Sos Ltd (SOS) 2017 Q2 法說會逐字稿

Hello, and welcome to China Rapid Finance's Second Quarter 2017 Earnings Conference Call. (Operator Instructions) Please note this conference is being recorded.

Now I will turn the call over to your host for

today's conference, Mao Mao, Investor Relations Director of China Rapid Finance.

Thank you, operator. Welcome to China Rapid Finance Second Quarter 2017 Earnings Conference Call.

Today's call is being webcast and is accompanied by a slide presentation, which is also available on our website. With us today are Dr. Zane Wang, our Chairman and CEO; and Mr. Kerry Shen, our CFO. Following management's prepared remarks, we will conduct the Q&A session.

Before we begin, I will refer you to the safe harbor statement in our earnings press release, which also applies to the conference call today as the company will make forward-looking statements. These forward-looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our current expectations. Further information regarding these and other risks is included in China Rapid Finance report published or furnished to the SEC. All forward-looking statements that we make on this call speak only as of the date hereof and are subject to change at any time. China Rapid Finance has no duty to update these forward-looking statements.

With that, I will now turn the call over to Dr. Zane Wang. Zane, please proceed.

Thank you. Hello, everyone. Thank you for joining our second quarter 2017 earnings conference call today. I'm going to start by giving an overview of the quarter, followed by an update of our business operations. Then I will turn the call over to Kerry, our CFO, to discuss our financial results and the outlook in more detail.

We had a strong quarter with robust growth in our consumption loan business, with the total number of loans facilitated accelerating 354% year-over-year, demonstrating our ability to successfully scale our business. We operate one of China's largest consumer lending marketplaces, and in this quarter, we achieved an important milestone, facilitating 20 million cumulative loans to 2.7 million cumulative borrowers at a significantly lower borrowing cost than many of our competitors.

We are firm in our belief that high

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are price sensitive and they're correlated to lower borrowing costs. I will shortly share with you a number of exciting operating metrics that demonstrate our ability to provide affordable credit to an underserved market with a 500 million population.

Our target market segment is China's Emerging Middle-class Mobile Active population or EMMA for short, and our mission is to use technology to fulfill EMMA's lifetime consumer credit needs. Our technology provides EMMA access to affordable and flexible digital credit through mobile devices in the target EMMA segment with a significant lifetime value, which we call the STAR EMMAs, sticky, targeted, affordable and responsive.

During the second quarter, we received validation that our business model is financially and operationally executing our plan, as illustrated by the 3 KPI metrics that drive total gross billings, which are all trending positively. Specifically, during the second quarter, we acquired 760,000 new borrowers, up from 545,000 new borrowers in the previous quarter and increasing at a 39% growth rate.

Our borrowers are borrowing high dollar amounts on a sequential basis over time. Recall the EMMA that you met during our IPO. They start with $100 in the first month and then by the 12th, 15th and 18th month, their cumulative borrowing amount reached $1,000, $1,300, and $1,555 respectively, which represents a 15x growth over an 18-month period. Furthermore, our average repeating borrower rate, representing brand loyalty to our marketplace, was 72% in the second quarter. Our STAR EMMA customers keep coming back as they loved affordability and the convenience of our service.

Moving to the other side of our marketplace. We continue to diversify and expand our lending base of marketplace investors. As of June 30, 2017, we had over 13,000 sophisticated investors on our marketplace. The composition of our marketplace investor base includes affluent, high net worth, institutional investors as well as banks and trust funds, who provide a more stable source of our lending capital. Unlike our competitors whose balance sheets are exposed to credit risks, our marketplace is one of the few marketplaces in China with a full risk transfer to our sophisticated marketplace investors, which provides a more stable source of our lending capital. We continue to focus on maximizing marketplace investors' returns while achieving a good balance between risk quality and attractive returns. The default rates on consumption loans and lifestyle loans were stable in the second quarter as compared to those in 2016.

During the second quarter, we continued to deepen our relationships with existing data partners and have utilized the data from those data sources to better refine our proprietary algorithms. We also developed partnerships with new data channel partners in relation to data collection and customer relation, through which we are able to leverage a vast amount of consumer data. Those partnerships provide us with additional means by which we can acquire quality dollars using our predictive selection technology.

Our industry-leading predictive selection technology, the proprietary automated decisioning technology, helped us maintain a distinctive advantage and remains as the core driver of our business. We believe our data-driven credit assessment technology is critical to our success as it continues to enable us to acquire borrowers at a low cost and increase repeat borrowings with a large loan size from our prescreened borrowers.

