Lexinfintech Holdings Ltd (LX) 2019 Q4 法說會逐字稿

Hello, ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter 2019 Earnings Conference call. (Operator Instructions) Today's conference call is being recorded.

I will now turn the call over to your host, Mr. Tony Hung. Please go ahead, Tony.

Thank you, operator. Hello, everyone, and welcome to Lexin's Fourth Quarter and Full Year 2019 Earnings Conference Call. The company's results were issued earlier today and are posted online. Joining me today on the call are Mr. Jay Xiao, our Founder, Chairman and Chief Executive Officer; Mr. Craig Zeng, our Chief Financial Officer; Mr. Ryan Liu, our Chief Risk Officer; Mr. Stanley Zhao, our Senior Financial Director; and other members of our team.

For today's agenda, Mr. Xiao will provide an overview of our recent performance and highlights. Mr. Zeng will discuss our financial results, and Mr. Liu will discuss our credit performance.

Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make forward-looking statements. Also this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.

Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in renminbi.

I now turn the call over to our CEO, Mr. Xiao, whom I will translate for.

(foreign language)

[Interpreted] Hello, everyone. Thanks to our efforts in the past quarters, our new consumption platform strategy is now entering a phase of increasing growth. And we were able to record another quarter of strong growth, surpassing our raised guidance in the fourth quarter.

For the full year 2019, Lexin's loan origination volume increased to over CNY 100 billion, reaching CNY 126 billion, an increase of 90.6% year-on-year, meeting our full year guidance; our revenue surpassed CNY 10 billion, reaching CNY 10.6 billion, an increase of 39.6% year-on-year; gross profit was CNY 5 billion, an increase of 65.8%; and net income reached CNY 2.3 billion, an increase of 16%.

In the fourth quarter, we originated CNY 42.8 billion in loans, an increase of 104% year-on-year; with revenues of CNY 3.1 billion, an increase of 50.4% (sic) 51.4%; gross profits of CNY 1.5 billion, an increase of 59.7%; and net income of CNY 518 million.

At the end of 2019, Lexin's outstanding loan balance reached CNY 60.6 billion, an increase of 87%, and our asset quality remains stable.

(foreign language)

[Interpreted] Our continued investment and deployment of our new construction strategy. In 2019, we increased our spending in R&D. The total investment in R&D for the year reached CNY 416 million, an increase of 29.9%. And for the full year, the marketing and sales fee increased to CNY 1.5 billion, an increase of 161%. This strategy has allowed for our registered user numbers to surpass 70 million, an increase of 96.5% year-on-year. New active users were 2.1 million for the quarter, an increase of 244%, continuing 2 consecutive quarters of growth exceeding 200%. Growth in our user numbers will drive our future transaction scale and the continued growth of our revenues.

(foreign language)

[Interpreted] In 2019, Lexin's new consumption platform started...

Hold on, Tony, could you let the operator check how many people being on the line? I got some analysts tell me saying they could not dial in because they cannot get to the operator. So can -- operator, can we have the operator checking how many people being online?

Yes. Hello, this is the operator. Upon checking, we only have 15 participants connected here on the main room as of the moment. And I'm still seeing a lot of participants dialing in, waiting to be answered by our operator, sir. This is really apologies due to the sudden -- due to sudden huge head count shortage, sir, we are expecting a hold time. We apologize, sir, for the inconvenience. This is due to the COVID-19 outbreak. We apologize, sir.

Can we just wait for a couple of minutes to have people calling, connect people, then we start again?

All right. Sir, sure. We can do that. If you want, we can wait at this time for a couple of minutes. Or if you could give me a verbal queue once you're ready to begin your call.

I think we're ready once all the people that's queued up have been connected to the call.

Yes, sir. As currently, I already cascaded the message to our operator, and they are doing their best to answer all the queues.

Okay. Just make sure that they connect everyone. And then once they do that, we'll continue where we left off.

