360 DigiTech Inc
NASDAQ:QFIN
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360 DigiTech Inc
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Ladies and gentlemen, thank you for standing by, and welcome to the 360 DigiTech Fourth Quarter 2020 Earnings Conference Call. Please also note that today's event is being recorded.
At this time, I'd like to turn the conference call over to Ms. Mandy Dole, IR Director. Please go ahead, Mandy.
Thank you. Hello everyone and welcome to our Fourth Quarter and full year 2020 Earnings Conference Call. Our results were issued earlier today and can be found on our IR website. Joining me today are Mr. Wu Haisheng, our CEO and Director; Mr. Alex Xu, our CFO and Director; and Mr. Zheng Yan, our CRO.
Before we begin the prepared remarks, I would like to remind you of the company's Safe Harbor statements. Except for historical information, the materials discussed here may contain forward-looking statements, based on our current plans, estimates and projections. Therefore, you should not place undue reliance on them.
Forward-looking statements involve inherent risks and uncertainties. We caution that a number of important factors could cause actual results to differ materially from those in forward-looking statements. For more information about potential risks and uncertainties, please refer to the company's filings with the SEC. Also, this call includes a discussion of certain non-GAAP measures. Please refer to our earnings release for a reconciliation between non-GAAP and GAAP ones. Last, unless otherwise stated, all figures mentioned are in RMB.
I will now turn the call over to our CEO, Mr. Wu Haisheng.
[Foreign Language]
Thank you, Mandy. Hello everyone. I am very pleased to report another exciting quarter with growth over the year with another set of record-breaking results and continued the growth momentum since 2020 Q4. For Q4 total loan facilitation was RMB69 billion up 29% year-over-year. Outstanding loan balance increased by 27% year-over-year to RMB92.1 billion. Total revenue was RMB3.34 billion, up 39% year-over-year. Non-GAAP net income was RMB1.31 billion, up 155% year-over-year.
For the full year, total loan facilitation was RMB246.8 billion exceeding the upper end of our guidance range, which was RMB242 billion to 244 billion by RMB2.8 billion. Total revenue was RMB13.6 billion up 47% year-over-year. Non-GAAP net income was RMB12.8 [ph] billion up 38% year-over-year.
We delivered outstanding results despite a challenging year hurt by the COVID-19 pandemic. This is an important testament to the resilience of our risk management system and efficiency of our overall operations. We are more confident than ever that we will be able to maintain sustainable and solid growth. Meanwhile, these results are a testament of our strategy and we plan to diversify customer base and our resilient channels. We are expecting accelerating growth in 2021.
While exceeding strong growth in key operational and the financial metrics, the quality of earnings in our overall business also improved meaningfully. Capital-Light and other cap solutions and new milestones contributing 34.1% of total loans facilitation in Q4. Recently, the fixed ratio reached over 50% on a monthly basis. Moreover, the quality improvement of our earnings indicate that we have succeeded in our milestone phase of cap driven strategy upgrade.
Despite the rising contribution from Capital-Lite, we have successfully maintaining the overall fixed rate around 4% by optimizing contractor trends with our finance and are boosting operational efficiency. Going forward, we are more determined than ever to further advance this strategy to build our business own technology driven model.
As we enter 2021, on the macro level we are seeing tailwinds from both the macro economy and industry policies [ph]. The macro economy recovery has continued and we saw strong demand at operational level, in particular our business activity [ph] outperformed normal seasonality during the Chinese New Year holiday as the government stayput guideline increased business activities across par.
On the regulatory front, we believe that the regulations brought out recently either has minimal impact to our business, or in some cases, even created favorable environment for top platforms like us. As you may already know, the new ruling from the Supreme People’s Court removed the more restrictive lending rate cap for our business. The new guideline on drug lending and micro-lending has a minimal impact on our business as our exposure to both is quite marginal. On the other hand, China’s antitrust and deleveraging push may squeeze some market share away from the industry giants, which will bring us spill over market opportunities.
Next, let me share with you some of our plans for this year. With the pandemic well under control and economy expanding, we’ll take a more proactive growth strategy this year. In the past, we deployed a large team of senior AI engineers to build our online marketing system, which builds the efficiency of our interaction with online [indiscernible] customers. We have also built out an experienced offline team. Currently, this impact contributed roughly 15% of the total transaction of new borrowers compared to 2020 Q3. We target our virtual credit card product adding over 620,000 new merchants and processed 4 million transactions per month. Our customers use product in high-frequency consumption merchants such as McDonald’s, KFC, [indiscernible], et cetera.
