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spk01: Ladies and gentlemen, thank you for standing by and welcome to the 2060 Digitech First Quarter 2021 Earnings Conference Call. Please also note today's event is being recorded. At this time, I would like to turn the conference call over to Ms. Mandy Dong, IR Director. Please go ahead, Mandy.
spk00: Thank you. Hello, everyone, and welcome to our First Quarter 2021 Earnings Conference Call. Our results were issued earlier today and can be found on our IR website. Joining me today are Mr. Wu Haisheng, our CEO and Director, Mr. Alex Ju, our CFO and Director, Mr. Zheng Yan, our CRO, Before we begin to prepare the remarks, I'd like to remind you of the company's safe harbor statement. Except for historical information, the material discussed here may contain forward-looking statements based on current plan estimates and projections. Therefore, you should not place undue reliance on them. Forward-looking statements involve incurring risk and uncertainty. We caution that a number of important factors could cause actual results to differ materially. For information about potential risk and uncertainty, please refer to company FEC filing. Also, this call includes discussion of certain non-GAAP measures. Please refer to our earnings release for reconciliation between non-GAAP and GAAP-1. Thus, unless otherwise stated, all figures mentioned are in RMB. I will now turn the call over to our Mr. Wu Haisheng, CEO of our company.
spk10: Hello, thank you, Mandy. Hello, everyone. I am very happy to share our performance this quarter. This is a quarter that surpasses our expectations in all aspects. We have continued to maintain the strong growth trend in the past few quarters. We have once again reached a new high in business. The combined return of QE in each quarter reached 7.41 billion yuan, which is 40% of the total growth rate. The first time the stock price broke 100 billion yuan, reaching 1019 billion yuan, which is 38% of the total growth rate. In terms of finance, our QE total revenue reached 3.6 billion RMB, which increased by 13% in the same year. Our Nangap net profit reached 1.4 billion RMB, which increased by 452% in the same year. With the gradual decline of our strategic measures and the obvious recovery of market demand, we expect this strong trend to continue.
spk00: Hello, everyone. I'm very happy to report that our quarter therefore exceeded our expectation across the board. The strong growth momentum that we have seen since 2020 Q2 continued in the first quarter, and we had another set of record-breaking operational results. During the quarter, total loan facilitation was RMB $74.1 billion, up 40% year-over-year. Outstanding loan balance increased by 38% year-over-year to RMB 101.9 billion, exceeding RMB 100 billion for the first time. Total revenue was RMB 3.6 billion, up 13% year-over-year. Non-GAAP net income was RMB 1.4 billion, up 452% year-over-year. As we execute on our various strategy initiatives, and the overall market demand continues to recover, we expect to maintain this robot's growth momentum in 2021.
spk10: As business continues to grow, our technological strategy upgrades have also made breakthrough progress. Our new asset strategy has received more than 50% in the first QE, While maintaining strong growth, we made significant progress in our technology-driven strategy upgrading and transition.
spk00: Long facilitation under the CapLite model and other tech solution models exceeded 50 by 0% of total for the first time. This ratio increased further to 55% in recent months. This marks a fundamental change to the nature of our business. In addition, our tech-empowered business line advanced on multiple fronts. Our smart marketing service product Intelligent Credit Engine, ICE, delivered the rapid growth in April. Key monthly operating metrics of ICE, such as users with approved credit line, transaction volume, and outstanding balance, doubled from the 2020 year-end levels. In particular, the transaction volume in April went up by an impressive 200% from the 2020 year-end levels. Moreover, our risk management RM-SATS product expanded rapidly. We have now established cooperation with 29 financial institutions under this model and with another nine in the pipeline.
spk10: From the perspective of several strategic businesses that drive the company's growth, we are very pleased to see the cooperation between the financial business of Qilong, Xiaowei and Jincheng Bank
spk00: In terms of strategy growth drivers, we are very pleased to report remarkable progress in key initiatives, such as embedded finance API model, SME finance, and the collaboration with Kingcheng Bank of Tianjin, in short, KCB. We believe we have successfully upgraded our core growth engines with more comprehensive and diversified operations.