All right. Once again, sir, we apologize for this inconvenience. Thank you.

Operator?

Yes. Hello, sir. Currently, we already have 30 participants now already connected on the main room.

How many still needs to be connected?

I can still see 30 participants, sir?

3 participants?

20 participants. 20 to 30 participants.

You're still missing 30? There's 30 still left to be connected?

Yes.

Okay. Give me a second here. Operator?

Yes. Hello, sir?

Let's continue.

All right.

Okay. So I will continue at the place that I left off.

You may continue.

Yes. In 2019, Lexin's new consumption platform strategies, 3 core businesses, developed rapidly. Fenqile's online e-commerce platforms SKUs grew to over 2 million, and our full year GMV reached CNY 8.1 billion, an increase of 38.7%, much stronger than 2019's industry growth rate of 8%. Offline consumption scenarios also generated 20.6 billion in transactions, as more and more supermarkets, convenience stores, leisure, restaurants and other retailers joined our platform.

Membership privilege cards and apps and working with leading online/off-line players expanded to include privileges with numerous brands to cover leisure, apparel, dining, hospitality and more. At the end of the fourth quarter, Lexin's paying membership products has already been utilized nearly 1.8 million times. Membership points have opened up both online and offline membership point systems, serving over 6.1 million customers.

(foreign language)

[Interpreted] Thanks to our strong technological base and highly stable and compliant operations and strategy, Lexin has won the trust of many partners. To date, Lexin is cooperating with large-scale banks, insurance companies, consumer finance companies, and has established partnerships with over 100 financial companies.

In this period of rapid growth, we are also committed to our social responsibility. At the beginning of the year, Lexin donated CNY 15 million to be used in the protection of frontline medical staff and occurring ongoing effort against the current COVID-19 pandemic.

(foreign language)

[Interpreted] As our Wuhan operations has been affected by the ongoing pandemic, Lexin has delayed the normal resumption of operations there and our loan servicing has been affected. As a result, we immediately adjusted our customer acquisition strategy and asset management strategy in order to ensure stable asset quality. To date, the company has taken many steps and actions, and our operations are now at 90% of normal.

In the first quarter, we expect loan originations to exceed CNY 32 billion, an increase of over 60%. As the COVID-19 conditions in China are gradually contained and as the economy recovers and consumption normalizes, we believe that we can return to a rapid path of growth. We therefore feel that, currently, there is no need yet to adjust our full year guidance of CNY 170 billion to CNY 180 billion, and we will make a determined effort to achieve this challenging goal.

(foreign language)

[Interpreted] Currently, consumption is Chinese economy's stabilizing agent, and in the current environment, new consumption and new infrastructure will become the Chinese economy's twin engines. The central government has also clearly expressed that restarting the economy and driving internal consumption will be integrated to drive new consumption and consumption upgrade.

Under the new favorable and encouraging government policies, Lexin's new consumption platform strategy will gain greater room and traction, continuing to serve China's real economy, driving China's growth and consumption, providing benefits to millions in China's new consumption generation.

We believe in steadfastly adhering to long-term value generation, serving the new consumption generation and continuing to open up both online and off-line consumption scenarios as well as membership benefits and using points and financial technology to create a new consumption service ecosystem and consolidating our leadership with our customers.

(foreign language)

[Interpreted] Next, I would like to invite our CFO, Craig, to discuss our recent financial performance.

Thank you, Jay, and hello, everyone.

I am pleased to announce that we have once again delivered a strong result. In the interest of time, I will not go over line items by line items of the financials. For a more detailed discussion of our fourth quarter and full year 2019 results, please refer to our earning press release.

