Q2 2021 360 DigiTech Inc Earnings Call

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Okay, you talked about data centers.

Until then.

Thank you for standing by and welcome to the 360 <unk> second quarter 2021 earnings Conference call.

Please also note today's event is being recorded.

At this time I'd like to turn the conference call over to MS. Mandy Dong IR director.

Go ahead Mindy.

Thank you Hello, everyone and welcome to our second quarter 2021 earnings conference call I'll read out what you should earn out today and it can be found on our IR website.

Joining me today are Mr. Shang, our CEO and thereafter.

Mr. Alex <unk>, our CFO and director and Mr. Don Yang our Seattle.

Before we begin our prepared remarks I'd like to remind you of our safe Harbor statement, Yeah. All earnings press release, which also applies to these costs. We may refer to forward looking statements based on our current plans estimates and projections also this call include discussions of certain non-GAAP measures. Please refer to our earnings release.

And in Asia between non-GAAP and GAAP was last unless otherwise stated all see demand RMB I will now turn the call over to our CEO Mr. White shelf.

Yes.

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Thank you gentlemen.

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Hello, everyone I'm very happy to report another quarter of record breaking operational and financial results.

In the quarter financial institutions originated RMB $88.5 billion loans through our path for marking another record high up five zero, 50% Y O Y and the 19% one nine kill them kill after reaching RMB 100 billion milestone in Q1.

Standalone balance continued to grow to RMB $111.6 billion in Q2.

Zero, 50% Y O Y and the 15, one 5% kill and kill.

Total revenue was RMB 4 billion in Q2 'twenty.

20% to zero, while white and 11% kill and kill non-GAAP net income was RMB 162 billion up 17, 1% Y O Y and the 15th one sites kill them killed.

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Gentlemen, does go away from the new fit Unbilled revenue.

Despite a continuously changing macro and regulatory environment, we have delivered five consecutive quarters of record breaking results over the past few years, we have built a comprehensive operational system that demonstrates remarkable resilience.

Yeah.

To be more specific.

Diversify that user acquisition channels and seeing that really allow us to effectively hot against any volatility for a particular channel.

Our extensive network of diverse financial institution partners gives us sufficient flexibility in terms of funding cost geography coverage and the pricing.

Foods <unk> risk management capabilities allow us to target different user segments with effective pricing based on different market dynamic.

Our access to some key financial guidance also give us ecosystem great. Because that's you know, let's say you have to comply with the ever changing regulatory environment.

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Over the last six weeks also kills me along with other Chinese Adi has experienced extreme volatility in the market.

There are multiple risk factors trigger such as share price movement within the markets overreacting to the negative elements and ignoring the solid fundamentals and a strong growth prospect.

Thanks.

As such after a careful evaluation with the approval of our board management decided to launch a share buyback program.

The company intends to repurchase up to USD 200 million of ABS.

Through open market or other firm up transaction over the course of next 12 months.

With the late at current market condition share repurchase other extremely attractive opportunity to destroy our cash and to generate great returns to our shareholders.

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We continue to make progress in multiple strategy initiatives and are gradually unlock tremendous growth opportunities.

<unk> do you need them, Kent progress, one diversified user acquisition strategy customer base continue to well and customers quality improved as badly.

Our embedded finance models drove so you need to cancel it.

The number of new borrowers in Q2 hit the highest level in the past six quarters after by more than 10% sequentially.

The number of SME borrower acquired offline also increased significantly.

In battery and finance model contributes close to 44 zero percent of our new customers with approved the private lines in Q2.

So far we havent established collaborations with 22, leading tablet platforms with another eight in the pipeline.

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Our SME finance business also achieved a breakthrough performance in Q2 by strengthening our ties with a leading industry partners and the optimizing credit approval process and the policies total amount of new eye probe decline line increased 22% Q on Q to RMB.

Seven 1 billion and outstanding loan balance increased 45% sequentially with Ara tickets exceeding RMB 250000.

Meanwhile, we are rolling out to customers long products catering to the specific funding.

Funding needs of different industries.

In July we launched tobacco business law and have served more than 700 offline tobacco business owners in the second half of this year, we plan to launch other industry specific loan products targeting cross border E Commerce supply chain finance as well as agriculture and forestry sectors.

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Long facilitation under the capital light model accounted for roughly 56% of total volume in Q2 and for the mouth of July capital Light accounted nearly 66 zero percent almost reached our full year Gulf of upgrading strategy.

Flowers smarter marketing program IC intelligence credit engine, the number of active user increased 74% Q on Q.

Action volume and outstanding balance both been tapped by 36%.

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Through the year. We appreciate delays were that they were targeting anti some ABS of course, yes.

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As for the recent regulatory changes that we want to share a few soft here.

One of the 13, leading into napp half form on the April 20, <unk>, we have maintained regular and the child's communications with regulators apparently the self assessment and the related it rapidly vacation process moving forward in an orderly manner.

We fully understand the regulator's requirements and expectations for the industry.

Although our business is a relatively focused and has a clear path towards full compliance with regulatory requirements. We don't have online payments online insurance online brokerage operation, which has stepped up to more restrictive regulations.

Our loan facilitation business, we don't do join lending nor have overlapped overleverage ABS issuance.

We are highly confident to satisfy all of the revised a regulatory requirement when everything said and done.

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As you May already know the proposed a new regulation will not allow loan facilitation platform to provide clarity as asthma related data the rapidly to financial institution and stuff data transfer masco into a licensed accrediting agency we have.

Pre emptively communicate it with the regulators to understand the policy direction and to make necessary preparations.

I would take multiple actions to satisfy this new regulation.

On one hand, we can cooperate with existing third party credit agency on the other hand, we can also seek partners to jointly launch a new credit agency.

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Recently, some media reports indicate that the regulator will require consumer finance companies to implement an all in interest rate cut of 24% for consumer lending.

This is consistent with the regulators longtime agenda to support real economy by lowering financing cost for consumers and Smes. Neither is also consistent with our long term business planning our own balance sheet loans and SME loan business already priced below 24%.

While our consumer facilitation business even.

More restrictive stress test in which we assume to cut our price to below 24% that rather rapidly we did not.

Not expect the price cut to have a minimal impact to our operational and financial results in 2021.

For 2022, it will be a transitional year when the entire industry will comply with the 24 rate cap by June.

In our stress test, we continue to see healthy volume growth in 2022, and net take rate should be around 3%.

There are also some positive factor that might mitigate that negative impact from the 24% rate cap.

Lower price, we should be able to develop a partnership with larger national banks that typically offer more stable funding at lower funding costs.

In addition, with all of our assay at 24% or lower we should be able to significantly increase the insurance of ABS, which typically carries.

Much lower finding costs around five to five 5% versus around 7% from banks.

Furthermore, and lower prices, we can attract more high quality Bora, which will naturally drive down overall credit cost by 1% to 2% point on IRR basis.

Finally, based on our experienced lower pricing normally boost up our activities retention rate and lifetime value or LTV.

To conclude we believe more prime customer and a better quality of financial institution would come along with lower priced products.

This will ultimately enhance our operational efficiency and will make our business more resilient and sustainable.

<unk> makes that have a solid base for us to accelerate it well. It's after 2022, we feel quite optimistic.

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I would now like to address the temporary removal of our 360 <unk> app from the App store. The removal was due to our product engineer missed out one of the function that was required by the regulators.

I've already fixed the issue and our App has been restored to all major app store up to today.

We have conducted a thorough internal reveal and they improved our operating protocols to ensure SEC is against never happen again.

Thanks to our diversified customer acquisition channel and the balance of product mix the impact at remove out to our operation has been minimal.

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During the quarter, we continued to diversify our funding sources, we accelerated the pace of ABS issuance with a total of RMB two 1 billion ABS in Q2 at an average coupon rate of five 3%.

It has brought our total lab ABS issuance to RMB three 1 billion so far this year.

Number four in the market.

Our risk management system to support more business lines, we continue to see further enhance of our asset quality.

The 90 day, plus delinquency ratio across our platform with a 119%.

And one platform rate remains stable at 98% and day, one delinquency rate at 5%.

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We continue to expand the scale of our collaboration with KCB total accumulated loan facilitation volume as of Q2 was RMB 33, 5 billion outstanding balance was RMB 24 billion at end of Q2.66 zero.

Present from tier one.

At least that the scale of the KCB partnership through man relatively stable for the time being.

We have brought a trust and a great flexibility in our collaboration with KCB.

Going forward, we will proactively explore new products and business opportunities through our cooperation with KCB.

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We made some good progress on the yes brief brown, which go up more and more attention.

When Dallas flagship Kona in Province. This July we took swift action to support by donating RMB 20 million through the <unk> Foundation.

Meanwhile, we organize the local team to join our rescue efforts.

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Oh boy, well quite satisfy them with our performance in the first half of 2021.

This fruitful result comes along from dedicated efforts of our excellent team.

I would like to express my gratitude to their hard work.

Well your time of rapid change and a great companies are always bumps in Grace Chang.

We have successfully demonstrated our capabilities and ambition over the past five years.

Fintech is a vast market with huge potential and our fintech product has profoundly changed financial service landscape and the user experience.

We will continuously launch innovative products and dedicate it to become the premium player in this market.

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Thank you.

Sure.

Now, let me turn to our CFO, Alex Toronto more detailed info. Thank you.

Thank you Hi, Joe Good morning, and good evening, everyone welcome to our quarterly earnings call.

The interest of time I will not go over all the financial line items on the call. Please refer to our earnings release for the details.

And as Joe mentioned, we delivered robust operating and financial results for the first half of 2021 powered by strong consumer demand for credit and further improvement in asset quality.

The strong business momentum appears continuing into current quarter.

In fact, we have seen record breaking volumes in recent months. Despite some reported softness of micro economic activities lately.