During the second quarter, we continued to invest in enhanced big data and AI algorithm development, which drives our ability to facilitate 5.1 million loans on our platform in the second quarter, representing 354% year-over-year growth. Stated another way and putting our competitive edge into perspective, we facilitated, on average, 1 loan per 1.6 seconds on our platform during the second quarter. We also continued to proactively invest in our product and technology in order to enhance existing product features, improve our customer experience and support our controlled environment.

Looking ahead, we are committed to our low and grow strategy, and we continue to scale with new customer acquisition, upgrade customers to larger and longer-term loans, generate increased customer lifetime value, diversify our lender base and develop new data and channel partnerships.

I will now turn the call to Kerry, our CFO, for our second quarter 2017 financial results and outlook.

Thank you, Zane, and hello, everyone. I will first go through our results in the second quarter of 2017 while referencing the second quarter slide presentation available on our Investor Relations website. Then I will highlight some of the key performance metrics that are uniformly trending positively. And finally, I will share our outlook for the full year of 2017.

As highlighted on Slide 8 of the presentation, we are pleased to report that our total loan volume facilitated in second quarter of 2017 increased by 244% year-over-year to $721 million, driven by the record expansion of consumption loans, which increased by 431% year-over-year to $638 million and 97% over the previous quarter, while lifestyle loans was $83 million as compared with $89 million in the prior year period. Remarkably, consumption loan volume facilitated in the second quarter exceeded that of the whole year of 2016.

For Slide 15, we set another milestone. Total gross billings on transactions and service fees, which are the key KPI we believe better reflects our fundamental top line growth, in the second quarter of 2017 increased by 59% year-over-year to 25 -- sorry, $24.5 million and 46% over the previous quarter, primarily driven by the increase in the volume of consumption loans.

Gross billings from consumption loans increased by 642% year-over-year to $13.2 million and 97% over the previous quarter, mainly driven by an increase in consumption loan volume. Gross billings from consumption loans increased to 54% of total gross billings from 12% in the prior period and 40% in the previous quarter. In particular, gross billings from consumption loans exceeded that for lifestyle loans for the first time in our history, which was in line with our strategic focus on engaging high repeat consumption loan borrowers, which have higher lifetime value as they grow on our platform.

Gross billings from lifestyle loans were $11.3 million as compared with $13.7 million in the prior year period, primarily due to the company's ongoing strategy to focus on consumption loans with prescreened borrowers. As a percentage of total gross billings on transaction service fees, gross billings from lifestyle loans were 46% in the second quarter as compared with 88% in the prior year period.

Net revenues for the second quarter of 2017 increased by 9% to $15.2 million, after netting off $8.1 million customer acquisition incentives or CAI, from $13.9 million, after netting off CAI of $0.6 million, in the prior year period and Q-on-Q increased by 45% from $10.4 million in the previous quarter, primarily driven by an acceleration in consumption loan growth. CAI is paid to marketplace investors in consumption loans offered to first-time borrowers, which was directly deducted from revenue.

As you'll recall from our IPO and detailed on Slide 17, under U.S. GAAP, net revenues reflect the deduction from gross billings of onetime CAI of approximately $11 per borrower paid to our marketplace investors, which we view as an investment to gain long-term customers with significant lifetime value.

Moving to Slide 18. Total operating expenses demonstrated our improving operating leverage, and expenses declined as a percentage of total loan volume, dropping to 4% in the second quarter of 2017 from 5.2% in the first quarter and from 9.3% in the prior year period. On a line item basis, servicing expenses increased to $3.5 million from $3.0 million the prior year period. The increase was primarily due to an increase in the number of servicing personnel.

Sales and marketing expenses increased to $9.5 million in the second quarter of 2017 from $5.6 million in the prior year period. The increase in sales and marketing expenses was primarily due to the marketing fees paid to channel partners in connection with new borrower acquisition.

General and administrative expenses were $15.8 million as compared with $10.8 million in the prior period. The increase in general and administrative expenses was mainly due to: one, the increase in operating costs in relation to the facilitation of consumption loans amounting to $1.3 million, including gateway payment fees, data analysts, customer service, call centers and operational personnel; two, the increase in research and product development expenses in relation to the consumption loans app of $1.2 million; and three, share-based compensation expense for incentive shares of $0.8 million versus $0.2 million in the prior period.

