Q4 2019 Earnings Call

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Thank you. Just a moment, please.

Thank you. Please give me your full name.

Thank you so much. And which company are you calling from?

Thank you so much for your line would be on listen-only mode. Thank you. Hope you have we actually takes no risk on the open platform business so long. I I'm not sure whether I understand your question regarding the actual losses. Okay? Okay, go ahead enough. So the partners with whom you had done business in the in the second or third wage for example, and if the losses are now higher than the the the what they had assumed initially then they are the ones who are still taking the loss and they are still willing to work with you. They are not dead kind of like backing off into the partnership. Oh, I got your question. So J actually as I also mentioned our open platform value also decline in the first month already because all the participants are experiencing the same level sanctions same downward change as we are experiencing so

I wasn't offered that the pain in the spirit in the special. And our take rate as you as you can also deduce from our account statement or take great. We're open platform increased from 10% in third quarter to eight percent in the fourth quarter, and we believe it will continue the game in the first quarter of this year as all. The participants are being hired Las Vegas. And again follow up on one of the questions asked earlier of 634 million customers you have with a credit line sanctioned by you. How many would you say are really high quality and how long meeting you know, you would be willing to learn to them since you have their track record with you and how many of them are actually approaching you for a loan right now. So what's the kind of like the demand environment dead?

right

So out of its thirty four million users with credit line all of them have approached us because they have to approach it first and and give us their summer some of their applications before we can approve the credit line. So also have happened in the last one or two months. Have they approached you for additional loan?

Right. So for the last quarter, we're actually were serving our mostly of our existing users instead of new users. So basically Thursday, I don't have an exact number for you right now who are really high quality one. Just out of our registered user base of our about 18 million. We haven't reached to all of them yet. So we don't really have a exact number regarding the number of high-quality ones and a low voltage one.

Okay, and the number of application for a fresh Loan in the last say in the month of February has it gone up a lot or not. Do you track that?

Let you may have the application but has has the application come in?

So over the past few months and quarter hours, our demands is kind of stable. We see cables and other metrics for people who looking for along our password.

Okay, and my final question very quickly. If you want to address it now the impact of some of the the the provincial governments often appearing to be moving towards 24% APR, I guess right now with the with the virus governments have a lot of other things on my mind. But if this happens are you preparing for this month? How would your business model evolved under a 24% limit?

Okay, actually we have we have seen a regulation specifically saying that the government allows allows allows 36% APR basis. We are holding up. We are holding a high level of compliance as a cappella company and we are keeping all of our lungs under IR of 36% which translates into a 20% APR basa koi 12 Miles Turner.

We are fine with that regulation.

Okay. Thank you very much. Thank you J.

Thank you. We have the next question from the line is Steven Chan from heightened International, please go ahead good evening management. This is even take three quick question. If I met one the first one is about in view of the rising and delinquency rate. Did you see any withdraw funding from the funding Partners or exit or funding Partners? That's the first one and second one. I think adding the other end is a talking about, you know, you disclose just about the provision or long impairment charge if you try to analyze that that's that's around twenty something percent critical wage. So my question is that if you single out on balance sheet long facilitation business if you include funding calls as well as

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Try that your own balance sheet long facilitation businesses are actually making laws. If you use the so-called the term effective tax rate after after settling down the credit calls and if that's the case, so we also apply it to the off-balance-sheet long facilitation business because we don't know the actual guarantee cause you're paying off these similar rise in guarantee calls that you have seen for your own balance sheet like your own balance credit calls for your off balance off balance on facilitation business, and I think finally I want to get a sense of because you you mentioned that you know that you will not pay much effort on on customer acquisition, but at the same time we we seeing some like similar amount of sales and marketing.

Pending expenses for each quarter. So I understand that that could be related to your own collection. So so that imply that in case if you I'm going to see further decline in Long volume in first-quarter, you are actually seeing the the lower the alarm volume the more these economies of scale you will you will life like that. That means that you know, if we use the term like like that's like causing come race or your cost income race or will likely to to increase quite substantially Dodge Jeep if your volume is declining drastically, so I think these These are the my three questions

Thank you Steve as well. All the three quick questions. So for the first one as I have already mentioned are open platform from the apartments also experienced the the way people the uprising of delinquency and that's why the volume of open cell phone has dropped in the first quarter as well regarding our loan business. We actually are supporting on all the loan book transaction volumes by our own Equity right now because the volume has go down and we have sufficient funk soul, but it doesn't matter whether whether the other funny pandas want to still cooperate cooperate with us for our loan book business.