Total net revenue for Q2 was 4 billion versus $3.6 billion in Q1.

And three points three 4 billion.

A year ago.

Yeah.

Revenue from credit driven service capital heavy was $2.4 billion.

Prior to 2.45 billion in Q1, and 3.0, hey, bidding a year ago.

Year over year decline was mainly due to facilitation volume mix change as capital heavy contribution decreased significantly.

Revenue from <unk> capital Light was $1.6 billion compared to 1.15 billion in Q1, and 259 million a year ago. The robust growth was mainly driven by.

Exceptional progress we have made in capital light and other technology solutions during the quarter capital light and other technology solution contributed roughly 56% of a total loan volume.

The underlying take rates relatively stable.

We expect capitalized contribution percentage to continue increase in the second half and to reach roughly two third of our total volume by the year end.

During the quarter average pricing was 27, 2% compared to 26, 6% in Q1, and 27, 2% a year ago.

Assuming the reported 24% rate cap guideline will be implemented across the industry.

We are expecting overall pricing to gradually trending down through mid 2022 to satisfy the rate cap requirement in our stress test.

Even under the more restrictive and steep rate cut scenario.

Where are we assume we cut the rate to below 24% starting from September the first.

In.

In such a scenario, we should still be able to maintain healthy growth and profitability in the transitional year of 2022 and resume to a more robust gross afterwards.

S. Microeconomic activity has picked up in China in the first half.

Men for Internet traffic also increased significantly along the way.

In addition, we are.

Also proactively accelerated the pace of customer acquisition in recent in the last couple of quarters to take advantage of the overall positive business trip.

Such we have experienced some uptick in sales and marketing expenses.

Average customer acquisition cost on the consumer lending side for.

For the quarter was about RMB 237, compared to RMB two six in Q1.

As we discussed in the past average cost per approved credit line is a calculated number with limited value in our decision making.

We will continue to use lifecycle, ROI and LTV as key metrics to determine the pace and scope of our customer acquisition strategy.

So far in 2021 healthy ROI trends have encouraged us to take a more proactive approach to accelerate the growth of our customer base.

Non-GAAP net income was $1 six 1 billion in Q2 versus $1.41 billion in Q1, and 942 million a year ago.

We once again set a new record in quarterly profitability, driven by higher facilitation volume and.

And noticeable improvement in asset quality.

The effective tax rate was approximately 18% for the quarter.

And sorry for the first half of 2021.

We see a similar level the ETR for the rest of the year longer term, we are expecting a normalized ETR to return to approximately 15%.

As we move towards a more technology driven business model, we continue to see marked improvement in operating margins.

<unk>, increasing contribution from capital light and other technology solution will generally lead to a higher margin structure.

Overall, we expect profitability growth to be more or less keep pace with the facilitation volume grows throughout this year.

With strong operating results and increased contribution from top line model in Q2, our leverage ratio, which is defined as risk bearing loan balance divided by shareholders equity further declined to four 8% sorry, $4 eight times from five four.

In Q1, and eight three times a year ago.

We expect to see continued deleveraging in our business driven by further movement towards capital light and solid operating results.

Total cash and cash equivalent.

<unk> eight 8 billion in Q2 compared to $9.2 billion in Q1 non restricted cash was approximately $5.2 billion in Q2 versus 6 billion in Q1.

The modest decline in cash was mainly due to more proactive deployment of cash in our operations to support ABS and the pre ABS assets, which generates higher returns.

Meanwhile, a significant portion of our cash also allocate it was also allocated to security deposit with our institutional partners and register a capital loss of different entities to support our daily operation.

As we continue to generate strong cash flow through operations. We believe our current cash position is more than sufficient to support the expansion of our business to invest in key technologies and to satisfy potential regulatory requirements. Therefore, we believe it is a prudent decision to use.

Some of our quote unquote free cash to invest in our own stock.

<unk> price to just sit around the companys liquidation value.

For a company that is still generating healthy growth for the next few years, we believe it is a great bargain.

Finally, let me give you some update about our outlook for 2021.

The operating results for the first half of 2021 were very encouraging and the momentum doesn't slow so far in current quarter, although we intend to keep our tradition of a conservative approach in providing forward guidance the numbers start to speak for themselves as such we would like to raise our 2020.

Total loan volume guidance to be between RMB 340 billion and RMB 350 billion compared to previous guidance of RMB 310 billion and and the 330 billion.

The revised guidance represents year over year growth of 38% to 42%.

As always this forecast reflects the company's current and preliminary view, which is subject to material changes.

With that I would like to conclude our prepared remarks, operator, we can now take some questions.

Yeah.

Thank you management.

Ladies and gentlemen, if you would like to ask a question to the management.

Please press.

One on your telephone keypad.

Two pencil. Please press there was two.

For those who can speak Chinese please come to the ask a question in Chinese first followed by English translation.

Our first question is from Richard at Morgan Stanley. Please go ahead.

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Goldman Sachs.

Sure.

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Basically sending.

More information through the credit scoring agencies.

Any detailed discussion on the.

Actual profit cause.

It's been a little while and you.

You mentioned basically there has been.

Further discussion and there's different versions out there just wanted to see what is what is the latest development on that front. Secondly is obviously very good loan volume.

Any discussion with the regulators in terms of any any.

And then the guidance on the pace at the proper pace. Thank.

Thank you.

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Yeah.

We were up on our findings.

Oh, Okay. So for the draft version of the regulation of the administration of quality assessment business that was announced and we have been communicating with regulators for a long time that actually in the market that there is no standard solution available. So far so now and also at Macy's.

As Jim has mentioned that actually there are two or three solutions. The weekend about the first one is that we apply for quite a lesson to launch a new credit agency and the second one as we cooperate with existing quite a agency to continue our business also with our <unk>.

Death cooperation with KCB, which offers.

Another item to you before the solution.

Whatever solution, we adopt and began the process of product might be different. However, it will not affect our result of the risk management and our risk models.

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Women come down.

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Sure.

Cleveland pension since they're not going back with them.

So for your second question regarding to our growth rate actually we have seen that the growth is not the problem and the regulators focus more on a standardized standardization of the product and of our business.

So we have seen that in the requirements by the regulators.

We have issued that we they want the platform's Ethernet platforms to sustain the growth and supports real economy continuously.

Okay.

Yeah.

Thank you.

Yeah Yeah.

Okay.

Our next question is from Alex Yeah out of UBS. Please go ahead.

Hi, Brian.

Brian do you want to see if Oh, what's the thing Youll see when T cells, Antigua financing Clinton and Quad.

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Talking about things like that you'll hear from our comments now.

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Super Thank you Jose communities like I got into the galley she's already broken down.

So now that you're out of your way can dice yep.

I'll briefly translate my question firstly on them.

Our regulatory department. So they look like the current Hum direction from the regulators continue to tighten the purse.

Perfect I've thought of the.

Her collection body companies, though I'm wondering.

Sure I mean, the regulators are issue more stringent regulation on consumer data collection and use in the future.

Would that affect our current practice of both data collection and use and how would that affect our credit model second question is on Europe.

Two world combined with a 20% interest rate cap. So you mentioned that in your stress test you are going to comply.

Comply fully complied with the type of thing kept by September this year.

So the stress test them with your.

This case or your pocket a trajectory towards.

Combined with that the new cap and then third question is also related to the interest rate trend so drilling market concerns about.

The 20% cap is only just the beginning of the future regulatory requirement of a further pushing down the overall lending right. So.

So I'm wondering if you have any comment on that and specifically.

Given you're also ramping up your M S.

SME loan so it looks like the exact amount will be the subject of further pressure.

From lower rate no guidance.

Also I appreciate your comments thanks.

Sure.

Diego and.

England.

Should we assume the exchanger.

Tickets usage, because the unions before coming.

Thank you.

Yeah.

We've been jumping in.

No one when do you think you can depend on.

No.

Nothing wrong with that but once you get from NIM CEO Shar <unk> within the U S.

Patients seizure.

Yes.

You should do and we will do.

Good could you Jim Pat.

Plenty of that easily.

Interest income.

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Chris you can get to everyone that I showed you the Parisian woman.

You put on Cleveland impact to Covid.

While you're thinking as you go into Brazil.

<unk>.

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You did.

Is that even in this room.

But what you would have I wouldn't you.

Yes, we came out with them.

We have dealt with this year.

Hershey, who showed you the somehow.

So far we can go even put a tweet CFO change.

Okay. So would you with your branch you know minimum wage that sometimes aren't women because you use the line.

Turning to good ultra woman to some degree hungry young Chung Yang Jong.

Hum.

If I'm hearing that were minimally.

Jim.

Oh gosh.

Sure.

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How did he get surely you're crazy.

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Okay.

Chrysler the aquifer Sundance.

Yeah.

Yeah, surely woman, which integrates outdoor in.

Well, that's a good thing when the onshore potential contango Hershey.

You can go to a Goldman Goldman.

And David you could do the equivalent.

So let's see.

Thank you.

Good woman you wanted to go younger they're two way audio.

Do you like opinion integrating Micronesia.

When the two year, we found junk with year with Asia with efficient coupon the phone with me.

Okay. Thank you Alex for your question so regarding to your first one that we actually we see Kathleen as well about the data capture and usage in this industry. So for regulator side. We think there are two basic principles. The first one is the minimum.

Standard for data capture so apart from capturing data from castle my side like forecast and of course, our application. We are working proactively with third party credit agency for ESG and external data sources as well as replacement.

And the second principle is that the customer authorization eight mandatary before data capture as you may know that our removal of our 360 THL applications from App stores. It was caused by these problems.

We will emphasize more on this principle in the future we believe that with our relatively standard personal loss and the impact of this tightening presupposed will have minimal impact on our business.

Good morning.

So that type.

So Jim Brown.

I will mention the kind of the.