We reported a net loss for the second quarter of 2017 of $13.5 million and a net loss per ordinary share attributable to ordinary shareholders of $1.93 per share. We believe our financial model is executing on plan as demonstrated by improving operating expense leverage. As highlighted on Slide 19, net loss as a percentage of total loan volume is decreasing, dropping to 1.9% in the second quarter of 2017 from 3.1% in the previous quarter and from 2.8% in the prior year period.

Through our low and grow strategy, we've built a multiyear relationship with our borrowers, which generate stable recurring revenue and represents significant customer lifetime value for us. Our customer acquisition costs are an upfront charge to the P&L, which we view as an investment into the future and fully expect to recoup over the lifetime credit needs of the borrower. As detailed on Slide 19 of the presentation, the net loss of the second quarter was largely attributable to CAI. On an adjusted basis, if we add back CAI, our adjusted net loss is declining from prior year period and previous quarter as highlighted by the green bars on the chart.

The strength of our balance sheet is improving as a result of the IPO. As of June 30, 2017, the company had cash and cash equivalents of $74.5 million and restricted cash of $17.4 million. Net cash used in operating activities was $16.2 million for the second quarter of 2017 as compared with $5.1 million in the prior year period. The increase in operating cash outflow is mainly due to the CAI and marketing fees paid to channel partners to acquire quality new borrowers.

Before I go into Q&A, I would like to share some additional color on our improving per borrower economics, which underpin our customer lifetime value proposition, as highlighted on Slide 20 of the presentation. Based on a $17 all-in customer acquisition cost and 1.6% of average transaction and service fee rates of consumption loans in 2016, the breakeven loan volume to recover this cost is around $1,000.

For the 2016 second quarter borrower cohort, the average breakeven time has shortened to approximately 3.8 quarters, driven by repeat and high-quality borrowers borrowing larger and longer-term loans. Please note that the breakeven loan volume for recent cohorts should be lower than USD 1,000 as the average fee rate is trending higher in 2017.

Apart from customer acquisition costs, the costs to serve EMMA is a large fixed cost. Therefore, once our borrowers reach the breakeven volume, additional revenue upside from repeat borrowing and increasing loan size will directly impact our bottom line. Out of the last 9 quarterly borrower cohorts, 6 cohorts have already crossed the breakeven volume points. The remaining 3 cohorts are tracking towards breakeven at an even faster pace. Our growth trajectory is both visible and sustainable.

As highlighted on Slide 21, our low and grow strategy maximizes the lifetime value of our consumption loan borrowers. We continue to see borrowers on our platform borrow repeatedly and with higher borrowing amounts. Based on historical data from 2015 fourth quarter, 2016 first and second quarter borrower cohorts, on average, all borrowers have doubled their line of credits and borrowed more than 10x such that the average cumulative loan volume of all borrowers exceeded $1,000. This borrowing pattern is attributable to our core PST and ADT technology, which in return proves that these technologies are well trained and fine-tuned to be effective and robust.

More importantly, recent cohorts exhibit more favorable borrowing behavior as compared to earlier cohorts in terms of growth of average loan size. As you can see from the chart of average consumption loan size per borrower on Slide 21, the time needed to double the average loan size has shortened from 12 months to 9 months. Meanwhile, our 2015 fourth quarter borrower cohort continue to be very active and repeatedly borrow on our platform.

As the average line of credit continues to grow and borrowers repeatedly borrow on our platform, the average cumulative loan volume continues to grow rapidly. As shown on Slide 21, for the fourth quarter 2015 cohort, the average cumulative loan volume per borrower increased by 19% to $1,555 in the 18th month from approximately $1,300 in the 15th month.

Now turning to the 2016 first quarter borrower cohort data. The average cumulative loan volume increased by 22% to approximately $1,340 in the 15th month from approximately $1,100 in the 12th month. This low and grow borrowing pattern is attributable to our core PST and ADT technologies, which have proven to be highly scalable.

With that, let me provide an updated financial outlook for the full year of 2017. For the full year ending December 31, 2017, the company expects to add between 2.5 million to 3 million new borrowers, representing a year-over-year growth rate of 350% to 400%. The company also expects total gross billings on transaction service fees to be in the range of $110 million to $120 million in 2017 as compared with $67.9 million in the prior year. Total gross billings for the 6 months ended June 30, 2017, were $41 million, meaning in the second half of the year, the company expects to generate total gross billings of $70 million to $80 million. These forecasts reflect the company's current and preliminary view, which may be subject to change.