We noticed that the embedded finance model has enhanced our competitiveness and provided strong growth. We are becoming the partner of the choice of this area for leading consumption traffic platforms in China for several reasons. First, compared with other platforms that only serve a strategic customer base, we are seeing a narrow price range, we have been serving broader-based customers with low, medium and high price options. This has allowed us to build capacity to operate under a wide spectrum of product setting.
Second, the fact that we do not operate a scenario-based consumption platform by ourselves, allow us to work with other consumption platforms without potential conflicts of interest. Third, those traffic platforms typically have strong need for monetization. Our outstanding risk management capabilities can generate superior returns for them. This also makes us an ideal partner. We believe the need for embedded finance service will increase among consumption traffic platform in the future, and we are very optimistic about the growth prospects of this business and our competitive edge.
So far, we have cooperated with 18 leading platforms, including [Indecipherable] with a few more in the pipeline, such as JD, China Telecom and China Unicom. Monthly transaction volume under this model reached RMB1 billion recently with some 150,000 new borrowers with approved credit lines. Both operation metrics showed about 100 gross compared with the number in October 2020.
[Foreign Language]
In addition to consumer finance, SME loans has gradually become a new growth engine for the existing platform. This is a blue sea market with estimated RMB90 trillion market size and nearly 50% of demand is unmet. Serving the SME market is also consistent with the Government’s policy of promoting financial services and accessibility to the SMEs. Alibaba Back to My Bank and Tantan Back to We Bank have developed some best practice in this market already and created considerable barriers of entry, leveraging our deep rooted partnership with KCB.
We become one of the very few players that are capable of serving base market in a large scale. In addition to outstanding risk management probability, our robust capacity in funding customer acquisition allow us to quickly establish our competitive edge in this market. For SME lending, we have developed three customer acquisition channels, including through SaaS service partners, offline customer reach and online traffic acquisition.
So far, we have covered around 20 leading SaaS service providers, including [indiscernible] Taiwan and India [ph]. For our offline channels, we now have a sales team about 1000 and plan to expand at around 2,000 this year. As you can see, we have established a set of diversified customer acquisition channels in SME business. Currently, we are pilot running these channels and monitoring the loan performance through the process.
Once the pilot is complete, we will rapidly scale up the business with our well designed products and the readily available funding. So far, a total of 548,000 borrowers received the credit line for SME loans with total accumulated loan facilitation over RMB27.3 billion, of them SME loan balance increased by about 200% from October 2020 to RMB7.4 billion.
[Foreign Language]
In addition, as we mentioned earlier, there might be some speed over market opportunities for us as the results of the ongoing antitrust and the leverage and push by the regulator this year. Currently our team is exploring some new products catering to our broader customer group. We hope to share more updates with you later this year.
[Foreign Language]
So this is our growth strategy for 2021. And now it's into our long term business model upgrading. Our region was an Internet company and our transition into a tech empowered credit platform where we take credit risk is a natural evolution in our corporate development. Under the capitalized model, we are currently working with 39 institutions and have another 22 in the pipeline. In Q4 loan facilitation in this model accounted for 34% of the total and recently this ratio exceeds 50%.
We expect this trending of capital-light ratio to continue throughout this year. Meanwhile, we also aim to keep our hit rate at around 4%, even with the main change. Intelligence Credit Engine, ICE, our smart marketing service products for financial institutions also experienced a rapid growth in terms of number of customers and the transaction volume.
Our RM SaaS product provides small risk management service and we have already signed contracts with 19 institutions supporting accumulated transactional volume about $16.7 billion. At this service growth, our income from non-financial services exceeded by 50% out of the total.
[Foreign Language]
With regards to our strategic partnership with KCB, we believe there are significant synergies in key areas of our operations. First, through the partnership, KCB may help us extend the reach of the capital-light model. This will not only increase the overall scale of capital-light, but also help us attempt better contractual terms with other partners. Second, our RM SaaS may provide much needed risk management capability to KCB in their non [indiscernible] related business.
Currently, KCB is trying our RM SaaS in they're working with a couple of major platforms. The success of RM SaaS at KCB will not only drive the growth of our tech driven volume and income, but also set a good example attracting other potential RM SaaS clients. Third, KCB provides us a unique competitive edge in SME loans with the access of certain proprietary data.