Hi, Susan to them, which would be true.

This is Roy onshore Dominion Louie.

Good.

Shanghai Wuhan Suzhou.

<unk> wishes syndrome Rfps Sean.

Women you guys from July <unk> to gain their critical hot.

And this is kind of in the plan that you're going to go food value.

J&J good Jin Guan as you go down and do it with me or with that too.

Michigan intelligent Shan shoot.

Turning to Asia.

Hum.

How did it go videotron.

Regarding to your second question the timeline of the all in interest rate cap at 24% actually we say that we are a different timelines what they find institutions some institution.

Follow the guidelines that outstanding balance.

Alone over 24% will be reduced to zero by end of June next year, and some institutions fold or the guidance that there will be no new originations by June next year. So we will follow these accordingly.

Steve Sanger sure.

Glen you kept <unk> okay.

<unk> was shut down.

Well the only our syndication fee income you guys seen this issue.

Ingersoll Institute.

Yeah, definitely men and women kind of annoying.

I'm going to send you that finishing hardest citic at Goldman.

This is vishal.

So sort of a year for sure.

You say you have a if you think as you know as you go into Q2 event.

So moved.

Yeah.

Turnkey lines wont quit shoe.

With that Sandy.

Indeed.

Yeah.

Yeah, Yeah, yeah yeah.

General Entertainment room, and do you think.

Got it thank our Colorado switching could could get goods to coach the tissue grades.

And that's a good way to go.

The good thing when they Enzo say women.

So this just isn't there.

England it'd be good to go.

The decision to men women Broomy switching.

Great fashion.

Uh huh.

Regarding to your third question.

24 interest the GAAP it will be lower it's more actually as all market participants no 24% interest. The GAAP has been when you look at them from our regulators to banks for a long time recently, India recourse back to lay the interest cap requirement expense to consumers on that.

Since the 24% cap has existed in the industry for quite some time, we don't think the rate cap will further go down.

Thank you for your question.

Hello, everybody.

<unk> will add.

Sure.

The combined Africa galley.

Hum.

Woman.

Hum.

I'm sure my ambition or where does it go shuang you can ask the choices you get harder.

The theater.

Good tissue, maybe you got some.

Thanks, you always issue Hood degree salvaging.

Food is the foundation for hip surgery.

Net political nickel, which is huge.

It used to be younger.

Playing out with Minsheng seem to be really mean.

You may put on Laguardia Purposefulness regionals, when they're doing 100, they don't for the woman to where he got acute angles.

Well look we can.

She has done that he couldn't get into it.

And when you meet your tour flow.

Oh My God you have within the shield you wish anything Jim Gwen.

Kind of one year type of tissue there you go.

The provision that big a deal.

Tissue.

And Furthermore, regarding to the interest rate of SME loans of course, if regulators wanted to say the interest rate will be as more as possible, but there is no standard.

It is similar to the consumer finance industry Alright.

Excellent and virus needs and supplies of the SME loans as a platform as much way, we will continue to offer the virus the services to make the difference Kansas ease of the SME loans.

Thank you.

Sure.

Okay.

Thank you.

Okay.

Thank you. Our next question is from Jackie True China Renaissance. Please go ahead.

Okay.

Sometimes I get what you're Gonna do you play you can see constant.

Yes.

Would you be in diesel and he shook language English.

How long it took all of it Fortunately how you push the teaching about Saar surgical new Detroit I push a whole chicken margins I don't call them. You know, we have talked about talking about central Europe.

So I can tell you that you don't pay a whole women.

G could you go about with APR coming calls.

To answer your clinical syndrome, but Chico.

With the pound.

Our whole can I use just your own channel more quickly.

She can play sensibility, great charter your ships.

You can travel.

Rollo, Dr. Glenn Teasers for Glenn you will note that neither cheap.

Can you share with us.

Two questions about unfortunately show yet.

Okay sounds.

One is on the leap.

No woman salsa music quite really to try you want.

Oh Gee the form yet the home of Mckenzie County alone.

Don't know if you could oh.

P. R margin teaching it may cause some topics.

Alfred.

Oh, Gee quite a chico's known volume Chabal synergy guidance.

So let me translate.

For these strong results. My first question is related to regulation as well.

So for the 24% interest rate cap mentioned and gave it.

A stress test for next year regarding the margin.

It will go down to 3% so just want to understand.

I understand what is our assumptions behind this stress test regarding too.

Funding costs and credit costs in the other.

Expenses.

And any chance we can get it.

Outlook for APR in the third quarter.

And second question is regarding to the estimate at all.

We've seen other competitors also move to this new business.

So how.

How are we going to differentiate our SME loan product and what is the APR of margin and our growth target this year.

And is this.

SME loan include that in our new.

Guidance. Thank you.

Okay.

Hum.

Integrity with Xinjiang <unk> mission.

P J.

Okay great.

Sure sure So assembly.

Timna that you've got tissue through a dasher women dose will surely a meal kit.

Houston, the tumor and John we needed a shutdown you don't drill them integrated with J&J.

Turning toward the $10 million at the end when you get home and they come in they've got your ship, maybe other races and downtime.

Did you eat in polo women's.

Well I'll tell you what you suddenly go you go.

But because of the huge Jordan women's so Josh its ability to hit them, but the senior leaders shop has you would see that that they could choose income agenda and the rules.

So you can come back.

And to me you could you see as AUM and <unk>.

Our season pass and ABS in India.

We've had that.

Some of it until the RSV challenge the whole AUM and then goes here, who can do that in Covid.

Uh huh.

Well again beauty, so I didn't want to be a different door, depending on which you can compete as you go through the income with you now you obviously have done well memorialize it happens when it gets down to unify.

Maybe if I can do with that.

You got a decision maybe others have been hard to hit that 110 million could be community. Good when I do this I think was at a 10 minute wait.

Yes.

Obviously, the dollar Wilmington goods intermittently shut down revenue.

Could you just keep LNG you could go down.

And a good portion I mean, if we determine that degree.

Yeah, we've shut down 70 the IRR.

So it's only kind of elements Yucatan achievement.

We're going to go quicker.

Got it and then they can call you will also need they can call type of ticketing attitude at the hotel and anything we can pump.

Gentlemen, you sent out a 10 month <unk>.

Luis Hitachi you go and become <unk> Johansson again, so you talk to him and he sat down with them and suddenly you can take with you pay down 10 million lives in the soil.

Thank you Jackie regarding to your first question about the stress test actually what we have delivered now is relatively static test with all other factors status quo, especially there's no improvement in our efficiency. So we estimate there is no cost of changes.

In this version of the stress test.

As we have known that there is a steady improvement of our cost.

Example, for Epiphone constant before we have a large portion of our funding from our consumer finance company with a relatively higher funding.

Some impossible.

And ABS Ballroom is also limited however, with a lowering cap interest rate or we can have more something from national banks or larger national banks, and we can increase our ABS voting. So we except expect our funding costs to be lowered by 1% and we.

Nobody lost an expectation to be lower by around 1% as well. So another major cost of customer acquisition costs will be lower as well. So we expect that actually the take rate of 3% will be improved in the feature.

Okay.

Yeah.

Just.

Curious on the 32 to one.

Women. So you tell me things that help you Jason do you want to.

So it shows you guys have done it for sure.

Now in Qs AUM and.

Yes.

You can't do good Shanghai Giordano.

And then at home in new ways to create that Sandy.

Good.

Finally me.

Appreciate it guys how're doing and keep enquiries.

And potential.

For the fourth quarter of this year, we have star changes a lower APR task. So the APR will be lower but there will be no meaningful impact on our financial results of the next quarter.

Thiago <unk>.

SME there you go.

In the new ship.

A woman.

A woman centric video, which I'm not an unusual gotcha.

Then under that.

Deal you didn't use to do the Zika.

Sure.

Hum.

Because you're trying to lease them individually. So for example younger women and we are convinced this ratio.

And I'm trying to I'm trying to them 20 years on the job.

And the ZIP Atlantis, <unk>, chairman and opening argument to go.

Yeah.

Inclusion of Duncan will you push it.

Should you should cut the good Dr. Then there needs to be done.

No women.

As Emil.

To ensure that women.

And as you see them.

<unk> that'd be home Hemo woman.

I'll read it.

That's a good expectation pushes content. So you can sit on them push waiver division.

Kind of as usual.

How would be tongue Joe.

Sure I can do it.

So there's always an ICU.

So kind of a day ago, well monistic chimney somehow tangentially you could sit underneath the hood.

Lauder woman TV included Formula Debenture.

Alicia the usage of feed hungry to unbalance fee AUM HOA does it go swimming season.

Good seasonality as well.

They show it in servicing income.

Delighted to do fully equivalently.

Just as a woman and take them and integrate them.

It sounded like there's heightened regulation yes.

Women.

It's a great and Jim.

Sure.

You're not going to negotiate.

Go <unk>.

Sandy.

And so we integrate.

But equal to cut down their guests into because we're managing that.

Where does it go to.

In EMEA.

So as income and they usually it's about it again.

For a complete integration will be somewhat dilutive you shouldn't see a woman.

We will send that they're good there.

Tim.

So where are you with that.

English reunion with Ya Qin another good.

Because if I'm going to get delayed.

So you go from here.

To them, but they don't usually women Greenway and <unk>.

In order to get started with you sometime in kind of deal.

So for your second question regarding to our competitiveness.

So there are two aspects. The first one is about risk management.

F N E business.

And from the traditional ones.

Because we focus more on the MSC.

E side, considering the traditional SME loans over 10 million in ticket size is not fully data driven however, we have adopted the <unk> engine regarding to our risk management about SME loans.

We evaluate from the individual side and from the corporate side with Teekay size of 250000 on average we have leased and food each licensed our accumulated experience of risk management in the past years and consumer phone lines.

