Q1 2020 Earnings Call
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Good day, everyone and welcome to cheer peaks Threesixty <unk> sports Huh.
The earnings conference call.
Please also note today's events during the quarter.
At this time I like to turn the conference call as its mix Monday.
All right so basically the money.
Thank you operator, Hello, everyone and welcome to our first quarter 2020, <unk> earnings Conference call I always outweighing sure I'd have to go out and it can be found on our website.
Joining me today on the call Ami, Oh, Wow churn, our CEO and thereafter.
Dr. Wu, our CFO, Iraq, sorry, I missed that don't want my problem.
Before we conclude our prepared remarks, I like to remind <unk> a couple of public domain in connection with today's earnings call exactly I mean, historically promotion and material discussed on this conference call No I can't go to contain.
Mm Hmm eight hour time car optimized our production and therefore, you should not place and dealing back.
Oh, no keeping up in bombing hearing lease and more profitable we caution Bob I'm not quite impact that caught I told me about the coupon acuity ground outcome, Tom Arnold Palmer.
Good morning promotion <unk> and now the second piece.
Please refer to the company fighting that battle cool and wet your children.
Yeah Bouchard, let's call. We also incurred on discussion I said in non-GAAP financial modeling piece, we quickly and easily me, which can go.
<unk> Ocean, Oh, My Gosh I go to the most directly comparable GAAP matter.
Finally, please note that a lot I never like both working gas promotion during this conference call Oh.
Hi, Matt Mccall over two hours beyond the director Mr. well sure.
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Everyone and thanks for joining I talk about the first quarter have come down 20, we Bob how are you got while doing rich boehne powers being part of that's great, but do I called me Michael older extreme drought.
Why I'm, having a compliance and the cost of operations geography, we walkable at toquepala with flying colors, I keep working our high quality borrower base and accrued all internal Montana.
Furthermore, we can't remark about program in every aspect of our big crochet, despite a challenging market conditions.
Well, our origination volume reached RMB 51.8 billion during the quarter.
And a 25.6% yeah, Oh, we will increase.
Outstanding loan balances increased to RMB 73.1 billion from RMB 72.2 billion embark fourth quarter, two or something like huh.
In terms of our financial performance.
Although revenue reached RMB 3.1.
For the first quarter.
If we exclude the impact of new accounting Bonder.
Non-GAAP net income reached RMB 700, and this excludes one more quarter first quarter.
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Our IPO.
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In terms of risk Nattymac warehouse hours Mondo faced some passur grant embarked upon bank. They do a month, it's back test and the stable.
These folks take a quick recovery of our out on the line asset quality and improving momentum can often be one delinquency rate action right.
Apt to crack on our do you think you want relinquishes I had thought until 6.6% why I'm, one collection rate increased to about 8% to 5.8%.
And lead delinquency rate reached lobbying the counter ramp up to 2.17 per cent compared to creep, Alabama level.
A number that day.
These are remarkable without a need the challenging environment.
We continue to ensure a provisional coverage for time during the quarter.
Thanks to our let's go operational uncapped Neal couple therapy.
Managed to provide our school and the Trump current industry, leading information decoder throughout the pre combined me on the combined make you aware.
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In terms of capitalized model and our platform service business for which we put no principal risk.
By the end of the first quicker platform service business, how we accumulated RMB 700, and open more operational cash flow.
Outstanding loan balances under the capital light model accounted for 21.2% of total loan book.
App from 19.5% in the fourth quarter of 2019.
Going forward, our long term growth strategy, we'll focus our expanding alkali model while contract the pacing the route to ensure that align well with macro dynamics and the maximize shareholder value.
Thank you gentlemen, and John who G suite equation Jody.
And the thing John Stupid.
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Well in terms of operational efficiencies, we proactively scale at per acquisition activity and continuing to come down south and the marketing spend during the quarter in with Dr. Mark you tank.
As I was out accretion caustically, each new borrower with approved Cryolife build to RMB 159 from RMB 220 in the fourth quarter of 2019.
These dropdowns in customer acquisition costs was attributable to that were brought down approval rate and a more prudent risk management strategy.
Also we carried diversified strategy in custom acquisition activity in Africa to expand more channels and obtain users with contact Cratty profile.
We have established a cooperation with very high quality channel partners with consumption models.
Not yet Hello bike sounds HM.
Since we provided more superior user experience.
We expect more and more channel partners would welcome our partnership.
In terms of existing customer management.
Neutral credit card products caught the pocket in Chang leaning class, which we doubled in the top increasingly contributed to our users becoming the first quarter.
Elaborate.
Repeat purchase rate redeemed 30 days, which include percent, indicating a monthly transaction number.
On time on average.
Additionally, we offered our credit limit upgrade per day caught seeing how young in Chinese.
Which to prove to be quite popular and it has accumulated 1.5 million users already.
Moreover, we're launching a prudent caught in Providence credit ongoing.
In tiny aiming to activate borrower who hasn't come back their first credit Georgetown allow.
These products proved to be quite effective as well.
In summary, we intend to explore these growth initiatives.
And operational efficiency.
We element of our business and the boot in does become a further.
In addition, we have successfully issued three eight.
Yes, so that.
The caught up in most recent ones, which are Cooper late as long as 4.2% for does anything change contributing to our further decrease in overall funding costs for our credit driven solely to only 7.7% from 8% in the fourth quarter of 2019.
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We used is going to push in Shenzhen.
Okay. Thank you.
In terms of compliance and dilutive impact platform in China, we have always adhered to the highest under in compliance.
Yes, there with.
Okay, no facts and other passport.
We want among the first batch of companies to receive approval to file our mobile finance APPM with that nationally Internet Finance Association of China.
Among those on the list of approve the mobile App well one off does feel performed that is neither of financial institution no our payment company.
Moreover, our athletes 16 killer App has received as level, great testing PPK from China national compared to a virus in magazine response enter.
The high level you showed vital containership.
In particular, our App, we see that level three waiting for both privacy policy and the data security.
For led to the EG this year.