To sum up, our synergy with KCB will bring significant value in the areas of capital-light model, RM SaaS and SME lending. Since we began working together, the outstanding loan balance under our partnership has reached RMB4.25 billion and accumulated loan volume reached 5.65 billion. We are actively advancing collaboration on other fronts as well.
[Foreign Language]
2020 was a highly unusual year. After year-long extreme stress test, we emerged even stronger than before. Our primary trend as more than ever and our relationships have expanded. We are now in a stronger market position than ever. Looking ahead to 2021, we will capitalize on the unprecedented market opportunities and then return our shareholders with better business scale and quality.
[Foreign Language]
Now, I will hand over to our CFO, Alex Xu
Thank you, Haisheng. Good morning and good evening, everyone. Welcome to our quarterly earnings call. So in the interest of time, I will not go over all the financial line items on the call. Please refer to our earnings release for the details. Strong business momentum continued in Q4 and into the New Year, as consumer confidence and economic activities remain on a steady upward trend. We have experienced robust consumer demand for credit, along with a further improvement in asset quality.
Total net revenue for Q4 was RMB3.34 billion versus RMB3.7 billion in Q3 and RMB2.4 billion a year ago. Revenue for credit driven service, cap-heavy was RMB2.56 billion, compared to RMB2.96 billion in Q3. The sequential decline was in part due to facilitation volume mix change, as cap-lite contribution increased significantly. And the decline in take rate, as we lowered our average interest rate in Q4 to 25.3% from 25.9% in Q3, following the Supreme Court ruling in late August.
However, we are expecting interest rates to gradually recover somewhat throughout 2021 as the 4xLPR rate cap is no longer applicable to institutional lending according to the Supreme Court latest judicial interpretation.
Revenue from credit driven services was also negatively impacted by a one off reassessment of early repayment discount. Revenue from platform service, cap-lite was RMB782 million compared to RMB748 million in Q3. If you recall, in Q3, there was RMB150 [ph] million one-time reversal of previous charges related to certain loans, risk performance versus performance benchmark, set by the revenue sharing agreement between us and our partners.
Aside from this reversal charge in Q3, for apple-to-apple comparison, the sequential growth of platform service revenue in Q4 was approximately 33%. The growth was mainly due to higher volume under cap-lite model as well as better contribution from the ICE model and the underlying take rate for the platform service also improved in Q4. For the full year 2020, platform service revenue grew about 80% as cap-lite percentage contribution to total volume nearly doubled.
Total non-GAAP operating expenses, excluding provisions, were up 5.6% Q-on-Q and essentially flat year-over-year. The sequential increase was mainly due to increase in facilitation volume and sales marketing expenses. Average customer acquisition costs per user was proven credit line was about RMB198 in Q4, compared to RMB172 in Q3. As the micro economy recovers, demand for online traffic increased significantly and Q4 was a seasonally high demand period for online traffic, particularly around intense online shopping events, such as Double 11.
For the full year, average customer acquisition cost was about RMB175. We will continue to use lifecycle ROI as key metrics to determine the pace and scope of our customer acquisition process. This approach has enabled us to generate satisfied return and mitigate major potential risks.
Non-GAAP net income was RMB1.31 billion in Q4 versus RMB1.29 billion in Q3 and RMB516 million a year ago. We once again set a new record in quarterly profitability, driven by higher facilitating volume and a noticeable improvement in asset quality, and the subsequent write-back of the privileged provisions.
For the full year, non-GAAP net income was RMB3.8 billion, up 38% from 2019. We are very proud of the achievement, particularly given the challenging market condition in early 2020. This further demonstrates the resilience of our business model, the effectiveness of our risk management, and the consistency of our execution.
Please note, as we transition towards a more technology driven business model, the structure of our financial model will also gradually change. With the increasing contribution from Capital Light and other technologies solutions, total revenue growth, maybe not as fast as the facilitation volume growth, given the different revenue booking methodology between cap-lite and cap-heavy. However, the quality of the revenue will improve and operating margin should gradually expand along the way. As such, overall profitability growth should be more or less keep pace with the facilitation volume growth.
With strong operational results and increased contribution from cap-lite model in Q4, our leverage ratio, which is defined as risk-bearing loan balance divided by shareholders' equity further declined to 6.6% -- 6.6 times from 7.4 times in Q3, and 9.5 times in early 2020. We expect to see continued deleveraging in our business driven by accelerating movement toward cap-lite model and solid operating results.