And the second advantage of Us and the corporation with KCB.

The only place platform in China, Mark cases that are able to have in depth cooperation with banks. We believe we have an advantage of data and the funding cost regarding to that any business.

Okay great.

On the mobile.

Isn't that kind of autonomy connectivity alcohol doesn't want me if it can be integrated in the children women that they couldn't move you're all familiar with Union SME Donington here with a big <unk> value added revenue.

So again.

And I think our mobile you can behind <unk> guidance linear.

So for our target of SME loans. This year it will account for around 10% to 15% of our total loan origination and it has been covered in our guidance.

Joining up with a new institution.

Digital sales.

Okay Jackie.

Just I have a few a sort of a clarification and then add up to Mr. Louis comments, there number one the most important clarification that 3% is not a margin. It's the take rate our net margin. This quarter was 40% and if anything for the next couple of quarters.

So, we'll probably see a little bit expansion of net margin.

Then this Q2, so the 3% though is the take rate.

Loan balance that we have been saying this in the past and then secondly.

And also regarding the second half pricing trend.

Even though we our stress test was taken the more drastic cuts starting from September 1st basically on that day I wish it goes below 24, but in reality, that's not going to be the case, just like <unk> mentioned it should.

Really dependent on the pace of our financial institution partners.

They're kind of a progress.

Progress there so most likely it will be a gradual trending down towards that kind of a go.

By the end of.

June next year.

So if you do a linear kind of distribution.

On any given quarter from now to mid of next year, you're probably looking at maybe a one percentage or a little bit over one percentage point change in pricing. If you just average out.

So that's the.

Regarding the pricing change.

And then this kind of a change.

For two.

2021 for the remainder of 2021.

Don't see any.

Kind of a meaningful impact in both low volume.

Or the.

The take rate.

Why in my prepared remarks, I mentioned that the.

The second half profitability will most likely keeping pace with the loan volume growth.

You have our guidance for the full year you can do the calculation.

They get the.

The calculation the sorry, the probability the number for the second half okay. So that's the.

Another clarification.

Then the third point is really about how do we get that's 4% I'm sorry, 3% take rate when this whole thing that set and done.

I have a.

Kind of a back of an envelope calculation.

That's assuming our current mix in terms of cap line versus cap heavy at <unk>.

Six to eight versus 46, they've been kept light.

And normally.

The reality is our cap light side of business carry a higher pricing versus the cap heavy so.

If we.

Let's say cut all the pricing to 22, 5%.

And then on the cap herbicide that we need to cut roughly about 2% on the life side, we need to cut.

Roughly about <unk>.

Six 5% to 7%, but keeping in mind that six 5% to 7% cut is accurate that overall cut remember we are only taking 30% of that sharing so 6% to 7% cut to us is only 2% in real impact right. So it's.

Actually the Cape line and kept have a basically you'll have a similar 2% impact just by the pricing alone. That's a pre tax impact if you add the tax rate on it.

Net impact on the pricing alone will probably be somewhere around a 1.718% maybe okay. So that's a pricing at all and then you know.

Again about the funding cost savings operational efficiencies and all these kind of things.

One clear change will be the risk factor just simply because when the pricing coming down you are naturally targeting a high quality group.

<unk> users.

Okay for that.

By our estimate.

The savings from after tax savings from that sort of a credit cost side will.

We will be coming somewhere around 6% to 8% range. So if you deduct the pricing impact one seven a deduct.

Did that 0.8, sorry, <unk> 68 from the one seven to 1.8, you've got roughly 1% that's not even considering anything on the funding cost on the operational efficiency and all the other things we mentioned earlier. So that's the very rough calculation just for your reference.

That's very clear thanks, guys.

Thank you.

Thank you so much that's the end of the Q&A session I would like to hand, it back to management for bracing for closing remarks.

Okay. Thank you everyone again to join our conference call and if you have any additional questions. Please feel free to contact us. Thank you.

Okay.

Thank you.

Yeah.

Operator Tropicana.

Yes, that's the way I did a conference call.

Hello, Thank you.

Okay.

Okay.

[music].

[music].

[music].

Thank you for standing by and welcome to the <unk> 360, <unk> second quarter 2021 earnings Conference call.

Please also note today's event is being recorded.

At this time I'd like to turn the conference call over to MS. Mandy Dong IR director.

Go ahead Mindy.

Thank you Hello, everyone and welcome to our second quarter 2021 earnings conference call. Our is now to what you said earlier today and can be found on our IR website joining.

Joining me today are Mr. Zhang our CEO and director, Mr. Alex <unk>, our CFO and director and Mr. Don Yang our Seattle.

Before we begin our prepared remarks I'd like to remind you of our safe Harbor statement in our earnings press release, which also applies to this call. We may refer to forward looking statements based on our current plans estimates and projections also and this call include discussions of certain non-GAAP measures. Please refer to our earnings release.

Delineation between non-GAAP and the GAAP one last.

Unless otherwise stated all Segun mentioned RMB I will now turn the call over to our CEO Mr. Watchful.

Okay.

Uh huh.

Thank you gentlemen.

Thanks <unk>.

Sure. Thank you the woman pool.

I do I buy a bunch of wheat.

The second woman diagnosed as Hugo can be sometimes a new issue.

Funding has been done around this view.

That changed.

Tissue shoot them down.

Though he changed by Lilly.

<unk> been done by the new ship.

Probably the number one issue.

Taiwan.

I'm curious I'm sure not all especially U b can be.

On the vanilla initially.

Non-GAAP junior in that slowdown.

<unk>.

Sure.

Hello, everyone I'm very happy to report another quarter of record breaking operational and financial results during the quarter financial institutions originated RMB $88.5 billion loans through our path for marking another record high.

<unk> five zero, 50% Y O Y and the 19% one nine kill them kill after reaching RMB 100 billion milestone in Q1 outstanding loan balance continued to grow to RMB $111.6 billion in Q2 zero.

Zero, 50% Y O Y and the 15, one 5% kill and kill.

Total revenue was RMB 4 billion in Q2 'twenty.

20%, two zero wildlife and 11% kill and kill non-GAAP net income was RMB 162 billion up 17, 1% Y O Y and 15, one five killen killed.

Sure Tim.

Tim on by noon.

Meanwhile, <unk> would you do to vote you should do.

Maybe on mute.

Well Linda Huber.

Chris in terms of the ratio.

Dorian boyfriend, whom she don't Lingo you will show that will be administered on the border.

Suzanne Wang song.

And then two if you go critical back several months.

Yeah.

Yes.

The regime.

Sure sure.

Good morning, Amit creep that you would see here, but could you quickly.

Thank you somehow neither Lucia document.

Gentlemen that away from it three times already with you.

Despite a continuously changing macro and regulatory environment, we have delivered five consecutive quarters of record breaking results over the past few years, we have built a comprehensive operational system that demonstrates remarkable resilience through cycles.

Be more specific our diversified that user acquisition channels and see narrows allow us to effectively hot against any volatility for a particular channel.

Our extensive network of diverse financial institution partners gives us sufficient flexibility in terms of funding cost geography coverage and pricing our foods backup term risk management capabilities allow us to target different user segments with effective pricing based on different market dynamic.

Our access to some key financial guidance also give as ecosystem great cause that you, let's say to comply with the ever changing regulatory environment.

Okay.

<unk>.

Bulk or COVID-19.

Similar to that agenda.

Sudan coupons on your total inflation into their day job.

Some are amazingly until such time as that new corridor Carola swimming pools.

Okay.

Adjusted EBIT NIM could you either tuned answer.

Yes, Sir.

Single.

<unk> J D.

So we shall see the children.

Women, John Cartesian can help weibo with Johan <unk>.

This is Jamie thanks for the Gen <unk> syndrome.

Then she was at Guizhou <unk>.

Yes.

For minimum wage that Duncan. This is helpful. In Asia, we go see it.

So we will quickly women towards the pivotal function.

Over the last six weeks also kill thing along with other Chinese Adi has experienced extreme volatility in the market. While there are multiple risk factors trigger such as share price movement, we will let the markets overreacting to the negative elements and ignoring.

With solid fundamentals and a strong growth prospect of procure fee.

As such after a careful evaluation with the approval of our board management decided to launch a share buyback program. The company intends to repurchase up to USD 200 million of ABS through open market or other form of transaction over the course of next 12.

Yes.

With the late at current market condition share repurchase other extremely attractive opportunity. So it's troy, our cash and to generate great returns to our shareholders.

While much of the industry.

Tuition.

<unk> Dot com will.

We'll move to hear AUM and <unk>.

So shall we continue Amanda.

Okay.

Well, the Toyota and therefore.

Tim Duncan do.

Thank you pause around tissue syndrome.

Could you need to ramp without your one channel to do co Gen portfolio. Thank.

Thank you for that.

<unk> got plenty of them done this year.

Sure John should all show equal code of.

And with that challenge as you know sure go ahead.

In certain cohorts antigen by Mr. Fischer will mean archrock out towards looking at Jimmy liquids or <unk> that you see pad Wittenberg AUM.

We continue to make progress in multiple strategy initiatives and are gradually unlock tremendous growth opportunities we.

We made significant progress on diversifying user acquisition strategy customer base continue to well and customers quality improved as badly.

Our embedded finance model grow significantly.

The number of new borrowers in Q2 hit the highest level in the past six quarters at by more than 10% sequentially.

The number of SME borrower acquired offline also increased significantly.

<unk> finance model contributes close to 44 zero percent of our new customers with approved credit lines in Q2.

So far we Havent established collaboration with 22, leading tablet platforms with another eight in the pipeline.

Well initially you would think chiara <unk> reporting that to you.

For more downtown Hotel book will bundle corridor.

Australia sure Charlie <unk> definitely seen them, so hewitt with Shaheed.

The number I'm Joshua.