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In addition was also worth mentioning that cannot banking and insurance regulatory Commission in short we are seeing.
The first time insured outcomes on the T. take track on the guideline of commercial banks online lending business for public comment on May nine 2020.
The class abandon is down one size fits our aspect how it previous merger such as regional banks geography conference and funding constraints on joint lumpy.
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It differentiates consumer finance long from business now and Thats separate the regulatory requirements in terms of Krave cat and income there based on criteria pick up respective loan per day.
We believe this will ultimately become the basic lower for online lending business in China.
Why on incoming as creek, rather rapidly Tom Thanks dropped further Dickey, Mike online lending task one in terms of business operation and the substantially reduce regulatory overhead.
Based marks a significant milestone for China online lending industry and the long facilitation business.
So in analyses that doubleclick matters and the support my real out in our sequential manner.
The yield this regulation as a beneficial to the industry, particularly leading player.
These promote a more healthy business with bank of America environment.
The regulatory development, it's in line with al anticipation.
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Configurations and argue due to can you either yet we will end up towards the Jeff.
We always believed that the streak regulatory requirements on the economy, the downside pressure with Dinesh a top players backed by enough to drive while gradually building out more and more caf one that through week to compete.
This chang known as Matthews of back has so far improvement in the first quarter.
As a booming demand within the consumer finance mining containers will be well patient to capitalize on the growing opportunity and the we'll have more market share with our promising outlook.
We will like to review Netrake, our full year guidance as loan origination volume, which is RMB 202 220 billion.
In the short term taking into consideration after gradually recovery market on the combining both in China on a globally our asset quality has always on already entered into a steadily improving momentum I've indicated by recent a recovering operation data.
Well.
To carry out our business operation with cautious optimism for the wrapped up the year.
Aiming to Vigilantly grow loans in Asia volume and the number of borrower.
This will further but that both permanently and the quality of our loan portfolio.
We remain confident could deliver more outstanding without to our shareholders in the coming quarters.
So many oil window CFO with young I can adapt spoken bookings.
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Sample remarks.
Okay. Thank you hi, Sir Thank you Mandy.
Good evening everyone.
Hi, Jason just job share with you allowed by exciting news about our first quoted in the coming quarters going forward.
My part will be a little bit more borrowing talking about the new accounting standards. So please bear with me.
So we see a very quite unusual quarter compared with the previous ones not only because of this outbreak of cobiz team, but also the complicated situation by the new accounting standards.
So let me start off by explaining the difference between the new accounting standards, we adopt to starting this quarter and a new ones and the migration between this twos hopefully hopefully we will give you a clear tightens up that this remarks.
On how to read all the statement.
As a U.S. listed company, we are required to adults new accounting standard a C. Three to six financial institutions Dash credit losses from this year.
In consequences.
Our results this quarter and not directly comparable with previous quarters on like for like basis.
In consideration of helping all stakeholders data on this done impact of the new accounting status as well does provide a more acuity section of our business and financial performance.
I'd like to spend some time working you through how did you accounting standards have impact all the financial statements.
As we provide guarantees of basis for crowded driven service business.
At the reception of each loan we estimate the expected guaranteed revenue.
And recalled.
Tianjin guaranteed liabilities with provisions for the period potential credit losses.
Under the accounting standards provision for the above mentioned the guaranteed liabilities and the guaranteed revenue on net out directly on the very first day of long exception.
However onto the new accounting standards guaranteed revenue is required to be recognized at amortized schedule through all along loan life cycle.
Cycle, where risk provisions for this contingent guarantee liabilities remain to be recorded as a whole at day one.
Two.
Key points to emphasize here.
First the amortized the recognition of guarantee revenue is not related to the actual pride in most often the ball.
To put into plan way.
Given the slow eventually becomes difficult.
Guaranteed revenue with skew be recognized by each installment as originally scheduled.
The credit losses are amongst accounted for by adjusting provisions and guarantee lipid cities.
Second.
From the perspective asset quality, the owed and the new accounting standards makes no difference.
The only change lies in the accounting Shimon on paper and the timeline of recognition.
As a result.
Each quarter going forward there have been too.
Additional items being on our income statement.
One is provisions for contingent liabilities.
Under the expense line.
Which accounts for the estimated credit loss associated with the contingent guaranteed liabilities hseven by the new loan originated during this specific quota.
And the other one is the revenue from releasing of guarantee liabilities.
Under the revenue not.
Guaranteed revenue released at amortized scheduled driven by the historical low assets.
During the first quarter this year.
Vision for contingent liabilities were.
1.7 billion, while revenue from releasing of guarantee liability was 1 billion, let me be.
Furthermore, the new accounting standards require a onetime adjustment of as expected credit loss related to existing loan portfolios.
Which is reflected in open balance of the return earnings at the beginning of 2020.
This translated into and 1.4 billion reduction ill return earnings.
I'd like to draw your attention here that the decrease of the retire omni.
Mainly results from the recognition of the contingent guaranteed liabilities and denim radek guarantee liabilities at inception of the guarantees in accordance with the new standards.
This done ratty guarantee liabilities, which is the Esa items will be recognized let's say released asset guarantee revenue on the amortized paid basis over the lifetime of the dome.
This has no impact whatsoever on net income business operations and asset quality when a guarantee servicing spots.
Hopefully that provides more conceptual clarity on the impact of new accounting standards now, let's take a look at the numbers changes on our financial statements due to this new accounting standards.
First as you can see on our PML. There was a revenue line on the credit driven service segment title revenue from releasing of guarantee liabilities, which represents the above mentioned the guaranteed revenue recognized for historical loan portfolios at amortized schedule.
This slight amount 1 billion under the new standards and the 107.
The million under the old standards.
Second there is saying expense line title provision for contingent liabilities, which stands for provisions set aside for the estimated credit loss associated with it a contingent guarantee liabilities driven by the new loan originated in the first quarter.
Which is 1.4 billion.
The remainder is the additional provision of 280 million, which accounted for the additional provision to cope with that deterioration of asset quality.
Of the historic whole loan portfolios due to koby 19.
Firstly.
