year. And in the next year we will expected a growth of middle [ph] – I mean, double digit level, right. So, that’s the numbers, macro number and what we will be able to deliver in Q4. As Oscar mentioned, the growth from the user demand, the consumer, SME, the high demand of course seasonality helps a lot and also the increased liquidity, we have seen huge liquidity boost across the board from banks credit card issuers, small business lenders, auto lenders, the Fintech lender companies. So de-leveraging of financial sector basically is slowed and stopped around August. August is a turning point for consumer and SME lending, I mean, overall, so that’s why we see there’s a lot of liquidity in September. And we have seen a huge liquidity last month. We will see this trend continue – will continue going forward. \And we are as the tech-driven, AI data-driven and the open platform. We are able to capture the growth better than other lender or Fintech company in the world, So we have built across more in the last seven years, right. It’s a -- we add more financial institution, more financial institution provide differentiated product into different geographic area, different consumer segments and the different products, right? And also in the other side – from the user side, our social media and partnership initiative we were able to capture the younger generation, second, third, fourth-tier – in the underserved market, underserved… So this is very healthy, diverse cycle. We were able to match more users with more tailored or personalized product. We have seen last two, three months we see our conversation rate have improved a lot. We see a higher prorate by different type of financial service providers. We have seen lenders or credit insurers, pay us more for approval. And once the number of commissioned approved credit card policy [ph] that’s approval we have seen increased over 40% year-over-year. So that’s both. There’s a combination of macro growth, industry growth, of course traffic growth, better conversion, better use experience and better monetization. So that’s why we are very confident that we are able to deliver around six cent growth this quarter.

[Oscar Chen:]

So, also, Piyush I think you also mentioned the – given the fourth quarter number was –any flavor on the 2019. I think we – our plan is to give quarterly guidance, but talking about the next year, what’s been share on the call is – so the China’s economy will continue to grow and more stabilize the regulatory outlook. From that as long as we see stronger user demand and also stronger supply as a financial service provider, as being platform will definitely and we are confident in next year’s growth.

[Piyush Mubayi:]

Thanks for all the detail.

[Oscar Chen:]

Yes. Thank you.

[Operator:]

The next question comes from Julie Hou of UBS. Please go ahead.

[Julie Hou:]

Hi, David, Oscar, thank you for taking my questions. I have two questions. First, could you share with us some data of the loan side like revenue contribution of Top 50 FSPs loan size breakdown in third quarter and revenue split between by FSPs perhaps? And my second question is the improving ROI for the quarter. As you opting for more balanced strategy between growth and efficiency. Could you provide more color on the ROI for loan and credit card business and how should we think about just going forward? With higher ROI, when do you plan to make profit? Thank you.

[David Ye:]

Okay, Julie, may I clarify your first question is about the loan volume contribution from different type of financial service providers. And what’s the second part? Probably it’s bit broker.

[Julie Hou:]

Revenue contribution of Top 50 financial service providers, loan size breakdown in third quarter and revenue split between different types of FSPs?

[Oscar Chen:]

Okay. In the third quarter firstly, let me talk about the contribution by different financial service providers of total revenues. So, because of credit card continue to growth in the third quarter and the loan – the revenue from loan recommendation reduced in third quarter. So the overall contribution – credit card already accounted for 46% of my total revenue. So, adding credit card and the loan recommendation revenue from the banks, so the revenue contribution by the banks already in third quarter reached close to 60% of my total revenue. And for the remaining – so that’s 60%, so we look into the loan – the revenue from the loan recommendations in the third quarter I would say it’s a one-third contributed by the banks and one-third contributed by the B2B companies and the remaining one-third was contributed by the non-bank licensed financial institutions including consumer finance companies and the macro lending companies. So that’s a revenue contribution by the financial – different type of financial institutions. And I think for the loan breakdown into the – breakdown by loan ticket size, I think it’s quite similar to what we shared in the second quarter. So that’s around 30% from the – with the loan size less than – with the loan size lower than 10,000. Around 50% contributed by the – with the loan size between 10 to 50,000, and the remaining 20% are from the loans with the size over 50% -- over RMB50,000. So that’s about your first question. Regarding your second question, yes, I think anticipating the changing environment in the third quarter the government intentionally adopted a strategy more balance strategy between growth and efficiency. That means, as you may remember we actively managed over 1000 marketing channels for acquisition. Firstly, in third quarter, our organic traffic contributed 39% of our total traffic and then we further manages the marketing channel by ROI and efficiency. We rank them by ROI and efficiency and put more resources into the high efficiency and the high ROI channels for user acquisition. So -- and also we have some new initiative, as David mentioned the social media and partner program that also have some positive impact on our contribution. So, this is why we significantly increased our ROI in the third quarter. So looking to the fourth quarter and onwards I would say the outside environment is always changing. So anticipated that, we would adopt to the phased strategy into the fourth quarter. So I would expect the sales and marketing and percentage of total revenue will hold constant into the fourth quarter. So we still have a good answer on the profitability yet, but I think the revenue will continue to grow according to the guidance we should. The gross margin and sales marketing as percentage of revenue will be stable into the fourth quarter, and R&D and G&A mostly headcount cost. So we would expect an ordinary [ph] growth into the fourth quarter. So, yes, that’s something I can share.

