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Operator
Hello, ladies and gentlemen. Thank you for participating in the fourth quarter and full year 2020 earnings conference call for Finvolution Group. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded. I will now turn the call over to your host, Jimmy Tan, head of investor relations for the company. Jimmy, please go ahead.
Jimmy Tan
Hello everyone and welcome to our fourth quarter and full year 2020 earnings conference call. The company results were issued via newswire services earlier today and are posted online. You can download the earnings release and sign up for the company's email alerts by visiting the IR section of our website at ir.finvigroup.com. Mr Feng Zhang, our Chief Executive Officer, and Mr Jia Yuan Xu, our Chief Financial Officer, will start the call with their prepared remarks and conclude with a Q&A session. During this call, we will be referring to several non-GAAP financial measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with US GAAP. For information about these non-GAAP measures and reconciliation to GAAP measures, please refer to our earnings press release. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Security Certification Reform Act of 1995. Forward-looking statements involve inherent risk and uncertainty. As such, the company results may be materially different from the views expressed today. Further information regarding this and other Risk and uncertainties are included in the company's filings with the U.S. Securities and Exchange Commission. The company does not assume any obligations to update any forward-looking statements except as required under applicable law. Finally, we post a slide presentation on our IR website providing details of our results for the quarter. I will now turn the call over to our CEO, Mr. Feng Zhang. Please go ahead, sir.
Feng Zhang
Thanks, Jimmy. Hello, everyone, and thank you so much for joining us today. First of all, on behalf of Team Revolution, I would like to express my sincere appreciation to our shareholders and stakeholders for all of their support over the past year. 2020 was an extremely unusual year with enormous challenges. However, despite the economic uncertainties created by the pandemic and the fast-evolving regulatory environment in which we operate, I'm proud to say we have done remarkably well. By strategically shifting to better quality borrowers, we delivered a solid financial performance over the past year. With the clearance of P2P balances in 2020 behind us, our focus for 2021 will be on resuming high-quality growth. After a strong recovery in the third quarter, we continued on our upward trend in the fourth quarter, helping us close the year on a strong note. For the fourth quarter, our average IRR was 26.4%, with loan origination volume increased by 24% from the previous quarter to 21 billion RMB, exceeding the top end of our guidance range of 20 billion RMB. We attributed these gains to our strong strategic execution, our industry-leading technological capabilities, and our sophisticated and prudent approach to risk management. We have successfully completed our strategic transition towards better quality borrowers as evidenced by the significant improvement in our delinquency levels. Equipped with our framework for enhanced risk assessment and management, we were able to continue decreasing our funding costs while simultaneously increasing the number of institutional funding partners, allowing us to maintain ample, diversified, and stable funding sources on our platform. it is encouraging to see our strong growth momentum continue as we enter into 2021. Boasted by our prudent approach to risk management and our industry-leading risk management capability, we saw further improvement on multiple key risk metrics. For example, our day one delinquency rate was 5.2% in February 2021, compared to 12.5% during December 2019, before the COVID-19 outbreak. primarily due to our transition towards high-quality borrowers and effective risk management capabilities. Our vintage delinquency rate is expected to fall below 3% in the fourth quarter, compared to around 6% in the same period in 2019. Going forward, we expect our vintage delinquency rates to maintain at similar levels in 2021. Notably, our 30-day loan collection recovery rate continue to stabilize at over 90%. Portfolio vertical delinquency rate for all outstanding loans on our platform is also at a new historical low. For example, delinquency rates that are 15 to 89 days past due improved to 1.38% compared to 5.6% in the same period last year. On the funding side, funding on our platform remained stable and ample, with growing numbers of institutional funding partners. The number of our funding partners increased steadily to over 50 as we continue to attract new partners on board. Our quality assets have spurred strong demand from institutions to facilitate loans through our platform. With our strengthened risk management capabilities, as well as better credit profiles