I think the number in this issue can you show huge with Uber I forgot.

Who is your Wilmington, they put who have either taken.

Tim do you want <unk>.

Sure women Tucson.

Some of that.

For Targa <unk> Shanghai infection.

<unk> Board has engaged.

In June.

Chinese.

<unk>.

How are you going to compete.

Our SME finance business also achieved a breakthrough performance in Q2.

Strengthening our ties with a leading industry partners and the optimizing credit approval process and the policies total amount of new eye probe decline line increased 22% Q on Q to RMB, seven 1 billion and outstanding loan balance increased 45% sequentially with <unk> exceeding our.

250000.

Meanwhile, we are rolling out to customers long products catering to the specific funding.

Bounding needs of different industries.

In July we launched tobacco business law and have served more than 700 offline tobacco business owners in the second half of this year, we plan to launch other industry specific loan products targeting cross border E Commerce supply chain finance as well at agriculture and forestry sectors.

Well Linda could you've done recently.

Tissue consultation sure the Susanna Moshe.

Total revenue for Ya.

Chip in Zambia.

This is Jason Bandel looser.

As inflation schedule niche and you move your AUM.

10, and Showtime Shahinian issue.

Sure Julian to Lumpiness in demand it is.

Joe as you have good data.

The number I understand flu.

Long facilitation under the capital light model accounted for roughly 56% of total volume in Q2, and the port amounts of July capital Light accounted nearly 66 zero percent almost reached our full year Gulf War upgrading strategy.

So our smarter marketing and product IC intelligence credit engine, the number of active user increased 74% Q on Q.

The transaction volume and outstanding balance both been tapped by 36%.

So youre going to consider doing that again.

I want to come back.

Yeah.

Yeah.

So as Johann emphasis on GAAP basis.

David and Kim has four main timber anecdotal data midyear.

Tom.

Mckenna.

Hey, Tayo.

As you well know pretax income.

That concludes our timberland to Johan please.

But then you also heard Sheila.

Well listen to you.

Provision for acuity.

We showed you two for you.

Thank you.

To that year over year pressure delays with that they were targeting anti some ABS costs.

So that's about it.

<unk> hundred machine Lingo months with Gen. One thing.

As for the recent regulatory changes that we want to share a few back here.

One of the 13, leading into napp half warm on the April 20, <unk>, we have maintained the regular and the Charles communications with regulators.

Currently the self assessment and the related it rapidly vacation process moving forward in an orderly manner.

We fully understand the regulator's requirements and expectations for the industry.

Although or our business is a relatively focused and has a clear path towards full compliance with regulatory requirements. We don't have online payment online insurance online brokerage operation, which has stepped up to more restrictive regulations.

For our loan facilitation business, we don't do join lending nor have overlapped overleverage ABS issuance.

We are highly confident to satisfy all of the revised our regulatory requirements when everything said and done.

This isn't going to be a garda.

Angela Aman here.

Women, because others, who came on boom and didn't go with whom Michelle in terms of the adoption to income base.

We have seen Jim you said that the current thinking digital first world Tuesday, one more question Joe <unk> sturdy.

We'll go to <unk>.

As you May already know the proposed the new regulation will not allow loan facilitation platform to provide clarity SaaS related data the rapidly to financial institution and stuff data transfer masco into a licensed accrediting agency we have.

Pre emptively communicate it with the regulators to understand the policy direction and to make necessary preparations.

I will take multiple actions to satisfy this new regulation.

On one hand, we can cooperate with existing third party credit agency on the other hand, we can also seek partners to jointly launch of Neocart Agency.

This is Chuck.

Okay.

So kunal RMC shot the windshield.

So you're assuming.

Thank you Angela.

Hey, good to incubate.

Woman.

Oh of course.

Demand will be eligible for you Amanda.

And our younger Diane Eutocia turnkey judgment and opinion linear transformation agenda, Shanghai or in Central Europe.

Our union.

How much of your EBIT.

On your on your.

Children.

<unk> NIM.

'twenty over an increase in income.

Linda.

Take rate increase.

I'm just on for you.

Gotcha.

To do that to me John.

Toyota attention they're familiar with.

In Russia, our downhole cause you don't win G without having yielded a cushion towards breakeven do banking I'm looking you could then your ABS fashion.

He will join the income.

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Hey, Matt.

I Hope you got Hampton video to Cushing in the Fujian sit on your behavior.

When you shop at that New Hoffman Hugh.

Revenue in the jungle.

Congratulations again.

So John with regard to Cook Williams.

And with the same window here.

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Eagle Twenty's is a woman negotiating.

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On the R&D hardware tweaking Joseph.

100 <unk>.

In San Mateo.

Women face against budget of 801.

Recently, some media reports indicate that regulator will require consumer finance companies to implement an all in interest rate cut of 24% for consumer lending. This is consistent with the regulators longtime agenda to support real economy by lowering financing costs.

Consumers and Smes need is also consistent with our long term business planning.

Our own balance sheet loans, and SME loan business already priced below 24%, while our consumer facilitation business even.

More restrictive stress tests in which we asked them to cut our price to below 24% that rather rapidly we did not.

Not expect the price cut to have a minimal impact to our operational and financial results in 2021.

As for 2022, it will be a transitional year when the entire industry will comply with the 24 rate cap by drilling in.

In our stress test, we continue to see healthy volume growth in 2022, and net take rate should be around 3%.

There are also some positive factor that may mitigate the negative impact from the 24% rate cap.

Lower price, we should be able to develop a partnership with larger national banks that typically offer more stable funding at lower funding costs.

In addition, with all of our assay at 24% or lower we should be able to significantly increase the insurance of ABS, which typically carries a much lower finding costs around five to five 5% versus around 7% from banks.

Furthermore, and lower prices, we can attract more high quality bar at which we are naturally dragged down overall credit costs by 1% to 2% 0.0 IRR basis.

Finally, based on our experienced lower pricing normally pushed up our activities retention rate and lifetime value or LTV.

To conclude we believe more prime customer and a better quality of financial institution would come along with lower priced products.

This will ultimately enhance our operational efficiency and make our business more resilient and sustainable.

<unk> makes that have a solid base for us to accelerate it well. It's after 2022, we feel quite optimistic.

Women.

Yes.

And the guidance of women.

Lola.

Gentlemen, I'm human Yo Yo Yo Gabba motion corner.

So you've got how would that impact good English on the inclusion in Shandong.

The transition will enable until Ah patient.

Thank you <unk>.

So as you can put that fashion.

The woman the cohorts without attempting to you Jin.

So I got to them they're young.

Sure.

I would now like to address the temporary removal of our 360 THL app from the App store. The removal was due to our product engineer missed out one of the function that was required by the regulators.

We have already fixed the issue and our App has been restored to all major app store up to today.

We have conducted a thorough internal reveal and they improved our operating protocols to ensure SEC incident never happen again.

Thanks to our diversified customer acquisition channel and the balance of product mix the impact.

Remove out to our operation has been minimal.

Yeah, well if I may.

So again, the Fujian would want in Shanghai bullion Amit.

Arguably ABS with FRC with yellow chisel, you'll show the team with John D. The income, but thank you.

Sure she vacuum ABS R.

<unk> continually bamboo Williamson.

If I can it's honestly.

Thanks from Sudan pending.

Well again, just so I can do that.

Joe don't hear from J D do you want to.

A woman talk are there certain foods and Argentina, we shuffle.

The delinquency ratio.

J E D.

And then just your box your balance sheet, you should get them back.

Easily tissue boxes that bevan.

During the quarter, we continued to diversify our funding sources.

Accelerating the pace of ABS issuance with a total of RMB two 1 billion ABS in Q2 at an average coupon rate of five 3%. This has brought our total lab ABS insurance to RMB three 1 billion. So far this year.

Ranking at number four in the market.

Our risk management system to support more business lines, we continue to see further enhance of our asset quality.

The 90 day, plus delinquency ratio across our platform with a 119%.

And one platform rate remains stable at 98% and day, one delinquency rate at 5%.

Well no hooks into income.

So it will be more tissue product.

Yes.

Ladies if Hong Kong some essential.

Sure more you at other avenues.

Can be cured either uhm Lucia.

Well.

You seem to look that way more that will allow you guys to gaming.

Jumbo Sunday with you.

Gingerly.

Woman you exit out of the door.

Jim.

Shimon.

Mcgann, who seem to have left the door.

It depends where it seemed that from here.

We continue to expand the scale of our collaboration with KCB total accumulated loan facilitation volume as of Q2 was RMB 33, 5 billion outstanding balance was RMB 24 billion at end of Q2.

<unk> six zero percent from tier one.

At least that the scale of the KCB partnership through man relatively stable for the time being.

We have brought a trust and a great flexibility in our collaboration with KCB.

Going forward, we will proactively explore new products and business opportunities through our collaborations with KCB.

This isn't going to glue together, yes keep on mute.

John has told us negotiation.

And then she couldn't honestly.

Well each.

With annual income if you can please jim.

Julian.

Puncture woman heaters would refund and then did the timing issue.

Yeah.

We've made some good progress on the yesterday, frown, which grew up more and more attention.

One daily flight Hunan Province. This July we took swift action to support by donating RMB 20 million through the <unk> Foundation.

Meanwhile, we organize the local teams to join our rescue efforts.

Great, Okay, our union someone NIM.

Mr Fischer Miranda.

They push it you go around bottlenecks from June <unk>.

The 100 gigawatt.

Gigawatt Saturday away something based.

<unk> hundred I got here.

Okay.

This is.

<unk> bin this is that you said on NIM.

So <unk> been loans, how would you in general with other groups.

When we don't know Fernando this is Jim tell me what I'm missing.

Dan, It's Jason who you'll hear him to lead our country.

4 million sushi punching pet food in the country.

Gentlemen, could you you can see you guys forget you decide though.