[Operator:]

And will be a follow-up. Was there a follow-up…

[Unidentified Analyst:]

Very helpful. Thank you.

[Operator:]

Okay. [Operator Instructions] The next question comes from May Yan of UBS. Please go ahead.

[May Yan:]

Hi, Oscar and David, thanks for answering questions. I have two questions, one is you mentioned big data, AI contributed 7% to the revenue this quarter. How do you see this business going forward? Is it going to account for – you said, high single-digit in fourth quarter and next year and maybe in the next one to two years? Is it going to be a vigorous or a meaningful part of the business more than 10% you said before you will break down the detail? Can you explain a bit more how this business has developed and how do you charge and how -- what type of the keys sort of income are you're able to charge? And how is it going to grow? And then secondly, we have seen slowdown in the industry, credit card total issuance for the whole industry and what's your -- in the third quarter and you mentioned about there's policies coming out supporting consumer lending et cetera, is somewhat different maybe in reality the credit card market is saturating. And in next year or going forward do you see that can be a smaller part of contribution to your revenue? Okay. Thanks for that.

[Oscar Chen:]

Thanks, May. To your first question, the big data, so I think yes, the big data and the risk management services as of last year is less than 2% of my total revenue, that’s in 2017, so this is why this revenue line was embedded in the advertising, marketing and others. Starting from early this year I think due to the overall regulatory and also the environmental reasons we find -- we found that the financial providers they emphasize more and more and more data and risk management services particularly for the online lending product, and nowadays we also – we have seen opportunities for credit cards. So for online -- our data and our big data and risk management services helps our initial service providers on both online acquisitions and online decisions. So for online acquisition, mainly we can use our data and use our profiling model to do better segmentation for different financial service providers that means we can match the users demand with particular financial products better and more efficiently. And on the decisioning side we can also help them to lower -- to enhanced approval rate and the lower the charge-off. We shared some case studies of how we collaborate with critical issues in terms of big data and the risk management services as of last the quarters and last quarter’s earnings call. For this quarter as David just mentioned, we found this is a good opportunity for us to further explore, so this is why we build -- we launched our joint modeling laboratory and host the joint modeling between us and the financial service providers. We found more and more institutions, and this laboratory has well received among the financial service providers. We see we have more dialogue engaged with financial service providers in terms of joint modeling and we also see – this also help us to cross-selling more products to the existing financial service providers. So, how we -- so looking to the future, because the big data and risk management is still small portion of our total revenue, the base is relatively low. So if we look into the next four quarters something, we still expect it will grow at – it can double in the next three or four quarters. So we can achieve you know triple digit growth for the big data and the risk management services. And regarding the revenue contribution, because our low recommendation and the credit card recommendation and other revenue lines will continue to grow into the next year, so this is why we say, it will be a high single digit contribution into next year. But looking forward, we believe it will contribute more because the risk management means we can -- we can help the financial service provider to lower the charge-off. Charge-off is the main cost component for the financial service providers. So I think it’s a – it’s even big market than sales and marketing.