spk10: We believe we have successfully upgraded our core growth engines with more comprehensive and diversified operations. Our embedded finance
spk00: API model remains very popular among our business partners and connected with more traffic platform during the quarter. So far, we have established partnership with 20 leading traffic platforms and further diversified our customer acquisition channels. As of now, embedded finance model has already contributed over 35% of our new customer acquisition. The pocket of the true credit card product added around 1.14 million new merchants during the quarter with over RMB 1.5 billion monthly transaction volume. This product continues to lift overall engagement level and the thickness of our customer base.
spk09: From the time we started to set up our small business, we achieved a breakthrough.
spk10: We have fully utilized the control advantages we have accumulated in the field of consumer finance, and created a dual-center control model of the entrepreneur and the enterprise. At the same time, we have seen a small business as a financial person plus a financial entity, which greatly enhanced our ability to identify small businesses. Our small business customers are currently mainly engaged in wholesale and retail, accommodation and catering, manufacturing, and other industries. In the first quarter, the number of new customers increased by 67% compared to the previous quarter. Online and offline channels have also made significant progress. We have already covered 28 top partner partners. It is one of the most widely covered platforms in the market. Our products are also rapidly becoming the most popular in the channel. The prices of small and medium-sized products are below 24%. Due to the low risk, the deadline is relatively long. We launched our SME finance business last year, and the segment delivered a significant growth in Q1.
spk00: Leveraging our risk management RM expertise in consumer finance, we developed a unique owner plus SME dual core RM model. Under this model, an SME is evaluated both as an entrepreneur, him or herself, and a business enterprise. This substantially improves our risk management capability and efficiency in SME lending. Most of our SME borrowers are engaged in retail, wholesale, hotel, SMB food and beverage, and the manufacturing. In the first quarter, the total amount of new approved credit line in SME segment increased 67% on a sequential basis. In addition, our online and offline borrower acquisition channels expanded rapidly. So far, we have established a corporation with 28 leading partners. These put us among top SME platforms with the broadest channel coverage. And our SME loan products quickly became one of the favorite among partners. Pricing of SME products is generally below 24%, with better risk performance, longer tenure, and a larger ticket size than consumer loans. which results in higher take rate around roughly 8%. With huge market potential, more supportive regulatory environment, and attractive economy return, we believe SME presents a very promising opportunity for our long-term growth.
spk10: Our cooperation with the Bank of Beijing has really begun. Our deep strategic trust relationship is bringing a very strong chemical reaction to our cooperation. In just two or three months, we have accumulated a total of 180 billion yuan in joint funds from the Bank of Beijing. The total amount is 13.3 billion yuan. On a scale, the Bank of Beijing has become our largest partner in cooperation. Our strategic relationship not only reflects on the scale of our cooperation, but more importantly, it is this trust relationship that brings about an increase in our operating efficiency. Our collaboration with KCB essentially kicked off in the first quarter. Our deep-rooted strategic relationship has translated into strong business results.
spk00: Within just a few months, total accumulative loan facilitation volume from KCB reached around RMB $18 billion, with the loan balance at around RMB $13 billion. KCB now has become our largest partner in terms of volume. Yet, our strong strategic partnership is more than just the scale of the business. More importantly, this trusted partnership has boosted operational efficiency for both parties. and it in turn serves as a showcase and helps us to improve efficiency when we work with other financial institutions. We have seen positive demonstration effects that have led to notable improvements in our overall efficiency.
spk10: We continue to further improve efficiency and asset quality, further reduce capital costs, and further increase the diversity of capital sources. So far this year, ABS has issued a total of 2.1 billion, with an average yield of 5.6%. This is the fourth-highest number in the market. With our combined asset risk performance, we are moving forward. In recent years, our M1 recovery rate has risen to 91%, and Day One's expected rate has dropped to 4.9%. Our asset value has increased to the best level in history.