Meanwhile, our provision coverage ratio reached 470% [ph] in Q4, compared to 436% in Q3 and 401% in early 2020. This was the highest provision coverage ratio in our corporate history, reflecting significant improvement in asset quality and our prudent approach in estimating provisions.
During the fourth quarter, we continued to generate strong cash flow from operations at approximately RMB1.4 billion. Also, during the quarter, we deployed approximately RMB1.7 billion cash to fund loan origination under our micro lending operation, and addition of three ABS assets. As such, total cash and the cash equivalent declined slightly to RMB7.7 billion in Q4 from RMB7.8 billion in Q3. Non-restricted cash was approximately RMB4.4 billion in Q4 versus RMB4.8 billion in Q3. As you know, a significant portion of our cash was allocated to security deposit with our institutional partners, and the registered capital of the different entities to support our daily operation.
While we continue to generally strong cash flows through operations, we will also proactively deploy cash to expand our business, invest in key technologies and satisfy potential regulatory requirements. We believe that sufficient cash position will not only enable us to compete in ever changing market, but also position us to capture potential growth opportunity in the market recovery.
Finally, let me give you some color about our outlook for 2021. While we intend to keep our tradition of prudent decision making and business planning, we are encouraged by continuous strong businesses momentum so far in 2021 as micro economy continues on a steady growth path, along with some regulatory clarity emerges. As such, we now expect total loan facilitation volume for 2021 to be between RMB310 billion and RMB330 billion, representing year-on-year growth of 26% to 34%. As always, this forecast reflects the company's current and preliminary view, which is subject to change.
With that, I would like to conclude our prepared remarks. Operator, we can now take some questions.
Thank you. [Operator Instructions] First, we have Jacky Zuo, China Renaissance. Jacky, your question please?
[Foreign Language]
So let me translate my questions. So, congrats on the strong results. I have three questions to ask. Number one is about our loan guidance. So we gave a very strong full year guidance, just want to try to understand the rationale behind the guidance. Do we expect a larger budget for sales marketing? How much contribution were from the MSE lending and what is the run rate for the first quarter so far?
And second question is about the customer acquisition channels. Trying to understand in terms of the channels, how much will be from the cooperation with leading internet platforms, as well as the offline sales and also the traditional online traffic channels? And third question is about our take rates. I'm surprised the Capital Heavy model our take rate was a bit lower in the first quarter. So I saw probably the impact is from lower APR and also late [ph] payment impact. I just want to understand the rationale about the lower take rate and what's the outlook for this year 2021? Thank you.
[Foreign Language]
Thank you, Jacky very much for your question. I will handle the first two and our CFO, Alex Xu, try to address your third question. For the first question as the fundamentals of our loan guidance, we are building this guidance considering in the past few years we have successfully achieved a decent growth, and considering the macro environments and the industry policy will tell you [ph] for the whole industry development. That's how we developed these 24% to 36% year loan origination guidance.
[Foreign Language]
Well, number -- first point, for the existing customer acquisition channel which is online traffic channels this year we will increase largely in terms of skill while maintaining stable customer acquisition cost. If your benchmark across the whole market, as some of our peers disclosed the CPS cost, we have very strong competitive edge on this brand.
[Foreign Language]
Second point, as we mentioned in my remarks, that we will spend more efforts on embedded finance customer acquisition channel this year, thanks to our input last year we will embrace rapid growth on this channel in this year with fast customers, new customers, well new customer from this channel will contribute 30% this year.
[Foreign Language]
The third driver for our growth strategy this year is SME loans. There are two parts of the growth. The number one is our transition from existing high quality individual consumers from our existing customer base. The second part is the newly acquired SME and [indiscernible]. In total, these two parts adding up will contribute around 10% of total loan book this year.
[Foreign Language]
The fourth growth driver comes from the RM SaaS service products. As we mentioned in the remarks, we are expanding the cooperation with KCB and ramping up this kind of smart risk management service to more and more financial institutions.
[Foreign Language]
As for the custom, our diversified customer acquisition channels, number one is the online traffic customer acquisition. Number two is the embedded same path [ph] our embedded finance customer acquisition, with that these two contribute 30% this year. Number three is the offline teams, currently base offline team contributes 15% of new customer acquisition. Besides that, the SME assumptions and narrow [ph] will be an additional channel.
[Foreign Language]
Our CFO, Alex Xu, will address your third question.
Okay, thank you Haisheng. I just want to add one small color to the earlier questions regarding the customer acquisition costs. Some of our peers disclosed their CPS cost and we look at the same logic and the same methodology to calculate it. We are running roughly 40% below that number, so that's just a small color on that customer acquisition cost.