Could you guys can cook idea in Q4.

You wish you well.

So can we integrate easily agenda going forward.

Oh boy, well quite satisfy them with our performance in the first half of 2021.

As fruitful result comes along from dedicated efforts of our excellent team I would like to express my gratitude to their hard work.

Well your time of rapid change and a great companies are always bumps in great change.

We have successfully demonstrated our capabilities and ambition over the past five years.

Fintech is a vast market with huge potential and our fintech product has profoundly changed financial service landscape and the user experience.

We are continuously launch innovative products and are dedicated to become the premium player in this market.

Some of your AUM in the CFO Alex.

Thank you Joseph.

Now, let me turn to our CFO, Alex Toronto more detailed info. Thank you.

Thank you Hi, Joe Good morning, and good evening, everyone welcome to our quarterly earnings call.

For the interest of time I will not go over all the financial line items on the call. Please refer to our earnings release for the details.

And as Joe mentioned, we delivered robust operating and financial results for the first half of 2021.

Powered by strong consumer demand for credit and further improvement in asset quality.

The strong business momentum appears continuing into current quarter.

In fact, we have seen record breaking volumes in recent months, despite some reported softness soft microeconomic activities lately.

Total net revenue for Q2 was 4 billion versus $3.6 billion in Q1.

And three points three 4 billion.

A year ago.

Revenue from credit driven service capital heavy.

Two 4 billion compared to 2.45 billion in Q1, and a three point O a bit in a year ago. The year over year decline was mainly due to facilitation volume mix change.

Capital heavy contribution decreased significantly.

Revenue from <unk> capital Light was $1.6 billion.

Two 1.15 billion in Q1, and 259 million a year ago.

The robust growth was mainly driven by.

Exceptional progress we have made in capital light and other technology solutions during the quarter capital light and other technology solutions contributed roughly 56% of the total loan volume well the underlying take rates relatively stable.

We expect satellite contribution percentage to continue increase in the second half.

To reach roughly two third of our total volume by the year end.

During the quarter average pricing was 27, 2% compared to 26, 6% in Q1, and 27, 2% a year ago.

Assuming the reported 24% rate cap guideline will be implemented across the industry. We are expecting overall pricing to gradually trending down through mid 2022 to satisfy the rate cap requirement in our stress test.

Even under the more restrictive and steep rate cut scenario.

Where are we assume we cut the rate to below 24% starting from September the first.

In.

In such a scenario, we should still be able to maintain healthy growth and profitability in the transitional year of 2022 and resume to a more robust gross afterwards.

S. Microeconomic activity has picked up in China in the first half demand for Internet traffic also increased significantly along the way.

In addition, we also proactively accelerating the pace of customer acquisition in recent in the last couple of quarters to take advantage of the overall positive business trip.

Such we have experienced some uptick in sales and marketing expenses.

Average customer acquisition cost on the consumer lending side.

For the quarter was about RMB 237, compared to RMB two O six in Q1.

As we discussed in the past average cost per approved credit line is a calculated number with limited value in our decision making.

We will continue to use lifecycle, ROI and LTV as key metrics to.

To determine the pace and scope of our customer acquisition strategy.

So far in 2021 healthy ROI trends have encouraged us to take a more proactive approach to accelerate the growth of our customer base.

Non-GAAP net income was $1 six 1 billion in Q2 versus $1 four 1 billion in Q1, and 942 million a year ago.

We once again set a new record in quarterly profitability driven by higher facilitation volume.

And noticeable improvement in asset quality.

The effective tax rate was approximately 18% for the quarter.

And sorry for the first half of 2021.

We see a similar level the ETR for the rest of the year longer term, we are expecting a normalized ETR to return to approximately 15%.

As we move towards a more technology driven business model.

We continue to see marked improvement in operating margins as increasing contribution from capital light and other technology solution will generally lead to a higher margin structure overall, we expect profitability growth to be more or less keep pace with the facilitation volume.

Grows throughout this year.

With strong operating results and increased contribution from top line model in Q2, our leverage ratio, which is defined as risk bearing loan balance divided by shareholders equity further declined to four 8% sorry, $4 eight times from five four times.

In Q1, and $8 three times a year ago.

We expect to see continued deleveraging in our business driven by further movement towards capital light and solid operating results.

Total cash and cash equivalent was $8.8 billion in Q2 compared to $9.2 billion in Q1 non restricted cash was approximately $5.2 billion in Q2 versus 6 billion in Q1.

The modest decline in cash was mainly due to more proactive deployment of cash.

Our operations to support ABS, and the pre ABS assets, which generates higher returns.

Meanwhile, a significant portion of our cash.

So allocate it was also allocated to secure the deposit with our institutional partners and register your captors of different entities to support our daily operation.

As we continue to generate strong cash flow through operations. We believe our current cash position is more than sufficient to support the expansion of our business to invest in key technologies and to satisfy potential regulatory requirements. Therefore, we believe it is a prudent decision to you.

Some of our quote unquote free cash to invest in our own stock, which is priced just around the companys liquidation value.

For a company that is still generating healthy growth for the next few years, we believe it is a great bargain.

Finally, let me give you some update about our outlook for 2021.

The operating results for the first half of 2021 were very encouraging and the momentum doesn't slow so far in current quarter, although we intend to keep our tradition of a conservative approach in providing forward guidance the numbers start to speak for themselves.

As such we would like to raise our 2021 total loan volume guidance to be between RMB 340 billion and RMB 350 billion compared to previous guidance of RMB 310 billion and <unk> 330 billion.

The revised guidance represents year over year growth of 38% to 42%.

As always this forecast reflects the companys current and preliminary view, which is subject to material changes.

With that I would like to conclude our prepared remarks, operator, we can now take some questions.

Yeah.

Thank you management.

So ladies and gentlemen.

Like to ask a question to the management.

Please press <unk>.

One on your telephone keypad.

Two pencil. Please press there was two.

For those who can speak Chinese please come to the ask a question in Chinese first followed by English translation.

Our first question is from Richard at Morgan Stanley. Please go ahead.

We're the only people don't they don't.

So you're going to go to even event.

Golden Tee Cheongsam nature.

Sure.

Yeah can I guess your guidance.

England Eagle at home.

Josef that J&J was Glenn Judy I think what I'm going to build some guy. It's all your foothold there did you see the swap warehouse isn't going to take a you go.

So you can kind of draw one maturity dates yet.

Good to hear.

With Covid I think you would find Dr. Sue.

Darren I'll go through the Georgetown ladies.

In General goes on the go no go once you know they got back on its own cool I sure.

No Dan I think a woman.

Yeah, Yeah yeah.

But I wasn't sure if you said that yeah, we're still there.

Got it that's it for me and.

Oh, Yeah Oh.

Yeah, we said it would be down.

Okay.

Uh huh.

John It sounds like you can take that yeah.

We need to get done what you.

She had a kind of a basic.

Basically two questions from me one is on the.

Basically sending.

More information through the credit scoring agencies.

Any detailed discussion on the.

Actual process, because it's been a little while and you.

You mentioned basically there has been.

Further discussion and there's different versions out there just wanted to see what are what is the latest dominant on that front. Secondly is obviously very good loan volume.

Any discussion with the regulators in terms of any any more guidance on the pace at the proper pace.

Thank you.

Yeah.

<unk> here.

Yeah, Thank you and I'm not sure the new food as you heard George fly that sounds really interesting when we get past Halloween.

We can't really get approval.

I'm not to go to my opinion, which I know you guys would kill you with that.

So you're good to go.

Okay.

Can you sort of hugely to hand out women's usually using one tool of BR towers, you didn't go through them.

Which means your money there.

Yeah, Susan compounding that big a deal yet.

With young woman courtyard condo.

Gwen.

Can you sort of two to four balance sheet.

Really you go unused.

You want me to about.

I got you to the degree that Johan.

You can go and what kind of ongoing inflation there.

And then guidance Yeah CCR Dominion.

That's what I think I should again be linearly.

I need to get done.

There you go.

Yes.

Good clinical in terms of them.

Hmm.

Uh huh.

No. It's a good thing if we had been doing when you believe you'll be able to go home.

On the detail.

Hello.

Mhm buses equally.

Towards two Hudson said, how big of a hit.

Thank you.

Kimberly that's really transform Austin also.

Uh huh.

Vincent Simpson.

As you can see with the first Lady.

Yes.

As you can but it does oh, a woman can swallow them upwards.

Some believe.

The other one that you saw angel or thereabouts was the how did you do.

Oh.

One other possible them it seems like the whole satellite.

C G.

Michelle.

That's the baton of most of the stuff.

You sound kind of put yourself at home.

Joe.

So good to see quite a while since you did people have you thought about sort of what's the Minnesota feature.

So you're going to sell so you must be quite a while.

Oh man.

Listen Christmas events, and in Boston, and San Juan as it elsewhere.

Yeah.

Thank you.

Oh, Okay. So for the draft version of the regulation of the administration of quality assessments business was announced and we have been communicating with regulators for a long time, but actually in the market that there is no standard solution available so far for now.

And also as Mr. Chen has mentioned that actually there are two or three.

Solutions the weekend about the first one is that we apply for quite a lesson to launch a new credit agency and the second one as we cooperate with existing credit agency to continue our business.

So with our in depth cooperation with KCB, which offers.

Another item to you before the solution.

Whatever solution, we adopt in the end the process of product might be different however, it will not affect our result of the risk management and our risk models.

Oh go ahead yoga.

Wilmington's, who suddenly be a crime Jim wanted to sort of come back.

Women come down.

So you can go 10 months this.

She likes to Cleveland.

Yeah.

And two P M.

People should be equivalent at tinder in children.

Jonathan Chauvin women kind of England.

Yeah Rich how are you sure.

She won't commence here then go we should pay a coupon for their coaches you him.