On balance sheet for a sub top line title.
Return, earning a shareholder equity section.
The balance.
I will accumulate to return earnings decreased by approximately 1.25 billion compared with year end 2019.
The decrease represented an aggregate amount of 1.4 billion reduction to opening balance sell through retained earnings.
Which accounted for one time provision for existing loan book required by the new accounting standards.
And when you may be 183 million increasing to retire earnings attribute to net income.
Attributable to ordinary shareholders in first quarter.
Well hopefully youre not lost in my borrowing Blubbery explanation on accounting standards just in case that the Youre already lost we have prepared a few slice which will be available our IR website in the coming few days to illustrate the migration phone okay.
Housing stand as to the new one.
So which is essentially what I mentioned just now.
Okay with it a clarification on the new accounting standards I'd like to now go over a like for like basis analysis on financial performance under the old accounting send us in an effort to help stake holders better understand our business operation in first quarter.
Firstly as high saying just mentioned.
Under the old accounting standards to total net revenue.
Wars, 2.3 billion, representing a 16.7% year over year increase and relatively flat on the quarterly basis.
Which was remarkable.
In our sense given the heat of the coping 19 during the same period.
Non-GAAP net income was 764 million renminbi, representing a 48% quarter over quarter increase one of the most exceptional quarters, we ever had since IPO.
Secondly, in Faisal significant macroeconomic uncertainty during the pandemic, we have undertaken decisive initiated just caught on cost and he has operational efficiency.
For example for instance customer acquisition cost.
For each new borrowers with approved quite a long dropdown further to 159 yen.
In the past quarter compared with 228 again in the fourth quarter 2019.
Total sales and marketing expense fell to.
223 million yen in the past quarter.
From 425 million in the fourth quarter 2019.
This was the third Hong Sik prosecuted quarter.
The improvement of customer acquisition efficiency and the financial discipline.
And another Saudi cost efficiency Hashman laid all our funding side.
Hi, Jason just mention in the past quarter would continue to develop cooperation with more institution founding partners. Despite the severe challenging market conditions.
Thanks.
The number of the institutional funding partners. We've worked with increased from 81 to 84 by end of the past quarter.
The first this further brought down the overall funding cost to 7.57%.
In addition, we successfully issued three rounds of EPS in 2020.
With a total size of more than 1 billion renminbi.
The latest round the issuance heaters historical low record of funding costs at 4.2% for the senior Challenge CNH.
We believe this is strong reflection of financial is tissue options faith with us.
Thirdly, given the negative impact from voltage high markets on asset quality, well continue to round out proven operational and financial initiatives to offset the impact of the effort. We're primarily reflect in three dimensions.
First in terms of the leverage ratio under the old accounting standards in wind down continually to 7.7 times from 8.1 times in the fourth quarter of 2019.
This was primarily driven by the increase proportion of our capital.
Line model.
And just mentioned.
While the our our total outstanding loan balances continue to grow the portion of crowded Keven service business actually decreased to 57.6 billion.
At the end of the first quarter from 58.1 billion as the year end of 2019.
Second in the fourth quarter 2019 with book to additional provision of 735 million to enhance our provision coverage ratio to 4.4 times as we noticed the challenge on the asset quality due to unfavorable market conditions.
In the first quarter of this year, we had visit witness that deterioration of asset quality in February.
Then slowly returning back to the normalized level.
Cash with said that book provision of 280 million to maintain.
Four times provision coverage ratio.
Third our cash result, hater historical record of 6.8 billion.
Excluding cash deposit required in operations registered capital for various business license and operational working capital.
Our free cash flow recorded at the highest level of 1.6 billion in the first quarter.
This was largely benefit from our daily diligent efforts on cost control and operational efficiencies such as reducing the turnover days of account receivables.
Reasonably increased the turnover days of payables to our business partners during during the Koby 19 situation.
All these efforts have not only equip us with their flexibility to navigate the panic that make a storm, but also position us to capture the historic and the enormous growth opportunities when we exit this question crisis.
Finally, let me give you some color about our outlook for the second quarter and full years from a financial perspective.
First our business during the second quarter has improved remarkably on a sequential basis and shipping reflected in our financial performance in the coming quarter.
We expect a decent growth in terms of both topline and bottom line on our PML in the second quarter.
Based on all covered assessment would do not expect to incur any further additional provisions for credit losses, Chicos pilot deterioration of asset quality in the next near future.
With a guaranteed revenue from historical loan book being recognized over time, we expect to shareholders equity to gradually return to a healthier level.
Second we are still evaluating market conditions to decide whether we will resume onest scalable expansion of business.
However, we shoot me.
Remain vigilant on the potential second round of the negative impact due to the global pandemic development.
Yes, we would like to maintain our full year.
2020 guidance no change.
That concludes my remarks, thank you everyone.
Now we are open for questions.
Thank you.
Well now begin our question and answer session.
If you have a question for today Speaker. Please press Garo one on your touched on keypad and you entered acute.
After you announced please ask your question.
If you find your question has been on sites before it is short term just speak.
Please press Dara to consider the question.
Personally will have a short reminder, shared the latest ready with mix you for many who can conversant Chinese language. Please come the may ask questions again in Chinese language. After your questions in English language. Thank you.
Our first question.
As from.
John Hi at Morgan Stanley. Please go ahead.
Hi, Thank you management for taking my questions and.
Congratulations on the results so.
I have a few.
You asked them one by one so first based on to your comp in the transmission.
So I notice that.
But the release mention that is drawn a 140 median.
Revenue on resulted from these.
Accounting change and that is 1.4 billion costs, so off I'll simply put.
The difference is deal comes in.
Treatments and nothing is roughly.
And Jim 40 580 million so.
And we're not at this number 12.
Profit is seems to be in high weve.
764 median.
Non-GAAP.
That profit on that Joe centers.
So first question cities chess, whether these other than that is correct.
John Yes, you are correct.
Okay, Okay, social and follow up on that is on.
The 1.4 billion incremental costs. So if I look at these number into contests off the guarantee off balance sheet.
Are you sure nation.