Total operating revenue for the full year 2019 reached CNY 10.6 billion, driven by strong growth in our financial service income, which reached CNY 6.8 billion, of which loan facilitation and service fees was CNY 5.6 billion. Adjusted net income was CNY 2.4 billion, reflecting our continuing strong growth and performance. Fully diluted adjusted net income per ADS was CNY 12.95. We continue to see the future potential of our business model. In the performance of the customer cohort, whom we acquired in the first quarter of 2015, whose balance is now RMB 13,639 and whose 30-day delinquency rate is approximately 1.1% with a quarterly active rate at 35.2%.

On our operating leverage, operating expense as a percentage of average loan balance, was 5.2% for 2019. And non-advertising -- marketing, advertising, G&A and R&D was 1.2%, 2.2%, 0.9% and 0.9% of average loan balance, respectively.

We currently have 73.3 million registered users and 19.4 million customers with credit line, up from 10.5 million in the December 13 -- December 31, 2018. We acquired nearly 2.1 million new active customers in the fourth quarter. Overall, our average credit limit was RMB 9,700, while our average tenor is now 12 months, our weighted average APR was 26.8%.

In the term of our funding for the quarter, no funding for new loan originations came from our Juzi Licai platform. And all of our funding for new loan origination came from our institutional funding partners.

The ongoing COVID-19 outbreak has brought and are continuing to bring many challenges to our business. But we are now seeing a gradual recovery. We believe that with a gradual recovery and the determined efforts of the -- of our team, we may still be able to achieve our previous stated guidance for the year. We are also pleased to announce that we now expect a total loan origination for the first quarter 2020 to be over RMB 32 billion.

Next, Ryan will discuss our credit situation. Ryan, please.

Thank you, Craig.

We continued our stable credit performance in each quarter. In spite of a challenging condition in the market, our credit quality continues to be high under the expected levels. And we fully expect our credit status to continue to perform well and at expected levels. Our 90-day plus delinquency ratio remains low at 1.56%, and we continue to see strong credit performance as our lifetime charge-off ratio is approximately 3%.

Due to the credit performance and the number of new customers as well as the ongoing COVID-19 situation, we expect the vintage charge-off ratio to our loan portfolio to increase to approximately 3.5% to 4.5% over the course of the next few months before improving in the third quarter. This is following with our range of expectations, and we fully expect our stable credit performance to continue in 2020.

With that, I conclude our prepared remarks. Operator, please proceed with the questions-and-answer section.

(Operator Instructions) Your first question comes from the line of Jacky Zuo from China Renaissance.

Maybe just for the interest of time, I'll just ask in English. So first question is about our first quarter guidance. I saw the first quarter guidance is actually stronger than market expected. So just wondering if management can give us more color on the recent situation regarding the virus. And how is the recovery in the recent weeks and also the asset quality situation regarding the virus situation?

And second question is about our take rate. I observed that if we just use the loan presentation fees divided by our loan origination, the take rate actually went down in Q4. Just wondering what is the reason behind? Is this because of our higher credit cost assumptions? What is our credit cost assumptions currently?

And the third question is about our upcoming accounting change. So can you share some color about the impact of, probably, acceleration of credit cost in the coming change of this accounting group?

(foreign language)

[Interpreted] So Jacky, with regards to the first quarter numbers and situation, well, I mean obviously, it's already the end of March. So you can say that we probably more or less accomplished the numbers that we have given out for the first quarter.

The operations right now, they're recovering pretty well. Overall, it's coming back and it's increasing daily. As mentioned earlier, we're at 90% of our normal levels. And our customer acquisition is also about back to normal, and we're becoming increasingly confident.

Now on the risk on the collections, as you know, that we have a major collection center, unfortunately, at the epicenter of the pandemic. So the staff there had to work remotely, which unfortunately also meant that they were not as effective. But on that note, they are definitely catching up. There is a bit of a backlog, but it's going to need some time in order to achieve that.

And for the second question, I think Craig would like to answer.

(foreign language)

[Interpreted] Yes. So Jacky, on the take rate or the overall probability, I think there's a couple of important points that Craig wanted to make.