Unfortunately, it should you didn't need to ship.

So a woman.

Two things for sure Jim Brian.

Could she can go there.

Wouldn't you missed them.

Sure.

Cleveland pension should things aren't going back with them.

So for your second question regarding to our growth rate actually we have seen that the growth is not the problem and the regulators focus more on a standardized standardization of the product and of our business also we have seen.

In the requirements by the regulators.

We have issued that we they want the platform's Ethernet platforms to sustain the growth and supports real economy continuously.

Yes.

Yeah.

Yeah.

Yeah.

Thank you.

Yeah Yeah.

Okay.

Our next question is from Alex Yeah.

Please go ahead.

Hi, Susan Obrien I'll go with that.

So when T cells, Antigua plenty Jin Guan thank God.

Hum.

Okay great.

Hum.

England facility.

Premium Donuts, who don't take.

So you can see in place would you does.

So just so you know some pretty gratifying went out you can download copies. You can you can go to Namath, Joe do you want that to the table in a way like they do in charges about four months.

Hum.

Well not be insulted honest with you.

What I hope is shiatsu, James Allen Smart phone calls by man.

Regarding our income yeah, that's the supply and take them.

Sure.

The percentage could easily calculate to go to.

It seems like there's all kinds keyed off all at once I got a stress test at the moment that is what that you'll get a fine tune that.

Oh, so I understood. So not counting I think I'll see the threat that not not in the women. They are your base case for them to move to Alex which is this is somebody goes to the NPL to Japan.

So does it the other one P M.

These aren't going to do the financing.

She's got.

Simple things like a building like this isn't some quantities.

Saar.

It seems like.

Uhm Jin Guan went up.

Oh, just the percentage of <unk>.

Hum.

Tom holds it out and know how in your opinion, maybe it would be shot down 6%.

With the highway Bill did you want that yard.

And what do you think that you'll hear from our comments.

<unk> no no.

Collyn, that's how might that go into what kind of woman changes towards how we thought climber notches away back lines.

Can you hold that she's already broken down so that it was almost like an buys you.

I'll briefly translate my question firstly on the <unk>.

They treat department so they look like the current hum direction from the regulators Eastern Canadian Titan the.

Perfect I've thought.

Of the Dave her collections body and tech companies, though I'm wondering.

Sure.

Later issue more stringent regulation on consumer data collection and use in the future how would that affect our current practice of both data collection and use and how would that affect our credit model.

Second question is on Europe.

Plant two world combined with a 20% interest rate cap, but you mentioned that in your stress test you are going to comply.

Comply fully complied with the type of thing kept by September this year, but.

So the stress test them with your.

This case or your pocket a trajectory towards our combined was that a new cap and then for question is also related to the interest rate trend. So my concerns about.

The 20% cap is only just the beginning of the future regulatory requirement of a further pushing down the overall lending right. So.

I'm wondering if you have any comment on that and specifically.

Given you're also ramping up your M S U.

SME loan so it looked like the SEC might won't be subject to further pressure.

From lower rate no guidance also appreciate your comments thanks.

Sure sure.

Diego and timberland.

England.

Should we assume a stranger.

Tickets Houston shows the unions will come down.

Oh wait wait.

Thank you Julien.

No one when do you think you can depend on.

I'm thinking like for example, with Jacob on NIM.

Sure good issuers in the U S fish and fish oil.

The agenda with you should you know women's where you could see Jim had women.

Woman plenty of like Egypt.

Just to get your income.

Shoot.

Of course, you can.

Good day, everyone that I showed you the Parisian woman.

You put on Cleveland impact.

Do you think you need to go with you as well.

Didn't shoot but.

You see a map, which would ya man without changing thinking you paid off.

We will Miss you can fool instead woman.

So you would you just would you you didn't seem to appear injured.

You can you can do this with your AUM and gentle to.

Susan pans out the furniture.

You do that either.

Oh wait.

Where you would have I wouldn't you.

I'll begin my more than we'd have dealt with this year.

Hershey, who showed you the somehow.

So far we can go even further to me.

Tangela.

Okay. So would you with your branch you know them in new ways.

Women because you use the line.

It kind of you alluded to.

Yeah, Julien so you shouldn't think of hungry young children.

Hmm.

I did I did.

Finally, having a woman who may and June.

Sure.

Gotcha Gotcha women, just if you could take a.

Do you see it how did he get surely you're crazy.

Hum.

Got it.

Okay, well, maybe Peter you go quite smooth away from Shanghai.

And kind of funny woman, which integrates outdoor eating mentality.

Well, that's a good thing when the onshore potential contango issue, where you don't.

You can go to Goldman <unk>, David Yeager showed you the equivalent the inflation placebo.

Thank you.

Good woman you've wanted to go younger they're two way audio.

M D.

Opinion integrating micronesia.

Women Latoya, we found junk with year with Asia with a page and click on the phone with me.

Okay. Thank you Alex for your question so regarding to your first one that we actually we see tightening as well about the data capture and usage in this industry. So for regulator side. We think there are two basic principles. The first one is the main them understand.

It was data capture so.

Apart from capturing data from cats, MSI like forecast and of course, our application. We are working proactively with third party credit agency for industry and external data sources as well as replacement.

And the second principle is that the customer authorization eight mandatary before data capture as you may know, that's our removal of our 360 THL agitations from App stores. It was caused by these problems.

We will emphasize more on this principle in the future we believe that with our relatively standard personal loss and the impact of this type of an increase proposed will have minimal impact on our business.

Yes, hi, good morning.

So that type of thing so Jim Brown.

Well mentioned, Colorado.

Hmm wish it could be true.

This is Roy ultra with Dominion Louis has been really good.

Sure.

Sure.

<unk> wishes syndrome, rfps or something.

Women you guys from July <unk> to gain their critical.

Great.

I was just hanging in there.

You're going to go food done at J&J, Good Jin Guan I did go down.

With that.

Two on Michigan intelligent Sharon Shea.

Moving to Asia, we plan to evaluate how to dig a hole videotron.

Regarding to your second question the timeline of the all in interest rate cap at 24% actually we say that we are a different timelines what they find institutions. Some institutions will follow their guidelines, that's an outstanding balance of <unk>.

Of the long overdue and 4% will be reduced to zero by end of June next year, and some institutions fold or the guidance that there will be no new originations by June next year. So we will follow these accordingly.

Yeah.

Yeah sure.

<unk> okay.

<unk> was shut down.

Well normally our syndication income portion of your senior secured yes.

In particular show associated with it.

Yeah, definitely men and women kind of annoying.

I'm going to send you that since youre sitting at Goldman.

In anticipation of the move toward food acres, so sort of a year for sure.

Are you seeing kind of a if you think as you know as you go into Q2 event.

So lindsay youre changing or sequentially a degree yeah.

Turnkey lines don't quit shoe.

With that Sandy.

In the <unk>.

And I wish him well woman.

Yeah, Yeah, yeah yeah.

General Entertainment room, and you Gotta.

Got it.

Switching could could get goods to coach decision.

Great tissue and that'd be a good way to go I need I think we're taking on the income say women.

So just as a man who is.

England it'd be good to go.

Because it seemed to me when you bring me she's inquiry fashion.

Uh huh.

Regarding to your third question that if the 24 interest the GAAP it will be lower and more.

Actually as all market participants no 24% interest the GAAP has been the window gather from our regulators to banks for a long time recently media reports back later.

<unk> cash requirement to expense to consumer finance companies since the 24% cap has existed in the industry for quite some time, we don't see a great capital will further go down.

For your question.

Hello, everybody equally Shanghai, Guangzhou wasteful Wheeler.

So this will be a degree of I was thinking about it bigger rally.

Hmm.

Woman.

Hmm.

I'm sure my ambition or where does it go shuang you can ask your choices.

Dozens of theaters.

Maybe you could tell me the outbreak.

So who do you agree with you.

Food and.

Families with young for him.

Net political nikko, which is kind of cool.

He doesn't have to be younger.

Now when you take a minute.

Is that you can live with Laguardia Purposefulness visuals and Antonio how did they don't food womenswear contango.

Well look we.

She has done that he couldn't get into it.

And when you move to Truecar.

Commingled yield with AUM as usual you wish anything Jim one kind of one year type of tissue the progression that <unk> P. M.

Tissue.

And Furthermore, regarding to the interests of the rate of SME loans of course, if regulators wanted to say the interest rate will be as more as possible, but there is no standard.

It is similar to the consumer finance industry.

Once in service needs and the supplies of the SME loans as a platform asking too much way, we will continue to offer various services to make the difference Kansas ease of the SME loans.

Thank you.

Now she wanted him with any other ones here.

Okay.

Thank you.

Yeah.

Okay.

Thank you. Our next question is from Jackie True China Renaissance. Please go ahead.

Okay.

Sometimes I get what you're willing to corner you can see from Ctrip.

Or would you be illegal chic language English Oh my God.

How long it took all of that George as you push it out.

Can you talk about large surgical new Detroit I push a whole chicken margins I don't call them you know we have done.

I'm talking about central.

That sounds so I can tell you that you can pay whole woman.

Good to go.

The APR coming calls.

Credit cards, but if you could just shows you the power of the Ah ha.

Oh come on.

I just couldn't tell though we are taking place and people are too great charter your ships.

Rahul Dr. Glenn Teasers for Glenn you will note that neither cheap tenure with us.

A few questions will come up Unfortunately show yet.

One is on the leap no woman that's the music quite really huge high you why the huge Oh Gee performed yet home am Kenji glass any loan that you could try and ship.

A P. R margin teaching it may cause some chocolate chip will be out with a whole.

<unk> quite a chico's loan volume Chabal synergy guidance.

So let me translate so congrats for the strong results. My first question is related to regulation as well.

So for the 24% interest rate cap Benjamin game.