I guess on Thats what.
So you would have so you put the whether it is by the origination of financial guarantee long. The number is 4.5% so let's take reflect our.
On a lifetime loss estimate for the first quarter.
Sure let alone and.
It seems a little bit hike even.
Our they wanted in consists trophies, 6% to 7% so.
Yes, just want to come from this.
First of all I need to take a look at the your calculation formula but that number is quite close.
Compared with our calculation.
Just wondering.
Small remind of this is not vintage this is our provision so it's all more like a coverage right. So.
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Probably our Seattle will give you more flavors on the vintage loss.
Numbers, but.
Here I can say is that.
This system to cover the first corpus.
As to made loss throughout the lifetime.
And we provide a sufficient buffer as well I just mentioned, we will maintain the four times coverage ratio.
Two.
Secured this uptick to to make sure stability of us business.
Okay. Thank you and and so also related to risk.
Basically us and we mentioned that the fee.
The provision for.
Okay home service unit in previous periods is 280 million so.
Yes.
If we exclude the accounting change.
The the guarantee release from the older homes, we follow the accounting impact you social wrong.
On generating media and so weve, so basically we don't have any.
Incremental provision for this quarter, we then that topic medisoft the previous.
Hum set us I guarantee.
Equal to fully offset incremental cohesion instead of pop understanding that's right.
Well that those numbers slightly off so for the revenue rate from releasing of a guarantee.
That is under the old vendors.
Yes, 170, meta while 70 not to 80.
That will and by the way that was the highest level.
Since our IPO.
Dan for the.
The additional provision on the guarantee liabilities for to cope with Toby knitting West 280 that part Youre correct.
That would be on though.
Yes.
Okay. Thank you and so so finally on.
The one I'm sorry on the on the EMS three Pos delinquency.
I think this is led by a quarter. So on is that the ratio lease up of two person now.
And and high speed. It does not include the impact from coming in so.
Yes, it's happens in the first quarter. So how should we expect this number to trend even.
In in second quarter and also.
Is that the pickup in first quarter due to the.
Cash and tightened in in the fourth quarter other than the community. Thank you.
Well.
Do you mind to translate in Chinese vessel, RCR will cause a little bit.
Yes for sure.
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Yes, okay.
And John this is the announcements will highlight analysts view first upward.
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IR website, which is the adjusted debt.
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The first 0.2nd point.
As for them in parking back to what it and the rate delinquency rate, yes, Youre correct.
Tom Nagging indicated it will be.
Affected by Dan.
Covenant restrictions in which it which happened in the fourth quarter of 2019.
But not all the way they think issue.
No cat than.
Maybe indicated as we disclosed.
One is the one delinquency rates, yes, they want and the expected and one capture rate.
So all you are way, we'll expect to see the end range delinquency rate based on past shirts, and coming quicker, but ill hourly accommodation to focus and the leading indicator well given that you at that point of our business performing.
Hello.
I will miss in at the Wendell Joe This is a dominant disease us Jenna element that they land deemphasizing Jan Chilean kill so that can use it to each other shit.
Okay has its where you can imagine that she's not certainty and little Brazil.
Now.
Possibilities at year, Judy via the which you do other will need you'd have to that says it typically so lucille once when the bottom cheese on of this will either.
But the.
Only an isolated to we'll implement Lilly tons and now this we go presently for the goods yet.
No.
Why do you.
Turning to the incident giada at the to the Baton due to the plan newness is how women Callaway. This would just elements that thoughts. So they go back and this is by the coupled with value.
We'll be chief.
By the you go beyond the eager eager to the classes reduction goals.
And then in transplant Seattle.
I would like to death is a better way too and that now then by looking at indicator, which if they want and want to elaborate more.
Finally, I would do you want it increased the has dropped down to document that will add assets that indoor fourth quarter of 2019 and in addition, it would look at the same week by week well leased by Rick is added happy to end defending trend.
For the end one could accelerate entirely cover it still above 86% already until recently, we take a closer look we believe it had the.
Probably will go high reaching 87% in the near future.
Well in our you know we believe we the asset quality of our business is in this data the recovery win momentum that does first quarter.
I can point to adapt to your question about any way delinquency rate, we'd like to Jack you to look at our provision now coverage ratio, which we expect comment can't afford huh.
Im pleased that Matt I'm, not asking that make aren't there are now.
Film and television.
So to do that treaties adrs, you're willing to put in to the Trump.
You'll use digital official going east industrial so this issue.
Okay.
So my final confirmation.
No.
Whether the current provision level has 40.
We plan to the potential loss due to the patent and collections in the fourth quarter and also the community in the first quarter.
Yes, John Youre right.
Thank you very much.
Thank you once again.
Please press zero, one im just kind of from keypad to ask a question.
Sure Counsel please press there too.
As a gentle reminder, to the impetus to ready within that Q.
So many who can convince some Chinese language. Please come with the Oscar questions again in Chinese language. After your questions in English language.
Our next question.
Check each all.
At China Renaissance, Let's go ahead.
Hi, Good evening management, Thanks for taking my questions.
So our first question for me is on the second quarter outlook.
And share with us.
The recent our loan.
Each nation Baldrige fan.
So I think we guided of staple album volume of for the second quarter, but just wondering if we see some pickup signs recently.
And probably more and that is.
In on whats condition will increase our loan origination volume or would that happen in the third quarter up given the current attachment.
And the second question is on the funding.
So I heard that our funding costs for the views to 7.7% in the first quarter.
Just a try to get some color on on the reasons behind is declining funding cost.
We see more demand ops or the new regulations.
Thanks.
Business.
And are we getting more funding from.
National.
Big banks.
And definitely we have some impact from the low as issues as well.
Low cost efficient as well so thats on funding and the mechanics that changed on the.
New product mentioned by our CEO or is it beat.
The.
So it's basically the virtual card products, so just want to get more color about the.
The number of users and.
The possibility of this new product.
I will translate my questions.
Two clinical how to Dan Sunderland yacht Eco ship, Glenn you women are cheaper Chico.