One, because there are a number of new customers who were testing, there were certain reductions that occurred from their early repayment. So what they would do is that they would discover our product, they will use our product, they would like the service, and then they will repay early. So in turn, that impacted the numbers a little bit.

And as you know, since the third quarter and into the fourth quarter, we had, on a quarterly basis, 2 million new active customers each time. So the new customers definitely behaved differently than the mature customers. And now that they're a larger proportion, they have a bigger impact. And of course, also their risk levels because they're new, they haven't matured yet, are also higher.

And of course, also on the overall probability, as you know, we made many long-term investments in the fourth quarter, whether it was in customer acquisition and other areas. And as you know from our model and how our model involves growing with our customers, these are long-term investments that will generate long-term returns.

Now in the future, we'll take additional steps to mitigate different things. Ryan may talk about a little bit of the steps on the risk side. But certainly, one of the things we may be doing is that, for the newer customers, we might give them smaller loans, so that way that when they will pay, it'll be a much more minimal amount. And we think that, over time, their behavior will return to being more normal.

And on the third thing, on the new SSO or the application, this, of course, would be industry-wide. This is a SEC requirement. And we're certainly working very hard on getting 100% clarity on it. Once we have clarity on the exact impact, we'll be sure to communicate that to everyone.

Our next question comes from the line of Lucy Li from Goldman Sachs.

(foreign language) The first question is a follow-up on asset quality. Just wanted to clarify whether the changes in the vintage line or the changes in write-off assumptions will be also reflected on the fair value change line in the P&L. If so should we expect to see a huge negative number in 1Q given the worsening asset quality?

And secondly, it's on the client perspective. Do we observe any changes in client credit demand? And related to that, how are we adjusting our client acquisition strategy in the first half of the year?

And lastly, just wondering, how do we see the pure facilitation model? And are we going to put on more emphasis to transitioning into such model?

(foreign language)

[Interpreted] Yes. So Lucy, I'm sure you understood all that. I think we had a little bit of a different situation with the new customers. And this year, certainly, we're changing and there may be some onetime things, of course, that result from that. So certainly, it's not necessarily something that we expect to continue.

(foreign language)

[Interpreted] So Lucy, with regards to your questions on the consumption, well, it's fair to say that, obviously, the events in the first quarter has suppressed consumption in China significantly, effectively freezing all the offline consumption activities. And clearly, this is also reflected in our Q-on-Q numbers, if you compare our first quarter guidance versus our fourth quarter numbers.

Now it's also fair to say that, gradually, the pandemic is being contained. We can see, for example, in Shenzhen, pretty much all the offline venues are coming back or have come back already. And this includes, in fact, certain high-risk areas, if you will, such as movies and otherwise. They're coming back and increasingly normal as well. And as we mentioned earlier, we're probably looking, in terms of our daily operations, of being back at around 90% or above.

Now with regards to the customer acquisition, even before the ongoing pandemic, we already were adjusting our customer acquisition. Obviously, the acquisition of customers online presents higher risk. We have to make certain adjustments. So ever since the second half of last year, we've been reducing the approval rates, adjusting the model, but also continuing to make sure that we keep the customer acquisition cost stable and consistent with the numbers we've mentioned before, at under CNY 200 per customer. So overall, we're looking at probably a stable situation when it comes to the customer acquisition.

Now in terms of our overall situation as a result, because of the actions last year and because of the customer acquisition, we are not under pressure to acquire customers this year so it could be more stable. And with the existing customers, we should be, basically, within range with a lot of effort of achieving our guidance on loan originations.

Now on your third question, on the asset-light model. Well, for this year, I think we're looking to increase that significantly, possibly by a factor of -- or possibly by 1x. So basically, yes, it will be significantly higher in that respect as compared to last year.