spk00: We continued to improve funding efficiency and optimize asset quality. Overall, our funding costs have been on a gradual downward trend over the last few quarters as we build more diversified funding sources. So far this year, we have issued a total of RMB 2.1 billion ABS, ranking number four in the market with an average coupon rate of 5.6%. key leading indicators of asset quality further improved and reached a new set of best records in our history. At this point, M1 collection rate increased to over 91%, and Day 1 delinquency rate dropped further to 4.9%, the best ever.
spk10: We have a detailed explanation of this model. We strictly follow this model to carry out regulatory work. Our model has also been accepted by nearly a hundred financial institutions. We strictly do not do joint loans, do not do student loans, do not go to supermarkets to issue APS, and stick to a technology-oriented position. Recently, you may have also noticed that the supervision department including our 13 platform companies. The supervision department first of all affirmed the importance of 13 companies in improving the efficiency of financial services and financial systems, reducing the cost of trading, and playing an important role. This supervision is an essential requirement for fair supervision to promote the health and development of platform economy. Through supervision of platform companies leading the industry, The direction of financial technology industry supervision is becoming clearer and clearer. The uncertainty is gradually decreasing. Our business is relatively monotonous. There are not as many private companies in the private sector. We have maintained the highest standard of compliance in our business. Therefore, we are very confident that we can meet the requirements of supervision for the industry. With the clarification of the supervision trend,
spk00: Let me share a few thoughts regarding current regulatory environment. Believe that the guideline of the commercial banks online lending practice issued by CBIRC in July 2020 provided a basic regulatory framework for long facilitation business. It sets some very specific practice examples of the loan facilitation model. We have always conducted our business in strict compliance with this framework. That is one of the reasons why our loan facilitation model has well accepted by almost 100 financial institutions partners. We have little exposure in joint lending and student lending and stick to our role as a tech-empowered loan facilitator. We also make sure we do not issue ABS over the leverage limit. As you may know, we were among the 13 major fintech internet platforms that the regulator invited to meet recently. At the meeting, the regulator acknowledged the importance of our role in improving the efficiency of financial service, providing service to unmet demand, and reducing transaction costs. We believe the meeting was a necessary step to apply, fill, and balance the regulatory supervision to market participants and promote the healthy development of the platform economy. Strengthening supervision of the leading players will increase clarity to the regulatory direction of the industry, reduce regulatory overhead, and promote a healthy and more consolidated market space. Compared to the other fintech company at the meeting, our business models are relatively simple and straightforward. We have consistently held our operations to the highest compliance standards. Therefore, we are very confident we can meet any regulatory requirements applied to this industry. As the regulatory framework becomes more clear, we believe that leading fintech platforms like ourselves will embrace a historical era of growth.
spk10: So, in the short term, the opening of 1G is really exciting for our team. Overworld, we are very excited that we are off to a very strong start in 2021.
spk00: For the first time, loan balance topped over RMB 100 billion, and the capital line model contributed more than half of our loan book. Our strategy initiative delivered better than expected results, and there is more regulatory clarity for the leading think tank platforms. All of this gives us full confidence for our development in 2021 and beyond. Now, let me turn it over to our CFO Alex to run through more detail import.