You should be lumpy on UTI should grow LNG been the good call on the Chicago switching to Chico.
So.
No.
Okay clinical events, you should sense you too.
Who equate to shoots actually outage on Shockwave Im John.
Okay.
Not Douglas issue.
Which I'd gone just digital ventures that you should do surety shotshell.
Got you didn't sheet knowledge he talks with the whole again, you should treat shanley sachi cinda.
That clinical any buybacks or hole.
Not to be bunker.
Hello.
Okay.
Hello.
Hopefully girls and PNC Bank, we shouldn't you know to hold the several institutions.
In the Chico reading RG distribution.
As shown.
Thanks, John charges.
Yes.
And they really need a sequel system.
So.
Pardon.
You guys are going again.
I'm going to outlook.
Argued Richard can you shouldn't you make when these issues.
So Tim good can you simply competent Jim when you're not product suite to new Heights.
In China, you could be a hobby supercom.
Are you team, which human argue is impacting out as you guys would you.
If I hear you would issue whats the sensor down to that accretion.
Considering how to get these you can see.
You would you argue to receive yet.
Somebody jogger Q2 to three yoga.
Howard and negotiate.
Yes consented duodopa.
Clinton or how we shoot.
Cars, how did you go from yet you could do to.
What do you have each incorporate peak when it's in the Asia you can they propylene pricing Delaware you too.
No unusual me.
To me quite you'd be doing border.
Why margins Greater Asia quickly integrate internal when do you don't see any right, which income can shop pendulum, which as you can have as you sit than digit cotter.
Which is in short we hope will equate.
Creates you thought can kinda.
Nick.
I wanted you to conduct essentially that the British humor, how should we tissue and we don't intend to into two categories or.
If you engine.
Okay, and then translate our parents.
No it's not going your question Jackie.
That's okay.
Okay, if we Andy's any doubt Inc. Q2, and the Chinese government gradually content and then make an antique leach and the market is them.
Okay. Thanks.
Recurring leach kill witness the improving Chen.
Our operating data as a quality and operational efficiency. Therefore, we believe we can expect and stoller critics and coming.
In operational and.
The initial aspect.
And your question for the Q3 I look well.
We believe is kind of too early to see but we will stay.
Vigilance now next.
To extend our business and for the rest of the yet which depends on steel factor number one is done global.
And then make situation as you know, leaving our global village length of stay safe. If others are there has to catch fire particular, though.
Well look at it then can shanty teeny tiny China and yes.
Which will lead to rollout, which will impact the and our export industries in China.
Thank you ladies brand the current a data we see the the limiting petland the second reason.
So to summarize well we can have some better the visibility we will.
Communicated Mike had our business plan.
Yeah, the going into Interments shutdown that Yang.
Right.
Two of them down.
You can you hold loans when you see me in Virginia requires you.
Well, we'll meet solar can go to PBS if I assume maybe has determined that everything a deep.
Then when we knew we can go and given that they can go systems through some cobu huge it's the tankers with your call.
Integrations that what's your take you could you duty tissue fashion that you don't ship.
The company's income.
In conjunction with other region.
We do used vehicle fleet.
Is your woman Kobe tissue Shankar three can do the has the way.
The temporary.
The agency huge at the time to college gentle because the color.
As little question.
About a dozen down does owning caused.
Correct, we see.
Sufficient liquidity end up in China market.
You can see mid successfully issued three yes, so far this year.
However, we believe demand we've analyzed theme that has also seen occasion passed on who the death.
Better quality asset at anymore in the more batting impella early in the in the corporation withstanding confusion as anything yet more and more more past one having trouble in their asset quality.
Okay.
Thanks.
When you woman, sometimes in gear willing potteries youre.
Good how many women, which is impella contention yet touchy when would you get empty.
After that you're ready to go you'll put to use and she volume would have will go.
Given timing thing, we're going to ensure that pad fencing tend to.
The only meet your revenue, partially that maker, who will listen.
Maybe what we'd be able to join the ships, which gentleman.
So it's about lender to grow.
I assumed at one time.
Weekend.
Sunderland Toyota frankly more.
Now we've had a unique you soon be assuming the two times and yet it has either.
It was a transition with the times.
Well as play arc threatened by the B pack, a tiny whaling class.
In short.
Dan.
That is down.
As a them very is done it's dan profitability level within that our core per GAAP basic thing pick out.
And also it down.
And I have to increase our is it takes me.
Okay you elaborate.
Well, we've done correctly the bad in that.
Basically federally Dan virtual credit payment.
And Andrew carry increase they users techniques and retention rate as I stated in my remarks, this Turkey based repurchase rate, if 80%, which means can kind of transaction.
Our average nowadays it accumulates take a 480000 were that based on our average 313, maybe a laundry nation David.
How's that.
Okay.
Very clear incremental.
Our next question is on that adapt to me one at a 60. Please go ahead.
Hi.
Thanks for taking my question.
So are we question first warm stack.
Youre.
Just can you update on your.
Uh huh.
Loss rate for Q1.
And also for the.
Thanks.
Second quarter.
And second.
Relationship that is what will your outlook for the operations.
In the second quarter.
Fashion.
That.
<unk> expense.
Welcome.
Inquiry.
I think part of that as related to a local issues. So just one show.
Got it but this time, but should we expect both pick a release of guaranteed.
In Q2 and also.
Worthy Corporation on your loss.
Second quarter.
And then the last question as we got annual customer acquisition.
So that youre.
On traffic costs.
Hi, I'm just wondering what's the driver.
Do you see more of industry trends or more because of your.
Tool that import.
Model and that you expect that the Chi.
No.
Cost to sustain Arctic cat.
Can you provide currency of Mexico.
No.
Especially like how the contribution.
Those Neil.
That youre talking about.
Yup.
Well.
Right.
Eagle.
Great.
Sure.
Indexed.
Sure.
Just on that.
Yes.
Hi.
Alex.
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Additional.
Bill.
Lastly arrangements with Barclays.
Yeah.
Again.
Loss rate.
Oh Gee auction one that George.
Yeah.