Now we are ready to open the call to Q&A. Operator, please proceed.

(Operator Instructions) And the first question comes from John Hecht with Jefferies.

It seems like the borrowers that you're identifying now are interested in taking out larger loans at an earlier phase than they were before. Is that because the data you're getting is letting you extend more credit earlier in the customer's life cycle? Or is it a better -- a higher credit quality consumer? What does your data tell you?

John, thank you for the question. Actually, this is basically driven by our technology. Because, as you mentioned, the more data we gather, the more robust we can fine-tune our prediction model -- fine-tune or calibrate our scores such that our scores -- our predictive selection technology can work better such that we have more confidence to not only underwrite the good, quality borrowers, but also we can also upgrade them in terms of help them to borrow larger amount for longer duration. So this reflects our revenue growth. And also, look at the curves, as Kerry just mentioned. The financial performance also reflects the progressive achievement of our technology.

Okay. And then you referred to some new channel partners with respect to getting more opportunity, I guess, to identify more customers and have more data. Can you give us any characteristics of the new channel partners?

Yes. Actually, we are actually deepening our relationships with our existing data partners and channel partners. We are working with e-commerce, the online payments and also the -- some telecommunication companies and also many other data partners and channel partners. Also, at the same time, we are aggressively opening up with new partnerships with new data partners and channel partners. As of today, we have hundreds of data partners working with us. So we stick with our given strategy, which is the low and grow, and also work with multi-data partners, multichannel partners. So this is a strategy -- or a step which carried through our strategy moving along.

And in terms of the composition of new borrowers by channel, was there any change in Q2 from Q1 that's worthy of discussing?

John, that's a good question. We don't really particularly have any so-called channel concentration. The overall mixture dynamic are pretty much the same. There are some sort of the dynamics going on, but overall, the structure, the strategy, the channel mixture basically remains pretty much stable compared with the first quarter.

(Operator Instructions) And the next question comes from Richard Xu with Morgan Stanley.

A couple of questions. One, a follow-up question on the channels. In China, I think, some other platforms are trying to also acquire channels and go -- I guess, trying to lift from your model as well. Are you seeing the competition for channels picking up in China? A further question to that is, are you seeing the cost related to taking partners and channel cost -- acquisition cost rising or declining? So related question to that -- we're seeing the customer acquisition incentive moderating a little bit in the second quarter, but at the same time, obviously, some other costs might shift a little bit. Could you update us in terms of the CAC? What's the component from a customer -- borrower acquisition, from investor acquisition as well as the channel partner cost? And also, any outlook on that front?

Thank you, Richard. Yes, I'll take your first part of the question. Talk about, probably, the overall landscape, the market conditions. I'll let Kerry to address those other financial impacts or the financial consequences of your question. Overall, we understand the consumption -- the consumer lending -- the consumption loans is the direction we pioneered. We understand, as of today, there are some other companies, some other players also trying to work in this direction. We are glad to see that because more and more people, more and more players start to realize the value of the consumer credit in this market. And we talk about there are 500 million people who are underserved, who have education, quality employment, they are willing to borrow and they are willing to consume. So those are our target audience. So moving to that direction, we are happy to see the market start to -- this kind of market dynamic be realized, understood by many, many other players. However, if you compared other business models, even though it looks like they are moving to this direction, but there are some critical component that's difficult to copy. For instance, the total acquisition cost. We have developed a strategy we call low and grow, which is we start with a lower amount, help people to get the lower amount, more importantly very low borrowing costs, provide them very affordable credit. And compared to others, they might move into this direction, try to probably issue loans to consumer with a small amount. However, their overall charging structures are significantly higher than what we are offering to our people, to our borrower, EMMA population. That's why we are still seeing, in this market, we are positioned uniquely to serve these people. We call them the -- they are very, very sensitive, they are very sticky, they are actually trying to get affordable credit. So the pricing structure and the total acquisition cost really sets us apart from others. That's why we still consider we have a unique competitive edge to take advantage of the market situation, [that then we'll] move along. With that, I will turn to Kerry to address those financial issues.