spk11: Okay. Thank you, Haisheng. 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. As Hansheng mentioned, we had experienced robust consumers' demand for credit, along with further improvement in asset quality in Q1. As the Chinese economy continued on a steady upward trend and the Chinese year-related seasonality was muted than normal, Total net revenue for Q1 was $3.6 billion versus $3.34 billion in Q4 and $3.18 billion a year ago. Revenue from credit-driven service capital heavy was $2.45 billion compared to $2.56 billion in Q4 and $2.81 billion a year ago. The sequential and year-on-year decline was in part due to the facilitation volume mix change as cap-heavy contribution decreased significantly, although a recovery in average pricing offset some of the negative impact on a sequential basis. During the quarter, average pricing was about 26.6%. compared to 25.3% in Q4 and 28.2% a year ago. Going forward, we are expecting a relatively stable pricing environment throughout 2021. Revenue from platform service kept light was $1.15 billion compared to $780 million in Q4 and $373 million a year ago. The robust growth was mainly driven by a 58% sequential growth in facilitation volume from CapLite, ICE, and other technology solutions, while the underlying take rate for the platform service were relatively stable. We expect capital contribution percentage to continue increase throughout 2021 and eventually account for a clear majority of our total volume by the year end. As microeconomic activities continue to recover in China, demand for internet traffic also increased significantly along the way. As a result, we have experienced some uptick in sales marketing expenses. Average customer acquisition cost per user with food credit line was RMB 217 in Q1 compared to RMB 198 in Q4. Meanwhile, we also noticed a clear pickup in customers' drawdown activity during the quarter. As a result, we were able to maintain a stable and satisfied ROI despite increases in customer acquisition costs. We will continue to use lifecycle ROI as a key metric to determine the pace and the scope of our customer acquisition strategy. For 2021, at this point in time, we believe current market conditions support a more proactive approach to accelerate the growth of our business. Non-GAAP net income was $1.41 billion in Q1 versus $1.31 billion in Q4 and $255 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. As we previously communicated to the market, With the transition to a more technology-driven business model, the structure of our financial model has gradually changed. For Q1, we have seen significant improvement in operating margins, as increasing contribution from CapLine and other technology solutions will generally lead to higher margin structure. We continue to expect the overall profitability growth to be more or less hit pace with the facilitation volume growth for 2021. With strong operating results and increased contribution from a capitalized model in Q1, our leverage ratio, which is defined as a risk-bearing loan balance divided by shareholders' equity, further declined to 5.4 times from 6.3 6.6 times in Q4 and 9.5 times a year ago. We expect to see continued deleveraging in our business driven by accelerating movement towards cap light model and solid operating results. Meanwhile, our provision coverage ratio reached 554 in Q1. compared to 470% in Q4 and 401% a year ago. This was the highest provision coverage ratio in our corporate history, reflecting significant improvement in asset quality and our conservative approach in estimating provisions. However, as Captain Light become a clear majority of our operations in the future, and we are deeply in the safe zone in terms of the provision coverage, we believe these metrics become less relevant to reflect the nature of our business in the future. Total cash and the cash equivalent increased to $9.2 billion in Q1 from $7.7 billion in Q4. Non-restricted cash was approximately $6 billion in Q1 versus $4.4 billion in Q4. A significant portion of our cash was allocated to security deposit with our institutional partners and the registered capitals of different entities to support our daily operations. While we continue to generate strong cash flow through operation, we will also proactively deploy cash to expand our business invest in key technologies, and satisfy potential regulatory requirements. We believe that sufficient cash position will not only enable us to compete in this ever-changing market, but also position us to capture potential growth opportunities in the market recovery. Finally, let me give you some update about our outlook for 2021. While overall business trend has been stronger than we expected so far this year, we intend to keep our tradition of conservative approach in providing forward guidance. As such, for now, we would like to maintain our 2021 total volume guidance of between 310 billion to 330 billion RMB, representing year-on-year growth of 26% to 34%, Meanwhile, we expect total facilitation volume for Q2 should be in the range of 85 to 87 billion RMB, representing 15% to 17% sequential growth. We will re-evaluate four-year guidance when we report our Q2 results. As always, this forecast reflects the company's current and the preliminary views which is subject to material changes. With that, I would like to conclude our prepared remarks. Operator, we can now take some questions.
spk01: Thank you. We will now begin the question and answer session. All the participants with questions to pose, please press 01 on your telephone keypad. You will place in the queue. To cancel the queue, please press 02. For those who can speak Chinese, please kindly ask a question in Chinese first, followed by English translation yourself. In addition, in order to have enough time to address everyone on the call, please keep to one question and a follow-up, and then return to the queue if you have more questions. Once again, 01 on your telephone keypad now. Thank you. Our first question is Jackie Zhao from China Rism. Please go ahead.