Oh for basic outlooks Schwartz.
Small.
Okay.
Oh, you saw that come back.
Hello.
She not provisions for credit cost.
Sure.
All these nominal and your supply.
Hello.
Just.
Sure.
Thank you.
Evangelical back.
She says usage.
Yes.
Sure.
Yes.
Yes.
Uh huh.
Absolutely.
She.
She's supercuts shoot.
I will just number than.
That's helpful.
Our content module valcourt loss last year.
Sure.
Sure Dan special in the nation.
Yes.
Sure.
Do you get deal when you buy another.
Since the middle to less than there was which as you are simply lies on them. So.
So I see that kinda as well.
Please will use the loosely this was unit will be eliminated the chimney cheetos, Ohio. So.
Anthony level has in place.
Boston solution, the usages Uhlman Shenya acquisition the phone Honda Chisholm Association. So these are comes up I'm not doing those on the right.
So interested I kind guys.
To buy chose that how the between Hong.
Okay, Let me translate the first question Daphne.
Just a comment about our CFO.
We do see and that the one delivery and then one and collection rate came out better down what is static hand, however waste base.
A contest and leave it at a rate our.
Great. Thanks, guys about that vantage likely to kill point by two or 3.5%. So at this year.
Our so we do it at the attending and momentum quarter on quarter basis.
And definitely let me answer your second question about a provision.
I'd like to dive into the details just.
Small reminder.
You fall.
On the earnings call, we mentioned that due to the uncertain macro situation. We are provides.
Roughly 700.
The median additional provision due to the.
Actual loss.
So when I just mentioned in my remarks that we wouldn't see any further additional provision on that perspective it.
On that this the same concept so as our Seattle just mentioned our lifetime expected loss for the for the whole you.
Within a range of 2.5%.
0.5%.
And overall on the quarter by quarter basis, you will see the vintage lows with decrease lot.
In the coming few quarters, so that's why.
When we set in the second quarter and third quarter going forward.
On the.
There will be no additional provisions on that front.
That obviously, that's under the assumption that there was no second round of negative impact will be 90.
Hopefully I answered a question too loud knots into our CEO for your third question.
Glenn Oclassen been.
On the frenzy.
You, where you know from Nick.
Hi, yet can you had seemed in the U.S who.
Condom pushes the about it and we couldn't on documentary so with the completion of the amount that you mentioned the shutdown you intend it sounds like you're here.
Fashions income.
Thank you meet you get pattern jump on major should be easier to will need to defect liquidity as ocean.
Somebody's here.
We don't we continue to Magento.
Mhm characterize your woman that.
Well Monday.
Digital continue could today to talk company, so let the political.
And in fact.
Sure.
Well they need the dropdown customer acquisition countries I thought it thats all I feel that just now number one Florida industry can you just mentioned in our view that per being not to the marry that vacancy in the first coordinate the fierce competition the chain ecommerce business or understanding.
And business in the advertising asset.
Sales increasing.
Second the whether it is the second we then may contribute more for the dropdown.
Could you can cause as we slowed down in the sale scaled back our liquidity position.
Tim.
Which lead to.
The decline in marginal cost.
Certainly as we.
Continuously refine our Oh.
The acquisition and get a d. and expand to more.
And a very high quality X to know pregnant women and this will contribute to it to the dropdown.
Okay.
Sure.
You're welcome that woman could see today.
Chapada.
I don't quote could at home.
Cobot you thought you probably you like you do that oil.
Enrollment that question what you don't.
And to goods and green shoot on eating.
Forgot about do we should I got on Jim.
You can see them, we usually since he is on whole Monday called on all right. Thank you had you should photo yoga Coke, whether you want me to conduct yet.
Due to which you don't.
Thank you all mentioned, but.
No it's I approve Linda.
And you.
We will materialize.
Hey, good due to.
They are doing Joe you tons, and we will Monday, which can be done.
And then go bundle depending on how to hinder you don't approximately.
So dollar.
Hold on to fine tune can you. Let you talk we can be sandwich Youre Andrew shows we are the culture.
Sure.
Okay for the yellow.
No at two.
Point element stats here number one we continue to refine mckeegan strategy tend to have a higher Oh hi.
For example in among the top.
Light Hannah Lee and I will tell my key strategies for example.
Again as you know.
It covers.
50% of there.
Hi, Keith activities.
Oh wait devoted and under these refined it Mckee strategy.
Thank you Emily.
The second point as we mentioned in our alike, we expanded the external cannot wait consumption scenarios nowadays so.
Eight contributor to 15% of our.
Total traffic.
Hope that answers all your question definitely.
Yes.
Just follow up on the channel partnership how much lower.
Acquisition cost.
Is that I should let based on revenue sharing model.
So I was hoping Chinese so just.
Bancorp.
Several of us.
Hello.
It also hardship.
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Revenue sharing.
Most of shoot shop.
Okay.
And then when do you what does the nigger through Moshe way too.
So you had a two Lucy reading the tea Hugh.
Which are essentially you'll fashion with that he.
Yes, obviously, you hydro three rigour cardio meal with a total autohop passionate and when can you just going into much.
Andrew and under the eager to get through independent coupon on how can indeed to move would be in TNT is on deal should cause you to do totaled roughly how much of what you thought you commented on the top rate.
Through conducting some renewed region torture that you're telling you in a better due to enjoy to.
We would you see included to downgrade beat me to put them would you be equal to now recall.
Well.
And as Bill mentioned.
While.
Mostly with copper way with these tiny recurring revenue sharing model.
First 0.7 point as you cancel the task in those consumption scenarios.
Well I winstone purpose to shop, therefore, they can give us better.
Quality.
With that credit profile.
But.
Okay.
Yes.
So last again like to ask your question. Please press Deborah wash biotechs, if you've had so castle flakes fresh as ever too.
Yes.
Our next question from our Steven Chen at high terms to international Brad.
Even they manage one.
You have three questions as well.
Just.
Quick.
I think but chassis one by one and do it one by one first of all about.
I don't want estimation I wanted to take Rachel.