of borrowers, we further lowered funding costs. The cost of funds on our platform fell to 7.5% in the fourth quarter, compared with 10% in the same period last year. With regards to the CBIRC's notice on further regulating commercial banks' online lending business, the new restrictions are focusing on the joint lending model. We do not rely on the joint lending model to operate our business. Instead, we are empowering our financial institutional partners through a loan facilitation model in which funding partners provide 100% of funds for loans to borrowers. As our funding partner is highly diversified with a mix of internet banks, private banks, consumer finance companies, and trust companies, the new CBIRC regulations impact on our domestic online lending operation is minimal. Now I'd like to share a little more about our new strategic initiatives. specifically on how we plan to leverage our technological capabilities and industry know-how to propel further growth for our company. Powered by our strong technological capabilities and credit risk assessment framework, we have also diversified our loan business into the micro enterprise segment. In 2020, we originated RMB 3.7 billion in loans to over 220,000 micro enterprises. This year, we plan to extend such loan facilitation services to further cater to the operating needs of small businesses. We believe offering financial support for MSE will help fuel the growth and prosperity of the overall economy, which is also in line with the regulatory guidance in China. In 2020, our micro enterprise loan volume accounted for around 6% of our total loan volume, and we expect this portion of our business to account for about 20% of our loan origination volume in 2021. Our international expansion is progressing rapidly with Indonesia market leading the growth. Our Indonesia operations, which today represent the majority of our overseas business, gained further traction with better than expected loan volume growth. Loan origination volume for Southeast Asia in the fourth quarter increased by 100% to 535 million RMB compared to the previous quarter. Over the past two years, we have obtained a peer-to-peer lending license from the Financial Services Authority of Indonesia and a Capital Market Services license from the Monetary Authority of Singapore. These developments are significant for us as we believe that Southeast Asia will be a fast-growing market. We will continue to harness state-of-the-art technology as well as our deep industry expertise and experience to make financial services more accessible for users in the region. In light of evolving market dynamics, our business remains solid with strong loan recovery growth that started in the third quarter of 2020. The performance was supported by our technological capabilities and the effective execution of our plan and strategy. With a successful transition to higher quality borrowers, we now expect our loan volume to be in the range of RMB 100 billion to RMB 120 billion in 2021, representing an increase of 56% to 87% year-over-year. In summary, our resilient performance in 2020 lays a solid foundation for us to drive further growth. Looking ahead in 2021, we remain dedicated to controlling credit risk with our technological capabilities. Given our proven track record in technology innovation, prudent risk management, and responsive measures taken to navigate challenging economic and credit cycles, we are well positioned to capture the immense potential in China's consumer and micro enterprise markets, as well as Southeast Asia's fintech markets. to deliver long-term value for our shareholders. With that, I will now turn the call over to Jiayuan Xu, who will discuss our financial results for the quarter.
Jimmy
Thank you, Feng, and hello everyone. In the fourth quarter, amid a recovering COVID-19 environment in mainland China, we delivered a net gap operating profit of 593 million RMB, representing an increase of 34% year-over-year and further demonstrating the resilience of our core business model. Our balance sheet remains strong with 4.6 billion RMB in unrestricted cash and short-term liquidity. Leveraging our strong technology capabilities, we look to capture new opportunities arising from consumer finance markets both in mainland China and Southeast Asia as we continue to expand and deepen our relationships with business partners. Now, turning to the financial results for the fourth quarter, in the interest of time, I will not walk through each item line by line on this call. Please refer to our earnings release for more details. Net revenue for the fourth quarter of 2020 increased by 50% to about 1.85 billion RMB from 1.23 billion RMB in the same period of 2019. primarily due to the adoption of ASC 326 at the beginning of the year and the increase in loan volume. Loan facilitation service fees increased by 19% to 643 million RMB for the fourth quarter of 2020 from 539 million RMB in the same period of 2019, primarily due to the increase in loan origination volume which was partially