spk03: Thank you for the opportunity to ask me a question. Congratulations to Guanlin for achieving a very strong performance this quarter. I have two questions to ask. The first question is about the loan situation of our small companies. As you can see, this quarter, K1Q has made a great progress in the loan increase of small and medium-sized enterprises. I would like to ask, what is the overall APR of the loan, including the entire economic model of the loan, and what is the goal of the loan of a small and medium-sized enterprise this year? Mr. Haisheng also mentioned that the take rate is 8%. What is the comparison between the 8% and the entire loan? The second question is about our technical output. I want to ask about the product of Zhixin ICE. It is different from the product of other green capital bonds. What is the take rate of the current cooperating banks? Thanks for taking my questions and congrats for the strong results. I have two questions. Number one is about our SME loan products. I saw we had very strong growth in our SME financing. So just want to understand what is the APR long-size unique economics about this SME financing product and what is our volume target for SME this year. And I think Mr. Wu, also our CEO, mentioned that the take rate is now about 8%. So how to compare the 8% with our overall loan take rates. And secondly, it's about our tech export business, which is the ICE. So just want to understand what is the difference between ICE and our other capitalized loan facilitation products. What is the take rates and what are the bank partners for these products? So I observed that our reported loan volume definition changed a bit this quarter. I think it starts to include this ICE loan volume. So just want to check what is the ICE loan volume for this quarter and last quarter. Thank you.
spk10: Thank you, Jackie. Let me answer your question. The growth rate of our small and medium-sized businesses is indeed fast. There are actually two types of businesses in the market, because everyone is talking about this, but this kind of approach is different. Some companies put traditional consumer finance customers, as long as they are We believe that this more strict and narrow-minded approach is also one of the approaches that we want to pursue more. It is truly based on the business data. To take small and medium-sized enterprises more as a business person. Combining our past experience in consumer finance, combining the attributes of the person and the properties of the business. This is the goal we are pursuing more. Sure, Jackie, let me handle your first question. Well, you are absolutely right. We see a significant growth in our SME business in the first quarter. As you know, there are actually two types
spk00: two types of SME products in the market. The first type actually we view is more related to consumer finance products. A lot of peers, they extended the existing consumer finance products to anyone who are the management or the owner of SMEs. This actually has quite similar unit economy with consumer finance products. This is not what we are pursuing. The second type is actually what we are pursuing now. It's actually more directly related to SME enterprise itself. We focus on the operational metrics of SME companies. By doing this, risk management of SME products. We leverage our existing expertise in consumer finance and uniquely developed the dual core risk management model. That means we evaluate this SME owner both as owner itself, also as the SME enterprise. This shows a much better unit economy than the general consumer products.
spk10: Yes, we think that the second mode is really more potential, because its customer base will be better. We also put this as one of our main work goals this year. In this mode, the product attribute is roughly like this. Its average APR may be around 20%. Based on the product of tax invoice data, it can reach a price of around 16%. Sure.
spk00: As we focus on the second type, which is more directly related or the truly SME loan, because it has larger market potential and a better unique economy return. The average APR of this product is 20%. For those more related to the tax-related SME loan or the invoice-related, the average APR is around 16%. Ticket size of SME law is 210,000 RMB. As we mentioned in the prepared remarks, the tick rate is around 8%, which is almost twice double the size of the consumer finance law.
spk10: The second one is about our ICE product. First of all, it is the difference between it and other real estate businesses. We think this business is more focused on smart marketing. So we will divide our users into different levels. We will distribute our users to those institutions that want to emphasize their ability to control.
spk00: For your second question about ICE products, as you can see, the full name is Intelligent Credit Engine Products. It focuses more on the smart marketing service. As you see, we have accumulated around 100 financial institutions. Due to the very long time cooperation with them, we know their preference and their capability very well, and we divided them into different layers according to their capability of risk management. For those who have the intention to improve their risk management probability or they already have very strong risk management probability, we will deliver the ICE product to them, which just focus on the customer acquisition service. Therefore, as we compare to capital line model, the ICE model just provided a customer acquisition service. The take rate is comparatively lower.
spk10: Yes, the financial institutions we work with are not particularly different from other assets in terms of properties. We have all kinds of shareholder banks, national banks, and small and medium-sized companies. From the amount of bonds, we have about 2.4 billion in QE, which is about a double of what we had in the last three seasons.