All right business. It seems that it has been declining one so just wanted to know whether it is related to you try to refer back.
Better quality customers.
And then of course lower lending rate customers.
Funding partners on that part all be calls.
We'll have to share.
Well what profits from the funding pond.
Because of the deterioration asset quality.
Do you go into this is why these days.
Well go do you do you want to haul what's and that's always article we've already I was on you do Hornby. She also aside did a jos and no Jay it's usually I answer here.
Bob.
Oh, the coal cars here Bob Cole.
Okay. So.
Yeah, Hi soon.
John She then saw Dan So you won't <unk>, Tony you want me band I would only about <unk>. She also dancers she's going to use this summer.
Steve a visit by two questions.
You are really good true to analyze it so instead of Showtime. Thank you for is the question.
As part of the as kind of a hybrid first of all obvious to you all assets deteriorate in the first quarter, especially in February So we have a lot measures to pre.
To to pretend to this situation.
First thing is that we.
We renegotiate some terms with some.
Founding partners business partners in terms of the chart. So to some extent the child is slightly lower than the Q4.
But the most important thing.
After the negotiation with the.
Business partners, we kind of thought.
Page, what we did in the Q4 I.E. we.
Speed up the return.
Payback schedule.
Before the terms so in our internally we call it into the discount rate is actually higher.
So that that me putting example, so there was for example, there was 12 terms.
During the first quarter, we kind of work with our.
Business partner to encourage people borrowers to repay the principal interest.
Say now it's only eight eight homes fourth Trps left so we are certainly if you pay them back now we will waive or interest not only for the rest four times, but also probably give you one onetime interest free treatment something like that so that discount rates so so-called discovery discussion.
Hi.
So all in all our take rate undercapitalized will be Saudi lower compared with Q4, so youre two adjustments right.
Okay.
Thank you.
Second question I think it's is similar to two definitely.
Question, but I wanted to.
Okay and more sense about about this provision for contingent contingent liabilities.
Excluding that 218 million you still have 1.4 1.4 billion.
Provisions in one so I just.
Wanted to clarify whether it is 1.4 balan is purely related to.
Quality usual or you still have some supply macro our local a other parameters putting into two categories model and resulting in some.
Provisions I mean comparing.
It's just like would it.
You still have some stage one and two proficient like what you see for full band stem is that you small related to macro economic outlook, rather than asset quality Jeff.
How much will that be.
And then I think.
A follow up on Japanese question.
Do you expect to add will be called Virginia conversion converging trends between the provisions and release.
In the reference that means that the gap between.
The the really easy in liabilities.
Well, we'll be read deals.
Okay, and that's all you saw Joseph.
They are so do you want a.
Well, you're doing a good quality band.
Bobby I.
No they use on the menu to our guy he or she said Oh.
We'll see.
A new members I know days.
Especially young people once again.
And model do you, Matt why do you take a 101 and.
Oh, we like to Taiwan that guy been so even though definition hot guy.
Sure I should also are out there so we like John one Doha do you.
Sanjay children.
Guaranteed I've been listening mandatory these gun <unk> expenses in the amended prohibition gender and they make a big.
Okay, We boy.
Hi, its yourselves.
Okay. Let me answer your question here.
So I think you have two parts of the questions. The first part is how how do we evaluate.
Right.
Obviously, the valuation model each take into account of the macro economy, and even some potential impact of the Sino U.S. tension situation.
So.
So it's kind of.
Blended together.
Perfect so too.
Device.
As a quantified.
The.
Impact of the macro economy versus the pure operation also the initial level.
Our company levels.
The.
Numbers.
So everything are taken into consideration and also this is for the assets generate wholesale reaching for Q1.
So.
As John just mentioned.
There was an easy way to calculate that is you just use 1.5 billion.
Divided by the new loan origination.
Under the capital having the model.
As long as a give you a rough sense, how much provisional actually take.
So and so the number were quite close to.
For four point something.
This is take into account of.
Sufficient coverage ratio.
Okay.
Your second question is whether there is sort of fall.
Calculation.
Between the this provision and the releasing of guarantee liabilities going forward.
The short answer is it's a very difficult question.
For everybody because every single quarter, we need to re evaluated asset quality base on that quarters situation.
So it's hard to say that but I can give you example.
So this this quarter.
Just.
Under the old accounting standards, the releasing of the guarantee liabilities was.
Phase 170 million.
As I just mentioned in my remarks paid this the highest to level off the releasing of guarantee lab.
Reason is that in Q4 last year.
We take a more prudent measure to to take provisions.
If it turns out the actual performance is better than our estimate so we will release a significant amount of money to our revenue.
So going forward is.
Todays estimate is to pass that has mastic.
Compared with the future.
We are confident to see the releasing of Kevin guaranteed a lot that it will go up.
On the country is there was a second round up the negative impact of coping 19.
We might take additional provision.
In down the ROE that my means we have last release of the guarantee liability on revenue.
But there is no crystal ball say, you can accurately forecast a number or see the breach between this provision and.
Got you lap.
Hope I answered a question.
Thank you very clear finally.
My question, just about a provision for loan receivable, which.
Nobody has trying to us.
Because if you tried to asking me that using a credit costs concept, meaning that you divided lift.
Outstanding loans it seems that.
Again in Q1, so again I just wanted to clarify one thing.
These provisions for loan receivable Pocs fall asset quality did she will also put in.
Macro economic factors when you've tried to estimate diesel call on balance sheet.
Lending business, a water and that's what you thought it was all.
Can you do that.
Sorry, Bill need and they said icon.
What it is all be.
The Triple B, John Hart, Oh filtering for know how do you see how do you see I was wondering job well done no geologic agenda actual Joseph.
One high Sydney menu.
Consequence.
Oh Wal Mart.
I think one the band or Tom on the U.S upon Brian can actually be they'll be quandary. So.
Oh sure thought would you need to assume to somebody else will then you're always agenda.
You don't local.
So what do you want and Taiwan. They also Tyson heartedly Jay the table.
Sure Bill need.
And because they don't have been hoyos all dancer.