offset by decrease in the average rate of transaction fees. Post-facilitation service fees decreased by 36% to 176 million RMB for the fourth quarter of 2020 from 276 million RMB in the same period of 2019. Primarily due to the decline in outstanding loans serviced by the company, and the growing impact of the deferred transaction fees. Guarantee income was 667 million RMB for the fourth quarter of 2020 due to the adoption of ASC 326. Net interest income decreased by 36% to 204 million RMB for the fourth quarter of 2020. From 317 million RMB in the same period of 2019 mainly due to the reduction in outstanding loan balance of consolidated trust. Other revenue increased by 60% to 162 million RMB for the fourth quarter of 2020, from 101 million RMB in the same period of 2019, mainly due to increased customer referral fees to third-party service providers. Non-GAAP adjusted operating profit, which excludes share-based compensation expenses before tax, was 630 million RMB for the fourth quarter of 2020, representing an increase of 38% from 445 million RMB in the same period of 2019. Net profit was 497 million RMB for the fourth quarter of 2020. representing an increase of 21% compared to $430 million in the same period of 2019. Our core business model is based on the loan facilitation model, whereby the institutional funding partners on our platform provide 100% of the funds for loans to borrowers, and our role is to provide value-added service to the funding partners as well as provide borrowers access to credit. We have a well-capitalized balance sheet, and our leverage is conservative. If you divide the total outstanding loans on our platform of 26 billion RMB by our shareholders' equity, the leverage ratio across the business was only 3.2 times. And our liquidity position remains strong with about 4.6 billion RMB of unrestricted cash and short-term investments at the end of December 2020. Our strong balance sheet enables us to be well positioned in the current environment and gives us significant flexibility. We have continued to return value to our shareholders through dividends and share buybacks. In the first quarter, we have deployed 13 million USD to buyback our shares. As of December 2020, we have cumulatively deployed 129 million USD on buybacks. Our board has also announced a dividend of US $0.17 per ADS for fiscal year 2020 for our shareholders. This is our third consecutive dividend declaration, which reaffirms our confidence in our business model, our core capabilities, and long-term market potential. Since we began our share buyback and dividend initiatives in 2018, we have cumulatively deployed USD 272 million in this regard. With that, I will conclude my prepared remarks and we will now open the call to questions. Operator, please continue.
Operator
We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. For the benefit of all participants on today's call, please kindly ask your question to management in Chinese first and then repeat your question in English. At this time, we will pause momentarily to assemble our roster. The first question comes from Han Yang with 86 Research. Please go ahead.
spk01
Thank you for giving me the opportunity to ask this question. Congratulations on your excellent performance in the fourth quarter. I mainly have three questions. The first question is that I see that we are already in line with the qualifications of the second listing of Hong Kong. Does the company have a second listing plan? If so, what time is it? The second question is about Takerit. Last year, maybe due to the more cautious management attitude, we also took the initiative to adjust the risk number, and reduced the loan APR. So assuming that under the same number, Let me translate my questions. My first question is regarding on the Hong Kong secondary listing. So any plan or timetable for that will be helpful. My second question is on take rate. So will we continue to reduce take rate in 2021? And last question is about our overseas business. So how we measure the time in Southeast Asia and what will be the proportion of the overseas business in terms of facilitation volume in the next several years? And what's our primary business model and how we measure risk in the area assuming the user profile is different? Thank you.
Jimmy
Thank you, Han Yang. Let me answer some of your questions. The first question is about the listing of the Hong Kong stock market. As you all know, there are a series of requirements for the listing of the Hong Kong stock market. At first glance, we should be in line with the standards of the listing of the Hong Kong stock market. However, we are still in a very early stage. In the future, we will also do some internal discussions and evaluations. So this is still a stage of evaluation.
Jimmy Tan
We have met the requirements for a secondary listing on the Hong Kong Stock Exchange and the company is still exploring the possibility as this is still very early stages. We will only update the market when we have further updates from our side.