spk00: As we cover various types of financial institutions like consumer finance, corporate banks, etc., there is not much difference among the loan assets we allocated to them. As we mentioned in the remarks, last quarter, this program of ICE reached $2.4 billion, which doubled the size from last quarter.
spk10: I hope I can answer your question. Thank you.
spk00: Thank you.
spk01: Thank you, Jackie. Next question is Richard Su from Morgan Stanley. Please go ahead.
spk02: Good morning, Mr. Wu. Thank you very much for this opportunity. And congratulations on the good performance of E2. I would like to ask some questions about our cooperation with banks. Mr. Wu mentioned that we are getting closer and closer to our cooperation with the Capital Bank. We also have more than 100 cooperating institutions. What is the situation of the funding layout now? How do we plan to turn to the Capital Bank in the future, or to cooperate with different institutions more broadly? take rate. Basically, two questions. One is in terms of the funding partners. You know, we're certainly increasing our cooperation with Jincheng Bank. But, you know, going forward, how do we allocate the loan allocation among different funding partners and any major differences on the take rate? Secondly is in terms of volume allocation between ICE product and other product. Certainly, take rate is different. So what will be the long-term strategic thinking on the loan allocations? Thank you.
spk09: Thank you, Richard.
spk10: The first question is about the future layout of our entire fund. We are still pursuing the diversification of our entire fund-raising cooperative. What is more important is that we achieve a sample of cooperation. Especially in this year, the design of new innovative products is increasing. In the early stages of new products, we need to have deep mutual trust institutions to cooperate more with us in design. So it is more about taking on the experiments of various innovative products and exploring various business models. It gives a good demonstration.
spk00: Sure, Richard. Let me address your founding question. First of all, the diversification of funding sources is always the goal we're pursuing, and we will keep that. Secondly, for KCB, as you know, we have a relationship with KCB. It's better that KCB as a showcase and to demonstrate it to other financial institutions. In addition, as you see, we carry out a lot of strategy initiative this year. It's easier for us to explore the new products with the KCB collaboration.
spk10: From the perspective of TechGrid, there may be some differences in the long term. But our cooperation remains marketable. So short-term fluctuations do not affect the fairness of other institutions in the long term. Thank you.
spk00: Yes, due to our deep-rooted relationship with KCP, there might be a short-term difference compared to the tick rate when we cooperate with other financial institutions. But it would take a longer-term view. We will definitely work with all the partners on our sales business term.
spk10: And our assets are relatively competitive in the market. The fundamental reason is our loan product is very competitive in the market.
spk00: Even there are short-term difference between the KCB business terms with other financial institution business terms, KCB can be as a showcase, and in the long term, other financial institutions will catch up with the equal terms.
spk10: The second question is about how to distribute our customers in the long term. We have always tried to make ourselves a company that can provide a comprehensive solution in financial technology. So we have maintained the ability to fully interact with our partners in every part of the process. In this, our solutions, because different products provide different services in different parts, so we are more from the needs of the institutions. If the other party If we need a comprehensive solution, we can provide a comprehensive service for it. If the other party has a relatively strong risk control capability, we can provide this kind of user-oriented marketing service. On the other hand, if the other party has more user resources and needs this kind of control capability, we can provide our financial brain products to the other party. So it depends more on the other party's needs.
spk00: We always spend no effort becoming the top clear in FinTech that covered every process or every function of the whole business operations. Therefore, for your question, how we allocate different assets or products among these 100 financial institutions, actually, we look at business needs from the funding partners. For example, if the funding partner, they need a comprehensive product, then we provide capitalized product. If the founding partner, they are very strong in risk management, then we only provide the smart marketing product. If they already have very strong source of customers, then we provide the RMS product to them. All in all, we provide a service based on the business needs of our founding partners.
spk10: Thank you. I hope I can answer your question, Richard.
spk00: Thank you, Richard. I hope I...
spk01: Thank you, Richard. Next question is Yadali from CICC. Please go ahead.