Richard, thank you for your question. Actually, in our second quarter, net revenue of $15 million, this has netted off customer acquisition incentive of $8.1 million paid to investors who make investments in new borrowers for the first time. If we divide the total CAI by the number of new borrowers added, this number in the second quarter is less than $11 per borrower. And in the first quarter of 2017, this number was $11.50 per borrower. And you also asked about total customer acquisition costs. In addition to the CAI, we also spend other marketing expenses and sales expenses paid to channel partners. Our all-in CAC in 2016 was $17 per borrower, and in 2015, that number was $20 per borrower. In the current year, as we started to scale the business and do larger scale customer acquisition, we are able to maintain the all-in CAC at $17 per borrower. I hope that answers your question.

Actually, any break down? Before, I remember, I guess, a large part, [being] $10, is customer acquisition incentive, and then there's some, I guess, a [measured] acquisition costs related to that and also the channel cost. Any shift in the mix in the moment, whether channel cost is going to be more important factor in the all-in CAC? As basically, we're seeing improvement in customer acquisition incentives, are we going to see basically offsetting factors from, say, the channel cost? Or we're going to see an overall continued decline in customer acquisition costs in coming years?

Richard, thank you for following up on that question. The all-in CAC of $17 per borrower, the composition of the $17 is -- the detailed composition of this $17 per borrower is not disclosed. But the overall CAC is mainly comprises the customer acquisition incentive and other sales and marketing fees we pay to data and channel partners. And that number, $17 per borrower, has been consistent since 2016.

I mean -- okay. And another follow-up question, I guess there on the product mix. Are we accelerating the upgrade to consumption plus loans? Any plans on the lifestyle light loan this quarter or in coming quarters? Any, basically, change on the strategy on that front? And then, I guess, the last question from me is on the regulatory front. There are some new regulations or connotation paper from CBRC on the assisted lending practices. I know this platform is P2P, but whether that will have any implications on potential cooperation with the institutional lenders like banks or trust companies going forward.

Thank you, Richard. Let me take your -- the first question first regarding our product mixture. We do foresee potential changes to our strategy. Our key focus is to stick to our so-called low and grow strategy by acquiring quality borrowers at a low cost and then maximizing their lifetime value. So we don't have new products or potential launch plans to disclose at this moment. Regarding your question about the regulatory framework, we understand China's regulators have launched efforts to encourage the healthy growth of the industry and to clean up noncompliant players from the market. We welcome the regulator's intention in tidying up the governors and making the marketplace lending industry healthy. We are closely following the latest regulatory developments, and we believe noncompliant players will be exiled from the market and the compliant and the disciplined companies will have more room to grow. So after this process, we anticipate institutional lenders would be more actively working with the platforms, so we're looking forward to that.

(Operator Instructions) And the next question comes from Ryan Roberts with MCM Partners.

Just a quick one for me actually. I wanted to ask about the current status of the kind of the Safeguard Program. I noticed that, on the balance sheet, the payable kicked up a little bit on kind of a Y-o-Y basis and moderated a little bit versus Q1. And also went down for -- the receivable also went down, so both sides kind of shifting around there, yet the consumption loans -- loan volume increased. Can you just kind of shed some light on what's happening in the balance sheet? And additionally, if you could, any changes in the Safeguard Program, kind of cash inflows and outflows and how that's working?

Thank you, Ryan. Let me say a couple of sentence, then I'll turn to Kerry. Overall -- thank you for mentioning this very important question. As you know, China Rapid Finance's overall strategy is to move into consumption area. Right now, not only our overall issuing volumes -- the majority of issuing volumes come from consumption loans, also our gross billings for this quarter mainly comes from consumption loans. Total billing number -- the gross billing number from consumption loans is -- exceeded the lifestyle loans. So we don't have Safeguard Program issues for consumption loans so that's worth note. So with that, I turn to Kerry to address more related to Safeguard Program issues.

Ryan, actually, the Safeguard Program only refers to our lifestyle loans. And then for consumption loans, there's no Safeguard Program at all. And then the -- and in terms of total loan volume, as Zane just explained, the consumption loans volume has now increased to 88% of our total loan volume. And then in terms of the position of the Safeguard Program, the safeguard payable is now standing at $16 million versus $17 million a quarter ago, and safeguard receivable is $5.1 million versus $5.51 million in the first quarter. So generally, the position of the Safeguard Program is pretty stable as the lifestyle loan volume has also been maintained at stable. So I hope that answers your question.