In terms of take rate for Q4, yes the Q4 take rate, particularly on the cap-heavy side was impacted by basically three or maybe two major items. One is really the interest rate cap causing the lower rate, as I mentioned in the prepared remarks, we lowered to 25.3% versus 25.9% in Q3, so that hurt the take rate on the cap-heavy side.
The other one is more like a one off item. If you recall, around November of 2019, the regulator put out a ruling or requirement basically allow customers to make early repayment without any meaningful penalty in there. So we started to change our practice along with other companies in the industry to adopt that. But at the time, when we get into the, like Q1 and Q2 of this of 2020, we don't know exactly how many or how much of the impact this early repayment will be. So from a financial kind of a planning or accounting perspective, we have to put out a best estimate in there. Back then the estimate was about early repayment discount ratio, we put in as about 12% and we need to wait for the full loan cycle finish for this batch of particular customers to fully understand what the real impact of the discount will be.
Once we get into the fourth quarter, keep in mind our average loan term is somewhere around nine months, so once we get to the fourth quarter, we saw the whole performance of the entire batch of a customer. And back then we realized the actual early repayment ratio or discount ratio was higher than the, our estimate in previous quarters. So from an accounting perspective, we need to basically kind of take almost like a take a charge to reflect the actual repayment discount ratio. This charge amount in Q4 accounted for roughly RMB170 million to RMB280 million. So that I would say it's a one off hit to the top line there. And then the third overall impact to the top line is really the mix change, meaning like the increased contribution from cap-lite and the decreased contribution from cap-heavy.
We do a back of the envelope kind of a calculation. For every $10 we facilitate under cap-heavy model, we roughly can make about $3 in the bottom line. But if we want to make the same $3 in the bottom line, we only need $6 in cap-lite facilitation. So, if you do the quick calculation, if you can get let's say 30% earnings growth for 2021, we only need 10% revenue growth to reach that. It is just because the mix change will continue throughout this year and actually pretty fast.
So that's why in my prepared remarks I asked all analysts as well as investors to change your financial model. It's gradually moved toward a kind of more cap-lite driven model with relatively slower revenue growth versus the low volume growth, but improving margin that drive the comparable earnings growth versus the volume growth.
That's very clear. Thank you, Haisheng [Indiscernible]
Thank you.
Thank you, Jacky. Next we have Xu from Morgan Stanley. Xu, your question please?
[Foreign Language]
Basically two questions, basically with the clear clarity on the interest rate environment, I just want to know whether the interest rates, and how much the interest rates will rebound, what will be the proper level for the interest rates given there's still some window guidance and stuff like that? Secondly, on the loan volume growth, what will be the long-term thinking? There's also some, I guess, regulatory focus on the pace of consumer credit growth, what will be the, I guess more sustainable proper pace for the longer-term? Thank you.
[Foreign Language]
Thank you, Richard for your question. I will answer your first question. Yes, after new ruling of Supreme Court at the end of last year 2020, we did see some, a little bit rebound of the interest rate on our product level. However, as you mentioned, considering the whole regulatory environment and as a company with social or society responsibility, we intend to carry out the long-term downward trend in price.
[Foreign Language]
Yes, we -- it can be showed on our several new business initiatives. For example, we are exploring products covering more better quality prime clients, as well as you see we are heading into the SME loan business, both new products have a lower interest rate compared to the existing products we are operating.
[Foreign Language]
Yes, we will take a comprehensive consideration while operating our business. The price is just a one brand. Actually, we take more focused on the lifetime value of our customer.
[Foreign Language]
Yes, considering the diversification of geography range and different attitude of local regulators across China, where we as a loan facilitation platform our purpose is to facilitate the demand and need between the borrowers and financial institutions. There are some financial institutions they have the demand for higher pricing range, that's why we cover more broader price range products.
[Foreign Language]
Well as for your second question compared to the industry giants, who had already trillion loan balance, we are still at a very -- at a comparatively early development stage compared to them. Therefore, in the view of regulators we are not the target they will regulate in terms of the antitrust progress [ph].
[Foreign Language]
As we mentioned in the remarks, SME loans are very important the business driver for us this year. This is very consistent with the government promoting policy to provide that visibility [ph] and financial service to SMEs.
[Foreign Language]
Thank you.
Thank you. Next on the line we have Steven Chan from Haitong. Steven, your question please?