spk08: Okay. Thank you, Manager Ceng, for giving me this opportunity to ask a question. First of all, congratulations to the company for achieving such a brilliant performance in the first quarter. I actually have two small questions for Manager Ceng. The first question is about our cooperation with Tianjin Capital Bank. I have seen that Tianjin Capital Bank has become our largest funder. So I would like to ask how much of the amount of deposit we have in the first quarter comes from the Capital Bank. The second question is about our small and medium-sized loans. I would also like to ask how much of the amount of deposit we have in the first quarter comes from the contribution of the small and medium-sized loans. In the context of the smooth development of the small and medium-sized loans, how much will our small and medium-sized loans account for by the end of the year? Okay, then we'll translate my question. Hello, management. Thanks for taking my question, and congrats to our solid results. So today I have two brief questions, and the first one is regarding our strategic partnership with KCB. So I've noticed that KCB has become the largest institution partner in terms of the loan facilitation volume. So could you please share with us more information on how much contribution actually comes from the KCB in terms of the loan origination in 1Q21? And the second question is about our progress on the SME loan business. So given our SME loan business has been well on track, so could you please elaborate more on how much contribution comes from the SME loan in terms of the loan origination in 1Q21, and how much contribution it will be by the end of this year? Thanks so much.
spk10: Thank you. Yes, Kincheng has become our biggest partner. Our QA has raised 180 billion yuan in total. The total amount of the amount of the amount of the total amount of the total amount of the total amount of the total amount of the total amount of the total amount of the total amount of the total amount of From a balance of $1.3 billion to $1.1 billion, that's about 10% of the total balance. We expect that this balance will continue to grow with the development of our new products. We are currently working on new products. Mandy.
spk00: Yes, you are right. As you can see in terms of business volume, KCB has already become our largest partner. As mentioned in the prepared remarks in Q1, GMV cooperated with KCB, totaled 18 billion RMB with loan balance 13.3 billion RMB. As we further advance the business initiative with KCB, we expect to see this number going up in the following years.
spk10: Yes, the second one is about our small business. At the moment, we have two kinds of business. One is wide-ranging and the other is narrow-ranging. From a wide-ranging perspective, we should be able to reach 30% to 40%. At the end of the year, this goal should still be um um um um Second question about the SME law.
spk00: As we mentioned that there are two definitions about the SME. For the broader definition that is a consumer finance law related to SME owner-owned management, In the last quarter, this part contributes around 30% to 40%, and we expect to see this number rising up to around 60% to 80% at the year end. For the second, more strict definition of SME, that is definitely the goal we are pursuing. That is more related to the SME enterprise itself. We target to reach $10 billion loan balance at the year end, As you, if you record, our guidance of loan total volume is 310 to 330 billion, and roughly you can get the contribution ratio.
spk10: Sorry, I have one more thing to add. We are still in the early stages of innovation, so we are currently using our deep-dive partners to carry out various types of testing. For example, we will be testing these customers who are particularly talented, and we will even be testing a product with a million GK size. So we hope that these new products will continue to bring more surprises to the business.
spk00: Let me add more color about SME. Although it's at a very early stage of this product, we are trying multiple directions to further develop this product. For example, for a very premium SME enterprise borrower, we may grant around 1 million ticket size products. And we expect to share more when we see more results coming out.
spk11: Sorry. I'll probably add a couple of details to your questions. First of all, regarding the KCB's volume, as Hansheng mentioned, up to the month of April, the accumulated volume from KCB is about 18 billion. But I guess your question is about Q1. For Q1, KCB's volume is roughly 10.8 billion, roughly speaking. So you can use that 10.8 to calculate the percentage ratio there. And then regarding the SME there, because, as Hashim mentioned, there's two definitions. One is more narrowly defined. The other one is more kind of a broad definition. We use the most sort of a restrictive definition for SME, meaning for those enterprises with the loans issued to the enterprise with actual operation, with sales receipt, with taxation information, those kind of things. That's the narrowest definition for SME. For that, the total sort of a long volume up to April, it's already at, that is 5.8. Yeah, it's 5, sorry, it's not to April 2. The first quarter is 5.8 billion RMB. And the loan balance for this restricted definition, it's roughly $7.5 billion at the end of the first quarter. Keep in mind, this sort of narrowly defined SME loans typically has a much longer duration than the consumer loans, which will result in a pretty fast buildup of the balance as time goes. That's my sort of add a couple points there. Thank you.