Jimmy
The second question is about the take rate. Last year, the whole take rate has changed. Previously, the price was higher. In the second half of the year, we adjusted the price. In the second half of the year, it was less than 4%. As for the growth of 2021, I think the overall take rate should be around 4. I can simply divide the take rate into several parts. The first part is related to the price. Last year, we adjusted the average price at 26-27. As you all know, later in the high month, there was an explanation that the APR 15.4 is not suitable for the financial institutions. So, from the management level, from the policy level, there is no limit to pricing. So, for us, there is a certain space in terms of pricing. In addition,
Jimmy Tan
Let me do the translation first. Let us recap the regulator's stance on pricing. The four times LPR only applies to private lending and is not applicable for us and our business is conducted using the loan facilitation model. From this perspective, we have the flexibility to adjust our pricing. However, the decision for price adjustment is dependent on several factors, such as the economic development, the level of customer satisfaction, and the level of currency rates, etc. We will need to consider all these factors before making any changes.
Jimmy
This is the risk. The other one is the capital cost. As you can see, in the Q4 quarter, our risk has been greatly improved. The capital cost is now about 3%. We also achieved 7.5% in the capital cost. In the future, we think there is still room for improvement.
Jimmy Tan
Apart from pricing, we also need to consider other factors such as the risk and our funding cost. For example, we have already shared with the market that our funding cost is expected to be below 7.5%. and our risk is expected to be below 3%. And from the tick rate point of view, we are confident to maintain the current tick rate at 4% as we have the capabilities to reduce funding costs and further improve delinquency rates.
Feng Zhang
This is, I'll just quickly add, you know, the 4% number, if you do the calculation, if you do the math, it is basically based on our current pricing, which is between 26% to 27%, and 7.5% funding costs. and about 3% loss. So it is based on these numbers, they come out with a take rate of 4%, about 4%. Now, as Chia-Yuan has mentioned, the regulation has clarified, the Supreme Court has clarified that the four times LPR pricing cap doesn't apply to our business model. So in that case, we do have And we do have room to further adjust our pricing upward or downward if needed upward on the take rate side. I'll just add that comment.
Jimmy
The third question is about our international business. In Southeast Asia, we have achieved significant results, especially in the Indonesian market. We have achieved a leading position in the market. As for the Southeast Asian business, we will do a lot of research in each country, including local regulations, pricing, and licensing requirements. Let us recap on the situation in Southeast Asia. Our Indonesian market is leading the growth and we have also ventured into other countries such as Philippines and Singapore.
Jimmy Tan
We will continue to keep abreast of the local regulations developments and keep our operations within the limits of the regulatory requirements. For example, we already have a P2P license in Indonesia and our average loan tenure is between one to two months.
Jimmy
We will continue to expand our market share in Indonesia as we think there is a lot of potential in Indonesia.
Jimmy Tan
It is just like China from a few years ago.
spk01
Thank you. Thank you, Mr. Xu and Mr. Zhang. I have a question. We just mentioned the business in Southeast Asia. Do we have any other competitors? In these markets, are they our main competitors? Let me translate the question. What are the main competitors in the Southeast Asian markets? in terms of the loan visitation business model. Thank you.
Jimmy
Okay, Haiyang. To be honest, there are some competitors. But at this stage, I think, for example, in the Indian market, there may be one or two companies that do a lot better. But in general, I think Ah, Yes, we have accumulated a lot of experience and technology, because our domestic business is doing very well, so we put this ability into Southeast Asia to do it. In fact, we are very successful, and we are very confident that we can do it in the Southeast Asian market, and the prospects are very good.
Jimmy Tan
The Indonesian market is still at a very early stage, and we do have the competence and capabilities to replicate our success in China over in those Southeast Asia markets. And by the way, I just want to add on that we are constantly among the top three fintech apps in the Indonesian market.
spk01
Thank you, Jimmy. Very clear. Thanks, Benjamin. Very clear and helpful.
Operator
Next question is from Alex Yu with UBS. Please go ahead.