[Foreign Language]
My question focus on two things, one is about there could be potential big increase in cash position, especially now we're moving towards Capital Light. I believe that probably the demand for restricted cash may likely to reduce and if that's the case with increasing balance of cash position, what will be our plan in the coming years, we can see the TEU pay off some of the cash as dividends like what like our peers did? The that's the first question. And second question is, what is your current plan of returning back to Hong Kong for leasing? Thanks.
[Foreign Language]
I will answer your first question. In terms of the use of the cash, the number one very important aspect, as we are still growing our business aggressively we will invest in the new business areas, for example, the cost of that product development and new customer acquisition.
[Foreign Language]
Well, in the long term, we expect there will be a balanced mix for these fintech players. There will be -- the mix will be majority loan book comes from the capital-light model, there will be a portion of the transitional loan facilitation model. And as well, there will be a portion for the own balanced loans of clients, self financed.
[Foreign Language]
There are a few reasons to increase their own balance sheet business; number one it returns with very high ROE about 40%.
[Foreign Language]
The third important use of cash is some major equity investments. For example, one of our favorite, the internet insurance company with rapid growth and the promising prospects; secondly, we are actively looking at some target investment targets with great potential synergy.
[Foreign Language]
The third aspect of cash use is regarding to the license. There might be capital rejection into our micro-lending license or guarantor license, as well as we may consider to repurchase more license.
[Foreign Language]
Yes, okay.
Sure, Haisheng. Basically Haisheng sort of covered the cash usage throughout this year supporting our business growth, get the proper license, get sufficient registered capital under a certain licenses, and also some potential M&A, although mostly, most likely, relatively smaller size. And with all these considered, of course, we're also looking at the operations because we're expecting operations continue to generate very strong cash flow throughout this year.
And, at some point, at some time, when we look at the cash position, when we satisfy all these needs, if they is still, “kind of free cash” available to us, we're not ruling out any other sort of return to shareholders kind of the activity down the road. But right now the priority, like we always said, is focus on expand our operation, get ourselves ready for this market.
And then, in terms of the Hong Kong listing, we are still in the process of dealing with some technical kind of problem solving. As you know, the requirements by Hong Kong Exchange VIE structure, voting power and everything is slightly different than the U.S. So we need to make some changes, in some cases some small restructuring under these new requirements, we are doing it as we speaking, and those process take time because some of them needs government time to sign up on that. Once we finish these technical issues we will be more kind of sort of the push, the official push for the listing. Right now it is still in the, what they call the pre A1 [ph] stage there. I think we're almost running out of time. We can take one more question.
Thank you. We will be taking the last question from Ethan from CLSA. Ethan, your question please?
[Foreign Language]
So my question is on the [indiscernible] of your current ratio. It will be helpful if management can help us put that down into Capital-Heavy and Capital Model, so we can observe the trend here. Thank you.
[Foreign Language]
I’ll hand this question to our CRO, Zheng Yan. Zheng Yan, please.
[Foreign Language]
Our last quarter [indiscernible] rate [indiscernible] has been improved this quarter and [indiscernible] and for temporary [indiscernible] taking notice this performance of Capital Light [indiscernible] is taking note.
Hi sorry, this is Alex. We've heard a little bit break down of the voice. I'll just do the translation again for the audience. So basically, our D1 delinquency at this point is standard about 4.8%, which is obviously the best level in our corporate history. And then the 30-day kind of a collection rate in the first quarter we were about 90%. Right now we are continuing to improve slightly from that level. The difference between cap-lite and cap-heavy, by definition the cap-lite we try to kind of offloading relatively lower kind of quality assets out. So the cap-lite delinquencies was slightly worse than the cap-heavy, but not a huge difference there basically.
[Foreign Language]
Well, I just want to add some color to our asset quality. Yes, the market what our investors will look at the risk management matters for them how do they want delinquency or delinquency or M1 delinquency rate. However, I want to point out that maybe you better look at the whole picture of our business together with asset quality operating metrics. Considering how much customer we acquire from customer acquisition channels, then how much, how many customers got approved the credit line, then plus, considering the asset quality metrics.
In short, we acquire more customers and we have a higher approval rate. And then we still maintain very stable a superior risk, risk management performance. Compared to some of other peers, because they acquire less customer and they have lower growth rates, that in logic and naturally they have better risk management performance.
Sure, I got it and towards that balance.
Okay, I think that --thank you. Thank you for everyone joining us for the conference call. If you have additional questions, please feel free to contact us through our IR team and thank you. Have a good day.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.