(foreign language)

[Interpreted] And so Lucy, Ryan wants to clarify that it's definitely not 100 basis points. It's more like 50 basis points. But this is the 50 basis points on top of the already anticipated increase. And the increase, again, the core of it will be because of the new customers. So you see some of these things in the fourth quarter that arises through the new customers, and this is just a matter of time and them going through the system and maturing. Now we did see certain challenging things occurring in the industry as a whole back in November. So since then, we certainly made adjustments, some of which Craig talked about. We adjusted our model. The approval rates in certain conditions will come down. And we are doing -- certainly are adjusting for longer-term analysis and more distinguishing between our new and old customers. But certainly, the credit quality -- or it's not -- or the vintage charge-off is not increasing by that much.

Your next question comes from the line of Sanjay Jain from Aletheia Capital.

Hi, everyone. Can you hear me?

Yes. No problem.

Congratulations on good results. I have 3 questions and allow me to ask them one by one. First is on asset quality and just reconciling the numbers. So in the delinquency, the vintage chart, I see the higher delinquency being 3.5% or close to that for the third quarter 2018 vintage, which would, I assume -- I'm always confused about how you report delinquency and how it translates into the loss rate or suppose it translates into around 7% loss rate. On balance sheet, if I look at the fourth quarter provisioning divided by the average loan, it works out to 21%. How do you reconcile the -- if it is 7% overall versus the 21% on balance sheet?

I think in regards to the vintage of the third quarter 2018, that is --

(foreign language)

[Interpreted] Yes. So as Craig had mentioned, basically, I think there's the on-off distinguishments. So when you look at the balance sheet and the amounts there, you can't necessarily get to the right numbers.

Now on the delinquency, it's worth noting that there is a way to do it, but to note that it's installment payment. So obviously, you need to make certain adjustments given the fact that it is installment and there is a way in which you can then translate using the math to get to the 3.5%, and I think some of these things may just take a little bit of time to run off. And I think Ryan might have something he also wants to add on this.

(foreign language)

[Interpreted] Yes. So the 2018 Q3 vintage was definitely impacted by the events in the P2P sector there. But you can see that quickly, in the subsequent quarters and thereafter, the things have improved. So we certainly made some adjustments accordingly.

Okay. Okay. My second question is on the recent customer behavior. When we spoke in February, you were saying that you are extending some relief to the customers who are calling for deferment of the February installment. So if you can give us some numbers around that. How many or what percentage of customers called? Did you defer for all of them? Do they know that they have -- that installment has been added to the end of the loan period, which means they have to pay? And as a follow-up or kind of like asking the same thing in a different way, what percentage of your customers are now at 80% or higher, say, utilization? And whether you have gone ahead and cut credit lines for any of the customers you identify as risky in the current environment?

(foreign language)

[Interpreted] Yes. I think I might have missed some of Ryan's numbers there. But in the first quarter, we did see that there was increasing risk, so we actually we tightened and made some adjustments, and we distinguished between new customers and the old customers. Some of the things that we did is we lowered some of the lines. So actually, the total amount of credit lines where lowered was probably the equivalent of something like CNY 2.1 billion, if I got my numbers right. And we do see actually now there are improving credit conditions. But certainly, again, we noted, based on the behavior of some of the customers, that we may need to make some adjustments, and we certainly did that in the first quarter actually.

Okay. And what percentage...

(foreign language)

[Interpreted] Yes. So Ryan said it was actually the -- and I suppose this is the way that we would look at the numbers. In terms of the number of customers that would enter the arena where the collections team will need to start contacting them and pursuing collection, it's only increased by about 10%. So it hasn't actually increased significantly. And we do see that it's coming back and coming down. Now for very specific locations like Hubei, the epicenter, which is also about 6% of our portfolio, obviously we need to be even more careful about it, and then of course, the numbers there can be worse. But overall, there hasn't really been that significant a change in terms of how we look at it, maybe only about 10% or so.

Okay. And my third and last question is on the CBs. Do you have a put option on your CB as well? And where is the cash? Is it still sitting overseas? And where do you plan to use it?