Alex Yu
Thank you for the opportunity to ask this question. I have three questions. The first one is about the value of our loan. The growth value of $1,000 billion to $1,200 billion is very strong. I would like to ask how we plan to achieve this growth goal. Because from the perspective of the growth of SYNC, it seems to be not as fast as it used to be. Will we have to make more contributions from our old clients or increase the size of our clients? The second question is about the small interest. We mentioned that this year's small interest debt ratio will increase to about 20%, if I'm not mistaken. I would like to ask, can you please introduce some of the main circumstances of this part, including the average net profit, IRR, and the deadline, and its loss rate, and how we get through it, and how its risk-adjusted return is compared to the consumption band from the perspective of profit. The last question is, I will translate my question. I have three questions. First one is on our long-term outlook. a long growth guidance of 100, 120 billion long volume for 2021 was very strong growth. So I'm wondering how do management plan to achieve that growth because it looks like our new customer growth momentum is still haven't returned to a very high level yet. And I'm wondering do we plan to like reactivate our old customers and increase the contribution from a higher ticket size to deliver that strong growth. The second question is on your MSC loan target. So Benjamin mentioned that you're going to raise the MSC loan contribution to 20% in 2021. So could you share with us some of the characteristics of this kind of MSC loan, including ticket size, IRR, vintage loss on your customer acquisition channel? And in addition, how does the risk just return of that MSC loan compared to your consumer credit? And finally, on your customer acquisition cost, that has been rising in the past few quarters. So that was partly driven by higher quality customer acquisition strategy. I'm wondering whether that kind of a high customer question cost is sustainable in the future. Thanks.
Jimmy
Thank you, Alex. Let me answer the first and third questions. Regarding the guidance we gave, which is 1 billion to 1.2 billion, it is very clear that it definitely requires our new customers and old customers to work hard. Actually, during Q4, the performance of our new customers has already shown a very strong rebound. The total number of new customers is 37,000. Compared to Q3, the number of new customers is nearly doubled. Compared to Q4 in 2019, the number of new customers is close to Q4 in 2019. And especially in Q4, the growth in December is actually faster than a few months ago. And this trend has been very good so far in 2021.
Jimmy Tan
In order to achieve the target of between 100 to 120 billion RMB, we need both the new and the old customers. For example, in the fourth quarter, our new customer was around 370,000 and this is a 50% increase compared to the three quarter and already at a similar levels compared to the fourth same period of 2019. And actually in December, this level is actually growing very fast and we expect the trend to continue into 2021.
Jimmy
In terms of new customers, we can clearly see that new customers have significantly improved our brand's recognition rate and registration rate compared to the past. So we are very confident that we can continue to maintain the efficiency of our customers in the future.
Jimmy Tan
Okay, the new customers are more acceptable to our brand as we realize that there are actually more registration actions from these new customers.
Jimmy
然后老客方面其实也类似。 我们从老客的附带的比例来看, 其实相比过去都有持续的非常明显的这样一个提升。 所以我觉得新客和老客这两块因素叠加起来, 是能够来支撑我们明年这样的一个guidance。
Jimmy Tan
We have also seen similar trends with our old customers as we have noticed their repeat borrowing rates have actually increased.
Jimmy
Then I would like to add one more thing. You may be interested in this. The growth was slower in the previous few years, but there was such a big growth in 2021. I think you can take a look at the performance situation two years ago. In fact, in the past, we have had a very high growth in business. Our growth in the past two years has been slow, but prior to 2018, we have enjoyed very rapid growth.
Jimmy Tan
During the last two years, we have been occupied with the P2P exit and the transition to better quality borrowers. We have successfully achieved both of these targets. Since both of these targets have been completed, we have the ability to resume high quality growth in terms of loan origination volume.
Jimmy
We have been acquiring our new customers through a diversified of online and offline channels.
Jimmy Tan
For the online China's, we are acquiring them through information feeds China's.
Jimmy
And then from the cost side, you can see that compared to the whole Q4 and Q3, we haven't changed much. It's almost at a level of about 500 CPS. But here, actually, because of the impact of the fourth quarter and the forgetfulness of the e-commerce, we actually think that the CPS should be basically controlled at such a level for the 21st year.
Jimmy Tan
Our customer acquisition cost in the fourth quarter on a CPS basis is $500 plus, similar to the level in Q3. But do remember that the fourth quarter was also impacted by the single stage event.