Regarding your second question the provision rate. So we we do not advise you to look at on balance sheet transaction and off-balance-sheet transactions separately. They are basic same function of user and we basically undertakes orderings. We would like to actually consider the on balance sheet and all partnership business office. Are they seeing trunks with the same kind of credit cost? And yes, they they they experiencing similar credit losses and you are absolutely right there. If you look at our fourth quarter number if we single out the open-top on business, we are actually experiencing a loss for our loan book business month. That's correct.

your third question

Our sales and marketing expenses include all the staff in our call center which includes a collection efforts as well. So I am absolutely correct. When we see a lower volume our unique nomics for spending actually gets deteriorated. That is we'll have a higher figure for our expenses percentage if if our if our loan balance gets lower.

That's right.

Thank you. The next question comes from the line of Lucy Lee from Goldman Sachs, please. Go ahead.

Thank you for taking my questions and thank you for sharing a lot of numbers. I'll just follow up on a little bit on the quality. So do we have a gouge on how much money I think what it is related to to virus outbreak and how much is not so I was just trying to trying to argue that if sometime later if we took out the the virus impact and what's the longer-term study stick will be will be looking at what look like and the later two that given that we are we are now try turning the key policy of what was the average APR or takes like like going forward? Yeah. There's a question.

thank you, Lucy regarding the quality is still too early to see how the industry down works and how the virus situation evolving the future is very difficult to to judge how we are our final losses be

if we split out this virus situation.

Actually, we are earning a nap not return on our book about like we are having a credit loss of about 13% going if we remove the virus situation.

Actually, there's no way that we can know and actually no one can actually tell when the the virus situation will be gone. So it's hard to tell.

Regarding your second question to see the APR to take rates. So the take rates for our open platform business has declined from 10% to 8% in the fourth quarter and it will continue to decline in the first quarter because for one thing we are the for one thing. We we are experiencing the industry and we hope to leave some cash table for our open platform participants. So we are getting a lower sharing of the profits.

Regarding the take rates for our loan book business is kind of table in the current year. We are charging users at less than 36% I are based off.

Okay.

Thank you. My next question comes from the line of livinho from HSBC, please go ahead how long management I have three questions here. And first one is that when do we expect from that we can recover from the net loss in first quarter. And actually this is an account question because for example, let's assume the situation gets better in June and people started to repay their defaulted loans in July month. So when will we right off the bat launched immediately in July or will be the late and maybe fourth quarter off. So how how can we expect the the delay or if the recovery speak from from the laws from from the first quarter going off?

And my second question is about the business strategy. So going forward for this year. We have two men business right now. When is the off-balance-sheet loans in one is open platform? So which one do we see more from being pressure right now in which one will be our strategy Focus for a 2028 and my third question. I think this is also a lot of investors will be also curious about this is the resignation of our CFO immediately before the June quarter results announcement. Just we have more detailed explanation for this for example, the China example, like having a higher pay wage job or how how do we process the succession or we say we will have to sign on the audit it's dead.

For the April or are we looking for a vehicle going forward? Thank you back to the the the loss accounting. We actually have different accounting treatment for our own balance sheet and off on and off-balance-sheet transactions for hours are all Financial transactions as we were recognizing the revenue the most of the revenue from day one of the transaction. We actually have to assess the name of the Galaxy liability from day one. So basically we have to consider the final loss from day one for our own balance sheet on balance sheet transactions. We recognized the revenue each month after after each month only accrual basis. So we use a row row red lingerie model to model the progressions wage.

each at each month

Your second question regarding the funding crunch crunch for loans and open popcorn lungs. That's not one of our concerns right now because as long as you know, if I were open. She's lost we do not support it with are often and that's we're purely taking we're appealing taking no risks on the Open Table on business. And for our financial loans, we have very limited of industrial transactions in this quarter because as we are delivering our own Equity is wage to support our loan book business right now.

Regarding our staff will cost resignation is due to his personal reasons and we have a succession team Mystic alien who is our finance controller and being promoted to VP finance and scallion will be signing our twentieth and documents. The succession team also include me. This is you as part of a master relations team you will be able to piece be free to contact our investor relations team and our contacts are available on our website. We will continue to serve as the key financial management of the company as we continue to be a publicly-listed company.

Thank you.

Thank you.

I said no further questions. I would like to turn the call back over to the company for any closing remarks. Please go ahead and took the call today even have any follow-up questions. Please feel free to counter our our investor relations team and visit and sign up for our email address. Thank you, everyone.

Thank you. This comes this conference call. You may disconnect your lines now. Thank you.

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