You mean do we have the right to call the CB?

No. No. So you a right to...

Yes. With the coming year, with 4 years -- we have about 4 years of put option.

Yes. They can put to us. We can't get it, if you will, but they can put it to us after a few years.

So is it in 2023? Is that correct?

It should be about year 4. So yes, 2023. They -- will have the right to put it to us then.

Okay. And the cash is still sitting overseas?

I'm not sure.

A portion, right. Portion, right.

Only a portion. Only a portion.

Okay. You don't plan to use it, at least temporarily, for on-balance sheet lending or something?

No.

Your next question comes from the line of Alex Ye from UBS.

(foreign language) So I have a quick couple of follow-up question. First one is on the take rate outlook for the next couple of quarters. Can you give us some color on what could be the positive drivers and what could be the negative drivers? And secondly, could you give us some update on the progress of your application for a consumer finance license? And lastly, on the customer acquisition strategy, given you're probably going to take a more cautious approach on online traffic customer acquisition, so which would be the other customer acquisition options that you would be more focused on this year?

(foreign language)

[Interpreted] Yes. So Alex, on the take rate, as you know, there are various components to that: our pricing, our APR, our cost of capital, our level of risk and then maybe some other costs. In terms of our pricing, our APR, that's currently about the same. But in the future, it might come down a little bit. In terms of our financing cost, as the team mentioned earlier, it might drop just a bit in the near future. Finally, on the risk, well, it's definitely going higher right now, but we do also see that it's getting better, it's recovering a bit. So it'll probably normalize sometime in the future.

(foreign language)

[Interpreted] Yes. So Alex, on the customer acquisition, this year we're probably looking at stable customer acquisition process or stable growth. In general, there probably wouldn't be too many changes, but we're certainly, as mentioned earlier -- and this is actually extension of things that occurred last year, as mentioned earlier. We'll control the higher-risk channels. We'll control basically what we do on those channels. And of course, those channels tend to be the online channels. On the offline side, historically this has been a very stable channel. We have very good asset quality. And we will probably continue to do more on it and focus a bit more on it this year. And of course also now, as we are growing in strength in terms of our brand, we have increasing natural traffic. And also our e-commerce brand is getting greater recognition, so we'll probably get additional growth from that as well. So overall, we're probably looking at a situation of stable growth, certainly stable customer costs consistent with what we've said before. And given the growth that we've done last year, basically we're in a position where we know that, this year, that will lead to better operations and certainly some better numbers. And as a result, we don't need to focus as much on customer acquisition this year.

Now on your second question on the consumer finance license, well, basically, there's certainly no new news at this time that we can give. But the minute that we hear something, we'll be certain to make sure that everybody is aware of it.

Your next question comes from the line of John Cai.

(foreign language) So I have 3 questions. The first one is on the exposures of those relatively high-risk customer that we acquire online. I just wonder, in terms of the outstanding balance and outstanding customer, what portion are they accounted for as a percentage of the whole portfolio? And the second question is about the tenor because we also mentioned that in the first quarter, the tenor declined quarter-on-quarter due to some trial behavior done by these new customers. And because in this year we expect that those new customers you acquired last year will contribute increase in volume, I just wonder if that put a structural pressures or downward trend on the tenor structurally this year? And the third question is about risk and provision. As Ryan just mentioned that loan outstanding is to be collected, that ratio has already stabilized. Just wondering, what's the recovery rate of the collection efficiencies? Or to put another way, how is that trending currently? And then in terms of the reserve, I look at the liability -- the guarantee liability on balance sheet, and that accounted for around 3% of our off-balance sheet loan and -- or 2x of our 90-days delinquencies. Just wondering if that's a proper understanding of our current users' level?

(foreign language) Tony, maybe you first.