Feng Zhang
Yeah, and going forward, you know, therefore, like Q4, the cost will be a little bit higher because of the e-commerce. They have a lot of advertisement because of the year-end events. And we are confident going forward that our CPS, our marketing cost will be controlled at a similar level. And, you know, giving the better quality borrower base and lower loss rate as well as lower funding costs. Such a CPS level, we think it is very healthy for our business model. I'll try to answer the second question. Our SME live business The target customers mostly are those mom-and-pop shop owners, like in Chinese, 个体工商户, and our ticket size range from a few thousand to mostly up to 50,000 RMB, with an average around 10,000. R is in the range of 18% to 27%, and slightly lower than our average borrower. We have seen better risk quality for these customers. On average, we estimate their loss rate to be probably like 1% lower than our standard loans. So the profitability we expect, given a slightly lower price, their price is a little bit lower and also lower delinquency rates. we expect the same risk adjustment margin and the same return. So in terms of, yeah, I think that's probably all the things you asked, right? Yeah, thank you.
Alex Yu
Thanks very much. Yeah, thank you.
Jimmy Tan
Thank you, Alex.
Operator
The next question is from Jackie Draw with China Renaissance. Please go ahead.
Jackie
Hello, everyone. Thank you for the opportunity to ask me a question. I have two questions I would like to ask. First, I would like to ask about the demand for this loan. Is there a positive change in the first quarter? And then, in fact, we have seen that the interest rate of ants has been adjusted recently. Have we seen any changes in the demand of ants? Does this have a positive impact on us? So thanks, management, for taking my questions. I have two questions. Number one is about the borrowing demand. Just want to check what is the latest trend we see from the borrower side in the first quarter, and do we see some additional borrowing demand from Ant users, given we've seen from the news that Ant is cutting the credit line for its users? And second question is on the funding side. We see some of our peers exploring the profit-sharing model with the funding partner. So just want to check whether it's our progress on the profit-sharing model. Thank you.
Jimmy
Thank you, Jackie. Let me answer your question. First, regarding the demand, we are very sure that you can see from the guidance we gave and our Q4 gives us a top-end real-time data. You can see that our growth is very strong. Behind this, there is an old customer's recognition and demand for us. The other is the new customer's help for our growth. So from this growth, we are very sure that this new customer has a very strong demand for us.
Jimmy Tan
Okay, the demand is very strong based on our loan origination volume guidance in 2021 and also our Q4 loan volume guidance exceeded the top end of our guidance in Q3 and these are due to the support from our old customers and our new customers.
Jimmy
As for whether it comes from G2, I don't think we have any direct data to prove it. But I think we can share some of our indirect information. We will regularly do customer interviews and questionnaires. In fact, we have received some feedback from our customers in these areas. They have some shortcomings in terms of financial data, and they need additional financial services.
Jimmy Tan
We do not have 100% confirmed data if these users are from the internet giant, but we are able to indirectly estimate some of the overlaps with other players in the market. For example, we have conducted sample surveys with results reflecting that demand has not been fully satisfied.
Jimmy
Okay. First of all, we have to look at the situation of supervision. From the current perspective, supervision has no clear guidance or attitude regarding the burden and division. So this is the first point.
Jimmy Tan
There is no specific guidance from the regulators regarding the capital light or risk sharing model.
Jimmy
Then from the perspective of the public, we think that the division is actually a From the company's perspective regarding the capital-light model, we will need to consider several issues such as leverage ratio, cash positions, and unit economics, etc. At this moment, the risk-bearing loan facilitation model is more suitable for us. In fact, in this year's business, we are also doing a lot of work on division. In this year's target, we will consider the number of division institutions as a higher priority.
Jimmy Tan
With that being said, this does not mean that the Capital Light model is not important for us. In fact, the Capital Light model is one of our priorities in 2021, and growing the number of institutional partners working with us in the Capital Light business remains our top priority.
Jimmy
Finally, I would like to share some information. As you all know, we now have more than 50 partners cooperating with us in the fund-raising sector. The mainstream fund-raising institutions are mainly cooperating with us in the housing sector. In the future, we will transfer these institutions from the housing sector to the fund-raising sector. We also have the foundation of long-term cooperation and trust.