A stress test for NIM.

Next year regarding the margin.

I, probably won't go down to 3% so just want to.

I understand what is our assumptions behind this stress test regarding to a T. Our funding costs.

They call them either.

Expenses.

And any chance we can get data.

Offload for APR in the third quarter.

And second question is regarding to the estimated loan.

We've seen other competitors also move to this new business.

So.

How are we going to differentiate our SME loan product and what is the APR of margin and our growth target this year.

And is this a SME loan include that in our new.

Guidance. Thank you.

Okay.

Hum.

Yes.

Okay, Great, we shut down or when do you all mentioned that did you guys figure it shut down.

So the crusher is assembly.

Ginger, but you've got tissue that show women dose will surely meal shipments.

Houston, the tumor and John you needed a shutdown did not drill and integrated tons yet.

The challenge for the 10 minutes actually to the younger woman you get at home and they come in the Doctor ship, maybe Macy's and downtime.

Did you even called out when we were going to go into the bigger we'll have to agree with you suddenly eager.

Because of him.

Women, so josh its ability to hit them, but that's in the literature, plus you would see that that they could choose income gender neutral. So you can come back.

They seem to me you could you see as AUM again, if you go to a degree so doing things there.

Our season pass and ABS and <unk> been waiting for.

We've heard that.

Some of it down to the RSV challenge the whole AUM and then goes here, who can do that again.

Hum.

Hmm.

Well I'm gonna jump beauty, so I didn't want to see a different door, depending on which you can compete as you guys think you're going to you know you obviously.

And then when we will actually rather than <unk>.

I'd be hesitant to go fast and Greenway you can wait until you get a decision maybe others have been hard to.

You hit that 110 million could be community. Good NIM was at a 10 minute wait.

Yes.

Yeah.

The dollar Wilmington, good sentiment in shutdown.

Could you just keep LNG, even though theyre not.

For example, if we get them in that debate.

Yeah, Yeah, we've shut down 70 the IRR.

So it's only kind of elements you have about 10 minutes.

But we're going to go quicker.

<unk>.

Then they can call you will also need they can call type of ticketing attitude at the hotel and anything we can pump.

Like element is something that at some point.

Hitachi and Peter mentioned that you could you walk me. So you talked to him and he sat down with them suddenly you could take away do you pay down 10 million lives in the soil.

Thank you Jackie regarding to your first question about the stress test actually what we have delivered now is relatively static test with all other factors status quo, especially there is no improvement in our efficiency. So we estimate there is no cost of changes in this.

Version of the stress test however, as we have known that it does it does the improvement of our cost.

Example, addlestone constant before we have a large portion of our funding from our consumer finance company with a relatively higher.

Funding cost.

And our ABS Ballroom is also limited however, with lowering cap interest rate, we can have more something from national banks or larger national banks, and we can increase our ABS volume. So we except expect our funding costs to be lowered by 1% and we.

So quite a lot of expectation to be lowered by around 1% as well. So another major cost of customer acquisition costs will be lower as well. So we expect that actually to take rate of 3% will be improved in the feature.

Okay.

Yeah, Yeah yeah.

Yes, the Q.

One woman. So you don't want me doing that has reduced even though we're going to do it.

She has a good shot down that's for sure.

Kiss AUM and.

So you can get it out for you in <unk> Shanghai told them that.

The annual minimum wage.

That sounds really good.

You can find we meet.

Where do you think is how the agency branch acquisition.

And potential.

For the fourth quarter of this year, we have star changes a lower APR task. So the APR will be lower but there will be no meaningful impact on our financial results of the next quarter.

Thiago <unk>.

SME there you go.

Sure.

A woman.

Oh man woman that degree of which I mentioned in the usual standard.

Under that.

Do you want <unk> sure.

So either.

Hum.

Because you're trying to lease them individually.

For example, younger women and we're convinced this ratio shortly.

Mm 120 years on the jewelry acronym.

The Zip <unk> chairman.

Duncan argument to go from.

Okay.

Inclusion of Duncan will you push it call. It should go should you convinced the country. Good Yeah, then there needs to be done now.

In Indiana the SME.

Sam you tell.

Sure there are women.

So you're referring to.

Wincing that'd be home human woman.

Gotcha.

It's a good reputation pushes countries. So you got to push where you could even argue with that.

It'd be kind of I'm.

Yeah sure I can do it.

So there's always an ICU.

You should have a good day.

Well monistic chimney somehow tangentially, you could sit underneath the hood.

Lauder woman TV and we couldn't do that you get a front end loaded nature.

Alicia the Osha should feed hungry to unbalance fee AUM.

I really think of foreign income.

Good Savannah schedule.

As I showed in servicing income so diligently to fully equivalently.

Just as a woman.

And integrate.

Food allergy because heightened my uhm.

And then.

It's a great and Jim the door.

You were saying I cannot agree with it.

Bingo.

Sandy.

It's always good when you when you aggregate equaled only cut down like I said, Lukas 1 million homes that so it is a good time in EMEA.

So in terms of an unusual year with Japan into good.

Hum.

Hungry to integrate should use when does it go.

I don't know that you shouldn't see a woman.

We reaffirm that they get to.

Hello, Sir.

And I think Oh, so where are you with that English reunion with Rio Tinto.

Because if I'm going to get delayed.

Sure.

If I can for you.

To them or they don't usual women Greenway and <unk>.

<unk> totaled 300 kind of deal.

So for your second question regarding to our competitiveness.

So there are two aspects. The first one is about risk management.

F N E business.

And from the traditional ones.

Because we focus more on the MSC side.

Certainly the traditional SME loans over 10 million in ticket size is not fully data driven however, we have adopted a new engine regarding to our risk management about SME loans.

We evaluate from the individual side and from the corporate side with Teekay size of 250000 on average we have leased and food each licensed our accumulated experience of risk management in the past years and consumer phone lines.

And the second advantage of Us and the corporation with KCB.

The only thing platforms in China, Mark cases that are able to have in depth cooperation with banks.

We believe we have an advantage of data and the funding cost regarding to that any business.

Okay great.

Mobile.

Isn't that kind of autonomy connectivity and alcohol.

With me it can be.

Interpreted in the Italian woman that they couldn't move you're all familiar with union SME dominant in here with a big Uh Huh.

So again.

T mobile is important element in Sidoti good guidance linear.

So for our target of SME loans. This year it will account for around 10% to 15% of our total loan origination and it has been covered in our guidance.

Joining up with a new institution.

Okay.

Yeah.

Okay.

Just I have a few a sort of a clarification and then add up to a Mr. Louis comments there number one the most important clarification that 3% is not margin. It's the take rate right. Our net margin this quarter was 40% and if anything for the.

Next couple of quarters, we'll probably see a little bit expansion of margin.

Then this Q2, so the 3% though is the take rate on.

Loan balance that we have been saying this in the past and then secondly.

And also regarding the second half pricing trend.

Even though we our stress test was taken the more drastic cuts starting from September 1st basically on that day I wish it goes below 24, but in reality, that's not going to be the case, just like Ashok mentioned, it's really dependent on the pace of our financial institution partners.

Are there kind of a.

Progress there so most likely it will be a gradual trending down towards that kind of a goal.

By the end of.

June next year.

So if you do a dania kind of a distribution arm.

Any given quarter from now to mid of next year, you're probably looking at maybe a one percentage or a little bit over one percentage point change in pricing. If you just average out so that's the.

Regarding the pricing change.

And then this kind of a change for 2020.

2021 for the remainder of 2021.

We don't see any kind of a meaningful impact in both low volume.

Or the.

The take rate that's why in my prepared remarks, I mentioned that.

The second half profitability will most likely keeping pace with the loan volume growth.

You have our guidance for the full year, you can do the calculation roughly.

They get the.

The calculation the sorry, the profitability the number for the second half okay. So that's.

Another clarification.

Then the third point is really about how do we get that's 4% I'm sorry, it's 3% take rate when this whole thing that set and done.

I have a oh.

Kind of a back in the envelope calculation.

That's assuming our current mix in terms of capitalized versus cap heavy at <unk>.

Six to eight versus 46, they are being kept light.

And normally.

The reality is our cap life side of business carry a higher pricing versus the cap heavy so.

If we [vocalized-noise].

Let's say cut all the pricing to 22, 5%.

And then on the cap herbicide that we need to cut roughly about 2% on the life side, we need to cut.

Roughly about <unk> <unk>.

Six 5% to 7%, but keeping in mind that six 5% to 7% cut is accurate that overall cut remember we are only taking 30% of that sharing so 6% to 7% cut to us is only 2% in real impact right. So it's.

Actually the top line and kept heavy basically you'll have a similar 2% impact just by the pricing alone. That's a pretax impact if you add the tax rate on it the net impact on the pricing alone will probably be somewhere around a 1.718% maybe.

Okay. So that's a pricing law and then.

Again about the funding cost savings operational efficiencies and all these kind of things. The one clear change will be the risk factor just simply because when the pricing coming down you are naturally targeting a high quality group of users.

Okay for that.

Our estimate.

The savings from after tax savings from that sort of a credit cost side will.

We will be coming somewhere around 6% to 8% range. So if you deduct the pricing impact one seven a deduct eight sorry, <unk> 68 from the one seven to one eight you've got roughly 1% that's not even considering anything on the funding cost.

Cost on the operational efficiency and all the other things we actually mentioned earlier. So that's the very rough calculation just for your reference.

That's very clear thanks, guys.

Thank you.

Thank you so much that's the end of the Q&A session I would like to hand, it back to management for bracing for closing remarks.

Okay.

Everyone again to join our conference call and if you have any additional questions. Please feel free to contact us. Thank you.

Yeah.

Thank you.

Yes.

Yeah.

Operator shall we cannot.

Yes, that's the idea of a conference call.

It can handle.