spk01: Thank you, Yardali. Next question is Steven from Hightown International. Please go ahead.
spk04: Thank you for giving me the opportunity. I have two small questions. The first one is I would like to ask about this small loan. I would like to know how much is the price of the mobile home we are building now compared to the price of the non-priced home. And then if you look at it from the perspective of consumer finance, the price of the mobile home, no matter how you use different indicators, how should you compare the two? This is the first question. The second question is simply to ask why we see a increase in the cost of our goods in the first quarter, and then the future for our cost of goods, the future growth trend should continue to go up. I'll translate it. Two questions. One is about a follow-up question on the SME loan facilitation business. I would like to understand the share of SME loans with collateral or secure SME loans and unsecured SME loans so far up to maybe April. And how do you compare the asset quality of SME loans relative to the consumer finance loans we have done in say different asset quality indicators. That's the first question. The second question is could you share with us why we have a rise in customer acquisition costs in Q1 on a QOQ basis and what will be our outlook on the trend of customer acquisition costs for the rest of 21 days. Thank you, Steven.
spk06: We don't actually have a mortgage. It's still a credit loan. But we don't treat small business owners as consumers. We use a dual-core air-conditioning engine of a business owner.
spk05: So in fact, the risk of our SME customer is lower than the overall market, about 70% to 80% overall level. And we use the door call engine to control this SME product, which means that The enterprise class business owner and the use of the door engine can match the suitable product. Otherwise, we will operate small business owners like individual customers. But this is obviously a difference between individuals and small business.
spk06: Yes, as our colleague just said, regarding the risks, no matter from which perspective, we are basically at a risk level between 70% and 80% of the overall risk range. Yes, that's it. Okay, the second one is about the cost of goods and services.
spk10: Yes, like what we shared before, we have always regarded customer costs as a process factor. What we actually value more is the overall ROI and the overall quality of the customer group. So from a daily business point of view, the quality of our Q1 customers is actually significantly improved. The response from the customer So overall, we think that QE's customer strategy is still better than before.
spk00: As we shared with Mark before that when we actually conduct our real operations, it's not the safety cost we are looking at. It's the ROI, return on the investment of customers we look at. As for in the first quarter, we believe we successfully conducted a better customer acquisition strategy. is demonstrated by higher customer approval rate and the larger ticket size, which in turn improves the ROI.
spk10: Yes, from the trend point of view, because we have been focusing on acquiring high-quality customers, including those with lower pricing, and even those with lower pricing, their long-term health and ROI performance will be better. So from this point of view, the cost of our customers may increase in the future. But we can be sure that it will be accompanied by better user quality and higher ROI.
spk00: As we expand the SME business, if we purely look at CAC metrics, since they have the larger ticket size, longer turner, and the lower APR, on the CAC level, it will push up this number. However, in actual business operation, we believe expanding SME is a much better business decision for us, as the quality is better and a higher ROI and better unit in our economy.
spk10: Okay, I hope I can answer your question, Steven.
spk11: Very clear, thanks. Steven, this is Alex. I just want to add one follow-up point from Haixing's point. As Haixing mentioned that as we expand into the SME, one nature of the SME business is that large ticket size, longer duration loans, which also associated with a much higher per ticket customer acquisition cost. Okay. And so that, Because we are kind of a growing SME business in Q1 more, I guess, proactively, that makes change also result in a little bit higher kind of a per credit line customer acquisition cost as we reported. So if you sort of get rid of the SME portion, just look at the consumer portion, the change was not as high as the well-reported number. So just one add up to the point. Thank you.
spk01: Thank you, Steven. Due to time constraints, I will now hand the session back to management for closing debrief. Please go ahead.
spk11: Okay. Thank you everyone for joining us for the conference call. If you have additional questions, please feel free to contact us. And that's it for the call. Thank you.
spk01: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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