Jimmy Tan
As you know, we already have over 50 institutional partners working with us, and most of these institutional partners operating under the risk-free model are also our institutional partners. This is why we believe that we have the fundamental trust and support if we were to venture into the capital-like models with them. Okay, thank you, Jackie. Very clear. Thank you, Xuegong.
Jackie
Thank you, Amy.
Operator
Again, if you have a question, please press star then one. The next question is from Henry Lyon with Gold Dragon. Please go ahead. Pardon me, Henry, your line is open.
Henry Lyon
Oh, sorry, just muted. Thank you, Manager Chen, for giving me the opportunity. Congratulations on such a good performance. I just want to ask, quickly ask, looking at the past few seasons, including 2021, the guidance is very strong, whether it's the amount of funds or the return rate. We are, this is indeed, compared to the industry, or compared to most of the I'm very interested in how we can make such a successful transformation in such a short period of time. Because it seems that most of the competitors, especially these P2P era players, seem to be far from as strong as we are. I want to understand how our team and some of our numbers are done. So basically, congrats on the good results. And it's pretty surprising to see all the metrics, volume, profitability going so well. Just wonder, can you guys explain what's really behind our transition and all the fantastic metrics? Can you share what is our core competitiveness thing?
Jimmy
Thank you, Henry. Let me answer this question. I think we can look at this question first. In the past few years, because we have 13 years of history, Two years ago, our business has been growing very fast. Every year, it has grown several times. So our team has the ability to grow fast. In the past two years, we have experienced a big transformation challenge. One is the capital, and the other is the crowd support.
Jimmy Tan
Okay, first of all, we have over 13 years of operating history. And if you take a look at two years ago, our business is actually growing very rapidly. But during the past two years, we have been occupied with the P2P exit and the upgrade to better quality borrowers. 在这两年转型当中,其实我觉得我们为什么能够成为非常少数,能够转型并且非常成功转型的,那我觉得有几个方面的原因吧。
Jimmy
The first one is that our entire team has a lot of potential in terms of decision-making. The second one is that our team's executive power is very strong. They can quickly complete the transformation work. The third is that we have accumulated a lot of core capabilities in the past, including our digital solution capabilities, our very powerful risk capabilities, and our technical capabilities. These all help us to turn quickly when we need to turn.
Jimmy Tan
We managed to transform because the team has the foresight, the ability to execute swiftly, and the core capabilities in the risk technological management. And with all these capabilities, we are able to transform very rapidly compared to most of our peers. 这边的其实还可以看一个例子,就是我们过去做的人群,大家知道我们是相对比较下层的人群,
Jimmy
Then we did the crowd-funding. We did a switch so quickly. And now from the risk aspect, it's very good. In fact, this shows that our original ability is not only dependent on the accumulation and experience of data. In fact, our ability is to interact with the underlying technology and solution model. So based on this, we can make such a change relatively smoothly in the transition of the population.
Jimmy Tan
For example, we have upgraded our borrowers successfully from the subprime borrowers that we used to do in the P2P era to the better quality borrowers today. This is not only because of our capabilities in data and risk management.
Jimmy
Sorry. Okay. Hey, Henry.
Henry Lyon
Hey, Henry. What now?
Jimmy
Our transition has basically come to
Jimmy Tan
temporary stop and now we have resumed our focus on resuming our growth and based on our past track record we have proven to the market that we do have the capability to resume growth rapidly 另外我觉得还可以再补充一点就是我们这个能力可以看到用在国际业务上东南亚业务其实也非常的理想 这其实也体现出来就是我们这个底层的能力它是有着共同性 能够帮助我们不仅在国内能够把这个 We have also proved to the market that our capabilities and technologies are transferable, not only in China, but also on the international market. And this means that we are able to replicate our experience in China to the international market.
