Jianpu Technology Inc. (NYSE:JT) Q4 2017 Earnings Conference Call March 5, 2018 8:00 AM ET
Choya Chen - IR
David Ye - Co-founder, Chairman & CEO
Oscar Chen - CFO
Piyush Mubayi - Goldman Sachs
Julie Hou - Morgan Stanley
Daniel Chen - JP Morgan
Good day and welcome to Jianpu Technology's Fourth Quarter and Fiscal 2017 Earnings Conference Call. All participants should will be in listen only mode. [Operator Instructions] Please note this event is being recorded.
I would like to turn the conference over to Choya Chen, Investor Relations Manager, please go ahead.
Thank you, operator. Please note the discussion today will contain forward-looking statements relating to future performance of the company. These statements are within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors.
Some of these risks are beyond the Company's control and could cause actual results to differ materially from those mentioned in today's press release and the discussions. A general discussion of the risk factors that could affect Jianpu's business and financial results is included in certain filings of the company with the Securities and Exchange Commission. The company does not undertake any obligation to update its forward looking information except as required by law.
During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the fourth quarter and fiscal 2017 earnings news release issued earlier today via wire services and also posted in the Investor Relations section of our website. As a reminder, this conference is being recorded. Webcast replay of the conference call will be available on the Jianpu website at ir.jianpu.ai.
Joining us today on the call from Jianpu's senior management is Mr. David Ye, Co-founder, Chairman and Chief Executive Office; and Mr. Oscar Chen, Chief Financial Officer. I will now turn the call over to Mr. Ye who'll provide an overview of the company as well as performance highlights of the fourth quarter. Mr. Chen will then provide details on the company's financial results and business outlook before opening the call for your questions.
I will now turn the call over to our CEO, Mr. David Ye, please go ahead.
Hello everyone and thank you for joining our fourth quarter and fiscal year 2017 earnings conference call today. We are pleased to conclude the robust year of 2017 by achieving impressive growth in the fourth quarter.
During the fourth quarter, which had historically always being our peak season since our inception, we continued to achieve strong growth across our product line together with improvements in operational efficiency, in spite of shifting regulatory policy.
In the fourth quarter, we achieved 383% and 264% growth year-over-year in loan applications and credit card volumes, which exceeded our expectations. Our total revenue increased by 414% year-over-year to RMB 584.6 million for the fourth quarter, with recommendation service revenues for loan and the credit card, up 429% and 555% respectively, driven by both volume growth and unit price increase.
In particular, the average fee per credit card grew from RMB 90.4 in the third quarter of 2017 to RMB 104.49 in the fourth quarter, which was the result of our continued efforts to improve matching and the recommendations capabilities to connect applicants with credit card issuers.
In the fourth quarter, our non-GAAP adjusted net loss decreased by 28.2% to RMB30.3 million, representing an active margin of 5.2%, such significant improvement compared to an active margin of 37.1% for the prior year period was due to the combination of scale effect from our proven platform business model, higher matching and recommendation efficiency, and better monetization capability.
There is enormous growth potential in China’s retail financial services industry, such growth is fueled by underlying structural dynamics and the multiple tailwinds for both consumers and SME demand. However, the retail financial service industry in China is still at its early stage in terms of not only in growth, but also regulatory framework and credit infrastructure, which may lag behind the industrial innovation.
Since November 2017, we have seen significant development in the regulatory environment and overall credit infrastructure. On one hand, we saw new regulations for the consumer lending sector, gradually unveiled and enforced. As an independent urban platform with a diverse network partner base and multiple product lines, we have experienced less impact compared to other players.
We believe in the long run, a more stringent regulatory framework will support healthier and more sustainable market for all market participants. Also we welcome the establishment of Wushing Main [ph] a government backed and centralized consumer credit system. The establishment of Wushing Main marks the stronger signal of the intension and effort of the central government to further develop China’s credit infrastructure by setting up a central repository showing underserved consumer's credit worthiness.
As everyone's financial partner, we believe our strong data and technological expertise give us unique advantages to capture the tremendous growth opportunity that lay ahead as we connect a large user base with a variety of financial products and financial service providers.
Before turning the call over to Oscar, I would like to provide a brief update on several operational development during the last quarter that bears testament to the strength of our model as well as our positioning to achieve long-term growth. Since the record half of 2017, we have observed stronger than expected growth in our credit card business.
In the fourth quarter, when tightening regulations begin to issue, and taking effect, we saw the demand shifting from non-secured loan towards credit cards. Our credit card business is well positioned to capitalize on this shift witnessed by a strong uptick in the credit card business in terms of both application volume and unit price in the fourth quarter. We believe this growth trend will be sustained and provides bedrock for a strong outlook for our credit card business throughout 2018.
As for our loan recommendation business our strategy has focused on adapting the product offering on our platform within the new regulatory framework and strengthening our operational efficiencies. In the fourth quarter, the majority of our newly launched products Gold Cloud platform were installment loan products with longer durations and larger ticket sizes.