[Interpreted] Yes. Sure. Yes. So John, on the customers, well, we don't quite disclose it that way, but we do disclose the new active customers. So obviously, you know the new active customers, you know the active customers, you know the loan origination. So you get a good sense of what's happening. Now in terms of the loan balance on that, obviously we don't disclose that. But obviously, again, new customers would have a lower amount, so you can get an idea.

Now it is also worth pointing out that while we talked about it in a certain way earlier, the new customers may not necessarily be high risk but just need time to develop. And of course, the channels that we have, they can probably now provide at least 1 million in terms of new customers a quarter. On the guarantees, I think you can't calculate it that way. But in the future, maybe we'll arrange a time for you to discuss with Stanley on how to get to the numbers.

(foreign language)

[Interpreted] Yes. So on the early repayment, I think we've taken steps, and we've reduced some of the credit and also made a order limit. So it's something that we think that will very quickly return to more normal levels.

Your last question comes from the line...

(foreign language)

[Interpreted] So yes, John, as I mentioned earlier, the amount of people entering delinquency in which our collections team needs to call has increased by 10%. But in terms of the people coming out, it's basically 2% to 2.5% or so behind the normal levels. But even there, we can see that it's returning gradually to normal. So hence, there's a positive trend there.

Your final question comes from the line of Daphne Poon with Citi.

So just a very quick follow-up to you, first...

Daphne, if you want, you can ask the question in Chinese and then just translate.

Okay. Hold on. (foreign language) So the first question is about the take rate outlook. I just want to confirm whether that has taken into the consideration of the new accounting policy, the CECL model, and whether that will lead to a lower sustainable take rate compared to the previous year's level? And the second question is regarding our current approval rate. Just want to get sense on the magnitude, like how much it has dropped versus our normal level? And the last question is about the capital-light model, whether we see any change in the attitude from our financial institutions partners that -- with dragging that across the sector, whether they are preferring to switch back to the guaranteed model?

(foreign language)

[Interpreted] Okay. So Daphne, on the take rate, I mean when we talk about it, and obviously the fourth quarter numbers are still on the old standard. So hence, when we talk about these things, it's still very much on the old standard.

On the impact from CECL itself, right now it looks like, ultimately, it's just a bit of a timing issue. Ultimately, we will make the same amount of money, and the CECL is just basically making it more conservative in this sense that more of the things will occur at the front. And there will be less income recognized up front, but that will be made up for more income being recognized towards the end of the life loan. So actually, over time, it's -- essentially, it's exactly the same. It's just a timing issue.

(foreign language)

[Interpreted] And so obviously, we have online and offline teams. But on the -- but on the offline team is offline right now. So it's just online. And hence, right now, getting straight to the answer, it's probably down 20% in terms of the approval rate for online.

(foreign language)

[Interpreted] So maybe a little bit surprising to hear, but as Jay mentioned, what has been the impact of the COVID-19 and the pandemic on the institutional side for us, it's actually been a limited impact or no impact or actually kind of a positive impact, in fact, because there's now a lot of macro policies, because the macro policies now are pushing the financial firms to support the real economy. And as a result, all the financial institutions have plenty of cash to deploy and limited places to deploy them. So clearly, we see now that our assets are not enough to meet all the demand from our funding partners. And this, in turn, has allowed us to gain benefits. Whether it's on the leverage or guarantees, we're getting good terms. So for example, for certain new financial institutions that we work with, they no longer require deposits or security guarantees.

Now with regards to what some folks would maybe call a no guarantee or may -- or open platform, we do see that in general, the bigger banks, they're slower to adopt this. But for a consumer finance company and a smaller institution, they're very, very welcoming to the model. And as Jay mentioned earlier, we're definitely looking to increase this significantly this year to be maybe something like 1x, rather doubling what we had in terms of the amount last year. Hope that answers your question. Operator?

There are no questions at this time. Presenters, you may continue.

Okay. I think then we can conclude the call.

Well, thank you, ladies and gentlemen. That does conclude the conference call for today. Thank you for participating. You may now disconnect.