Feng Zhang
Hey, Henry, this is the phone. I think, you know, China has said pretty well. You know, I want to add a little bit more color. I think there are a couple of things. One is our company, I think what set us apart from a lot of other players in the market is we have a really strong risk culture. We put a really high focus or emphasis on keeping the risk at our targeted level, and we don't sacrifice our risk for growth. The one thing that I can share is our current president was the chief risk officer of the company before I joined the company in 2015. And I joined the company as the chief risk officer, and now I'm the CEO of the company. So that kind of gives you the color of how important is the risk in our management focus. And that's why... Given a good risk track record, we have a very smooth exit of P2P, and we have a very smooth transition to institutional funding facilitation model. We also emphasize a lot on technology. We continue to invest in technology as we believe that is the key competitive advantage for long-term success in the fintech market. business. Finally, we have a very strong team. I think it is why you see suddenly you see risk is good and growth comes. I think it really is a groundwork of the result of many years of groundwork. We set our strategic goal of direction to you know, for better quality borrowers for institution facilitation model more than two years ago. And we are seeing, like, improves today, and we believe we will see even better going forward. So it is really a combination of, we think, good strategic planning and strong execution.
Henry Lyon
Thank you, Mr. Zhang and Mr. Xu for your introduction. I will quickly add a question. One is our latest... How much is the current interest rate of these new partners? Because the fourth quarter is up to 7.5%. What kind of capital cost level can some of the most recent marginals reach now? And there is a very high growth in the amount of money we put in. So I wonder if we can roughly, based on our more stable take rate now, Thanks for the very insightful sharing and just a very quick follow-up. One is like what is our marginal funding cost that we can negotiate with the new funding partners in the current situation? And secondly, how much of this growth in our top-line volume can be transitioned into the profit growth like earnings or net hit rate? Thanks.
Jimmy
Okay, Harry. In the pipeline, there are now 10 to 15 institutions that are preparing to join. So from the capital cost point of view, there is room for further improvement.
Jimmy Tan
Okay, the funding size remains ample. We already have 10 to 15 partners in our pipeline, and we believe there is further room for improvement in the funding size.
Jimmy
But when we look at a fund, we don't just look at its capital cost. It has many dimensions. We think the price is just one aspect. For example, in the customer experience of borrowing money, in the capital use of the company, in its system capabilities. In fact, we will have multiple dimensions to comprehensively evaluate, and then choose the most suitable institution to be our funding partner.
Jimmy Tan
However, funding cost is only one factor. We would need to consider other issues such as funding partners' ability, the level of customer satisfaction, and more. However, at the current moment, our priority is not to have the lowest funding cost, but to find the most appropriate partners to support our high-quality growth.
Jimmy
Regarding that, we have given a guidance on loan generation. We have also given a take rate. We are confident that it will remain at this level. so that we can know the level of our top line.
Jimmy Tan
Okay, we have given our loan origination guidance and we have also given our take rate guidance of around 4%. So if you do a calculation, you would be able to have a sense of how much revenues that we are going to have.
Jimmy
But from the top line to the bottom line, I think there are some factors that affect the top line. One of them is in terms of customers.
Jimmy Tan
However, from top line to bottom line, there are several factors influencing this. For example, customer acquisition is one of them, and we need to recognize this cost upfront.
Jimmy
New customer acquisition is not purely a cost for us. If you understand us, you know that new customers is required for growth.
Jimmy Tan
This is why we view new customer acquisitions as a form of investment.
Jimmy
Therefore, we will try to maximize the acquisitions of new customers on our side. 另外一个影响是在于准则确认, 就是按照ASC-326的准则要求,
Jimmy Tan
Another factor influencing the bottom line is the season accounting. And because of these two situations, it will cause some diversions from top line to bottom line when doing the calculations.
Jimmy
However, we are still confident to maintain a steady growth in the bottom line trend.
Operator
This concludes our question and answer session. I would now like to turn the conference back over to the company for any closing remarks.
Jimmy Tan
Okay, thank you everyone for joining our call tonight. If you have any further questions, feel free to reach out to the IR team tonight.
Operator
This concludes the conference call. You may now disconnect your line. Thank you.
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