It does. I guess my question -- perhaps maybe shifting more to product then. As the average loan size increases, again, as we get forward in time on the low and grow strategy, will we be implementing anything similar to the safeguard type program for investors? I'm just kind of curious if management can share some thoughts on that.

I appreciate your question, Ryan. You're right. In terms of the average size of the consumption loans, they increased from $101 per loan to $125 per loan, so the increase rate is around 22% over the first quarter. And for the consumption loans, we don't make any provisions at all. Our investors take full risk of the loans. And so we only pay investors customer acquisition incentives, which we were just talking about, is roughly less than $11 per new borrower, if investors were matched to a first-time, a new borrower, and no other additional incentives will be paid. This incentive will help us to lock in quality borrowers who will repeatedly borrow on our platform. And that's -- we benefit multiple years through the repeat borrowing behavior of these borrowers.

So Ryan, what Kerry just said is we don't have intention to change the current plan. So we move a lot of the lending consumption investors to take the credit risk, and we intend to keep it that way.

Got you, okay. If I can just sneak one more in, just -- sorry, just quickly. You said earlier in the remarks that risk was generally -- sorry, the loan default rates, the liquid fees were generally in line with what you expected. Can you share some more color on what you -- how that's playing out?

Yes. Actually, our -- we anticipate our credit quality -- actually, as a result of our pure marketplace model with a true risk transfer, changes in credit performance have no direct impact on our platform itself and the only impact is net return of the lenders on the platform. So in second quarter of 2017, our investors' risk-adjusted returns were pretty much stable. So there's no significant change in default rates in this quarter as the mature repeat borrowers keep showing very good credit behavior while we are tracking new borrowers' credit behavior carefully. So overall, the credit quality of the borrowers on our marketplace was stable in second quarter 2017.

And the next question comes from Stephen Ju with Crédit Suisse.

I have 2 questions here. One is regarding to the KPI. So we see the gross billing looks very decent in first half while the net revenue growth is not that exciting. So I'd like to check with the management what's the key KPI for the company. And the secondary market care more about earning growth. So any pressure from the weak earning growth? My second question is regarding to the regulations. So we know the regulator released new rules about the APR cap on the cash loan products, 36% in the first half. So I'd like to know how that works. Any significant impact on the sector going forward? So also, what's the average APR for the consumption loans and the lifestyle loan in the first half?

Thank you, Stephen. I appreciate your question. And let me take the first question on KPI, and I'll let Zane, our CEO, answer the second question on the APR, et cetera. Actually, the net revenue in the second quarter grew 45% Q-on-Q. But we use gross billings as a KPI as we believe gross billing is -- more truly reflects the fundamentals of our business performance. Customer acquisition incentive is paid to investors for lending to first-time, new borrowers -- consumption loan borrowers, and therefore, it is not directly related to loan volume and our business growth. We look at these 2 strategies separately. Therefore, we measure our growth by looking at gross billings instead of net revenue. This is because in the U.S. GAAP accounting, net revenue is reported after deducting the customer acquisition incentives. Because of our low and grow strategy, we really build a multiyear relationship with our borrowers. We expect borrowers to generate multiple times of returns on our initial CAC over a period of few years, and we pay CAI that in order to generate recurring revenue from these high-frequency repeat borrowing -- borrowers as they grow on our platform and get access to larger size line of credit over a period of multiple years. And for the second part of your question, I'll pass on to Zane to handle it.

Thank you, Stephen. It's a very important question that you raised: What is the current regulatory requirements for the APR? Actually, APR is the number -- the ceiling number that is set by the Supreme Court. Right now, the highest number -- the ceiling number is 36% annualized. The current CBRC take that kind of measurements. Compare what we are doing -- actually, what our consumption loan charges are very much in the same line as the prime credit cards are charging. In the credit card world, banks charge about 18% APR annualized; and also for cash advance charge, roughly about 2% for 1 cycle, which is 1 month. In our case, we charge 21% interest, 21% APR with 1% to 2% service fee, so very much in line with what the prime credit cards are charging. This is one of the key advantage. We are providing affordable credit to our targeted EMMA population while others charge higher cost to go to -- maybe go to the subprime population. But we are serving this prime or near-prime EMMA population with a very affordable rate.

(Operator Instructions) As there are no more questions at the present time, I would like to return the call to management for any closing comments.

Thank you, everyone, for joining us today. We wish to thank our shareholders for your ongoing support and look forward to speaking with you soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.