[David Ye:]

Hi, May. This is David. I would like to provide some macro level information for the landscape of the retail China and China retail finance service markets. As you probably know the whole market is still hugely underdeveloped, underserved compared to U.S. or Japan or other European countries, I just -- a couple of number like the average credit card for Chinese adult is about 0.46, in the U.S. it is about 5. I mean, in China we have 1.4 billion people, less than 400 million people have a credit card, have a mortgage, or have a data in the Central Bank’s credit bureaus. So, that’s why -- our growth – for not only from first, second tier city we see the growth from Generation Y and that is the Generation Z, the third, fourth tier cities. I mean not the Chinese farmers, for example have a mortgage or have a credit or they can receive a retail financial services. So you find this segment of the market the sales marketing, big data risk management or cost based solution or system IT solutions for financial institutions. As we know the overall market grow around 25% moreover shifting from offline to online, right. As digitalization, we have enabled more lenders to make decision online, serve customers online. We have the number actually, the sales and marketing, the market last year, end of last year was about close to [Indiscernible] RMB over RMB9000 which is growing at about 40%. Big data risk management is about RMB3000 the market size. However, the growth rate is over 100%. So if you tied the market sizing the growth potential or different segments into all our business, we know overall we grow around the 50% in Q4, that’s our long and credit card recommendation. I mean its [Indiscernible] we’ll managed around 60%. However, our big data risk management and service we expect the growth in triple digits. We’ll growth at a higher digit, I mean for years down the road. I mean – if you compare the China’s market conditions of growth, the adoption of AI technology over IT used by financial services company, we see, we can actually compare some of the trends in U.S. in Japan or even in other markets like Taiwan or Korea 10 or 15 or 20 years ago, I mean, they studied leveraging internet, leveraging data technology to serve customers online. That’s why we are confident that the big data risk management service or card based solution. I mean card based solution is still small in our part of business than the overall provide professional for detection like online decisioning and joint model development program and account services and systems to financial institutions. I mean, that's another segment, it’s a smaller size, but we expect a higher growth. And I just want to summarize our outlook for the whole sectors, and also different segments of our business. I mean if the market grow around 20%, 25%, and online we able to grow at a faster rate and a different product service or credit card or like large scale credit, in large scale credit slowed volumes, in Q3 we will see growth again in Q4 and in the next few years. But of course, the tech side, data side, technology side and analytical side and the more value added service side we believe that’s more valuable part for financial institutions. That’s the part we are going to heavily invest not only in talent, in people in technology in our overall capabilities.

[Oscar Chen:]

And also to your second question about the credit card, our focus is more on the online part of the credit card issuance. Probably you may notice some slowdown of the credit card issuance, but our observation is that the best still finds the online channel is more efficient than the lower cost channel compared to the off-line. So this is why we saw a strong growth in the third quarter. And we are confident that this trend will continue into the fourth quarter, because quite some banks has not achieved their annual target yet of credit card issuance.

[David Ye:]

Yes, the credit card market is highly debatable, however, May, in my view, in our view we are actually feel the credit card markets in China is still underdeveloped. I thought a number of the average credit card for Chinese adult is about a tenth of U.S. and less than 400 million of Chinese have credit card. And if you look at the strategy of a Chinese bank, state owned banks, or joint stock owned bank. I read a report by another banks say, now the credit card division of the banks are the most profitable division and a high growth division. Banks are shifting their strategy or their investment away from wholesale lending, from SME lending away from mortgage lending, right? Credit card or large-scale credit is really the growth strategy and the risk reverse, I mean it’s also a good strategy in this economic slowdown or slow growth. That’s why credit card, now recently we talked to more banks, the credit division. Actually we are trying to meet the target and exceeded their expectations. Overall we saw the number in China, first nine months close to 100 million new cards issued, still average is very low. And we have actually found out a couple of banks, one of the top five bank is the Bank of Communication for example. The retail bank, if the credit card business doing well, so overall bank will do well. So now the wealth management, wholesale banking, real estate lending are not part of the bank’s cost strategy. So I guess, I sent – we probably we were underestimated the potential for the credit card or maybe I guess down the road, virtual credit card. A credit card is a product combined with payments, with installment or mostly credit, right? I mean that’s really the future of the credit card market. I know – you’re talking about 800 million Chinese farmers who live in the countryside? None of them now even have a card issued by a bank and thus, the sky is the potential.

[May Yan:]

Okay, thanks David. And Oscar, just a follow up, so how can you – but there’s now how many financial service providers do you work with? That big data risk management side and how many of them are fee paying, and how much fee do you charge them? Thanks.

[Oscar Chen:]

Nowadays we are working with over 200 financial service providers in terms of big data and the risk managed services. All of them, we have counted the number of [Indiscernible] they pay us.

[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 us at [e-mail] or TPG Investor Relations at [e-mail]. Thank you for your attention. And we hope you have a wonderful day.

[Operator:]

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.