Yes, Stephen visit our concussion.
There are two main factors leads to the decrease to the provision for loan at amortized cost.
First of all.
Written remember when we talk about these past few quarters almost every quarter, we say, we see the funding costs phone consolidated Chaucer.
Actually low compared with the funding costs from the financial backs. So we take more on a through the consolidated Chaucer right, but the situation change in Q1, because this funding cost of financial institution, I mean backs decreased significantly.
Which leads to lap to be relatively high funding costs of the Charles So in Q1 way actually intentionally dilute the decrease the contribution from our customers consolidate Charles as a funding source. So that's the plan primary.
Reason for that decrease of provision the second thing, yes, Youre right.
So.
In Q in Q4.
We see the.
Unfavorable favorable.
Industry situation and also.
When we.
Prepare the result.
But I was in Q1, so we kind of.
We estimate the LP significant heat on asset quality.
But when we prepared to Q1 results.
We definitely take into account of the.
The macro situation, obviously now today that pandemic issue is.
Much less concern than what we've seen in Q1, so the overall.
Vintage.
Flows as expected vintage loss decreased a little bit slightly not too much but that will contribute to that relatively low provision on the on bearish assets.
Basically this two key reasons drive the decrease.
Hope I answered your questions.
Thank you for Korea.
[noise]. Our next question, Sean last John Hi, Adam Markman Stanek. Please go ahead.
Hi, Thank you for taking my questions again, Oh, it's just one dimension to maybe how I'm happy to understand a little more upon the.
Competent.
Competition landscape. So since we operate in a second would be for price and on average is 28% correct me if im wrong, but it's on average 28% so.
And we understand that the small or medium pay yourself as it did the markets. So.
Is there any on social basically the question is how many.
Competitors.
Mostly an official I missed the competitors because that has to when we can have a local power self how many unlisted.
Pay us weve decent size in these you know on average 20% segment.
We have seen in the market.
Uh huh.
And.
Are they in very close competition to us in terms of the risk management et cetera. Thank you very much oh he's option.
No. One is about 42 is actually goes season since as you can go through matters.
I think one that he's intimately on bottoms up approach within the home.
Elementary school.
Contingent upon should think about Josh bother you go you go to you.
Steven Seagal Saddam Bye now.
Much worse on should essential because if ancelotti official should that just to.
Thank you typically so that it sounded like.
He said I cannot tell to other onetime charges will push on how would you do a woman who opinion show them the telephone call them as somebody who youre just going to the official onto.
And could be does it's only because the.
The other social should save Us monitory democracy.
Since what do you remember though.
Great.
Knocking down to ship and leadership SIGA.
Pardon me.
Mmm, because new cannot essentially there was the mechanism.
The outdoor should that be pretty anemic.
Before the we essentially they're going to.
My reading.
But quickly into income.
Go ahead, our fee side.
So is there.
We essentially to continue Mukundan should per day.
Perfect LNG to Cushing Ameche Kingdom contingent income.
Mmm venture woman Piechocki issue.
Who is here and then go to can give you that we'll move to Gorgon.
Marty can you give we get that Trajenta can you be here, how should the U.S. cogs with it.
So you're going to major today.
Todd Cohen and three.
Hi, good reducing them with the mean got venture can we be if I mean, you tenants, who yes or whatever do.
In that.
Yes.
Okay.
Let me translate well everything else. That's all going you could have very good way to segment.
Mike, Yes, multinational my head and try not by ATM.
Well as for their primary competitor. So you mentioned, where they live here with our two and lead bank and JB. Both up then on operating Oh principally to below.
24% ATM.
Oh or sell by your settlement, we shall we make no upgrading the again.
Aseptic imminently, those probably coming here.
However, we do come back some customer research and find out back in terms of the you did a when they launched here with the sand or category with those primary competitors.
Which manifest that.
There are stem there or not and there are.
No you did that they may not be sensors to the eighth yet but they.
They more emphasis and user experience and the study.
When you go Digger cities Yorkshire, and ship I wish every deal is that.
Alan.
Problem is on sure.
The issue that they're getting galleries humans.
Three triggered it was when you talk to sit on good you digital agenda.
When we can this thunder sanguine leads again, we ended given that you.
Or we don't tell me.
Regarding what triggered since you did seem done we'll meet suites to ensure we can younger members who is engine.
Thank you essentially the did you Douglas limit how maintenance covenants you pay woman did on.
You go we want you to would that be who switch units you go out in the leap.
But would you do that.
In January but could you go from.
Phusion ended including the me, who currently if I'm not Cupid two.
Due to incremental related with you're going to me.
Sure seem to not only believes it should pay so given that young woman and putting them into money. They how can we showed would you be turned into firm commitments you should be who can do it is where EBIT to do them towards retirement.
And that you would use on you can woman and Nancy Kingdom see.
Hmm.
Sandridge is you do reach its way.
Well.
Still and.
Click to call it two to provide our competitive trends compared to the threeg or competitors you mentioned.
The first one.
Hi, dot compared hate the private.
Yes, I somehow actually bank, where they love through because they operate the lower ATM I can't.
The competition directly components and then it's quite limited they can't high compared to other measure of the this Kelly you asked my cat well, we have strong confidence we tell them that we add internet giants back to Ah.
Consumer Finance company, we got a strong support from our parent cosmetics secret now for.
Yes.
Structuring.
Advantage.
Uh huh.
Risk management traffic and and a brand.
And so certainly the third high compared to the third hyper competitive.
We tried to license the consumer finance.
We view them.
As most of the founding paying is indeed.
The consumer like hit.
So we over thank Dan in terms of the our risk management cold up there.
Veritiv anchor user experience provider to the borrowers.
Well I hope that I live the color on the competitive landscape at better catching up.
Feeling as usual statistical analysis is it.
Yes.
Okay great.
Are there any more.
And I didn't.
Kill catch your line is not maybe we can conclude the call today.
Okay.
Thank you there no questions on the line.
So this concludes today's conference call. Thank you all slipped participation you may disconnect.
Thank you.
Yes.