I'm further pleased to report that in the fourth quarter we entered into strategic partnership with China Minsheng Banking Corporation and Axe Financials to engage in more in depth corporation in areas such as own and sales marketing and decisioning, big data risk management as we continue to broaden and deepen our corporation with more licensed financial service providers we strive to strengthening our technologies, search and recommendation capabilities and data driven decisioning and risk management solutions.
In closing, since our inception, we have been relentlessly focused on providing superior financial product discovery and the recommendation services. This dedication has paid off, and today we are the number one independent open platform connecting users with financial products and services in China.
Our strong network and deep ecosystem of users, SSPs and third party data providers combined with our big data analytics and the decisioning allow us to continuing provider better user experiences establish broader and deeper cooperation with the financial service providers. And consequently generate a more robust growth and higher monetized returns. All the while without assuming any credit or liquidity risk.
With that, I'll now turn the call over to our CFO, Oscar Chen, who will discuss our financial results.
Thank you, David and hello everyone. We have continued the robust growth trend from the last quarter and delivered very strong fourth quarter 2017 performance. Our total revenues increased 414% year-over-year to RMB 584.6 million during the fourth quarter, well above our guidance of RMB 545 million. Within the revenues from our recommendation service grew 452% year-over-year, driven by increase in both volume and unit price.
Our gross profits increased by 449% year-over-year and the gross margin in fourth quarter increased to 89.5% compared with 83.7% in the prior year period. We also benefited from our improvement in operational efficiencies arising from better monetization capabilities and marketing efficiencies. As evidenced by the decrease of the sales and marketing as a percentage of total revenue to 85.5% in the fourth quarter from 100.3% in the prior year period. On the bottom-line, we are pleased to achieved considerable improvement in non-GAAP adjusted net loss, which decreased to RMB 30.3 million from RMB 42.2 million in the prior year period.
Now I would like to walk you through more details on our fourth quarter 2017 financial results. Total revenue for the fourth quarter of 2017 increased by 414% to RMB 584.6 million from RMB 113.8 million for the prior year period, primarily due to the increase in revenues from recommendation service. The revenues from recommendations services increased by 452% to RMB 547.9 million in the fourth quarter of 2017 from RMB 99.3 million in the prior year period.
Revenues from recommendation services for loan increased by 429% to RMB 429.3 million in the fourth quarter of 2017 from RMB 81.2 million in the prior year period, primarily due to the significant increase in the number of loan applications on the company’s platform. The number of loan applications was approximately 32.5 million in the fourth quarter of 2017, representing an increase of approximately 383% from the prior year period.
Revenue from recommendation services for credit cards increased by 555% to RMB 118.6 million in the fourth quarter of 2017 from RMB 18.1 million in the fourth quarter of 2016, due to an increase in the credit card volume and the rise in the average fee per credit card. Credit card volume for recommendation services reached approximately 1.1 million in the fourth quarter of 2017, representing an increase of approximately 233% from the prior year period.
Our average fee per credit card increased from RMB 69.25 million in the fourth quarter of 2016 to RBM 104.49 million in the fourth quarter of 2017. Revenues from advertising and marketing and other services increased by 154% to RMB 36.8 million in the fourth of 2017 from RMB 14.5 million in the prior year period, primary due to the increase in revenues from big data and the risk management solutions, as well as an increase in advertising services provided to credit card issuers.
Cost of revenues increased by 231% to RMB 61.3 million in the fourth quarter of 2017 from RMB 18.5 million in the prior year period. The increase is primarily attributable to the increase in traffic acquisition costs for advertising and marketing services, data acquisition costs, short message service fee, and share based compensation expenses.
Gross profit increased by 449% to RMB 523.4 million in the fourth quarter of 2017 from RMB 95.3 million in the prior year period. Gross margin was 89.5% in the fourth quarter of 2017 compared with 83.7% in the prior year period. The increase was primarily attributable to revenues from recommendation services, continuing to grow more rapidly than revenues from advertising, marketing and other services, as the former has higher gross margin than the latter.
Sales and marketing expenses increased by 338% to RMB 500 million in the fourth quarter of 2017 from RMB 114.2 million in the prior year period. The increase was mainly due to growth in marketing and advertising expenses, payroll related cost as a result of rapid development of recommendation services, as well as the recognition of share based compensation expenses in the fourth quarter.
Research and development expenses increased by 271% to RMB 74.2 million in the fourth quarter of 2017 from RMB 20 million in the prior year period, primarily due to the increase in payroll costs, and the recognition of share-based compensation expenses.
General and administrative expenses were RMB 67 million in the fourth quarter of 2017 compared with RMB 4.3 million in the prior year period. The increase was primarily due to the increase in professional fees including one-time expenses in connection with company's IPO process and recognition of share-based compensation expenses.
In the fourth quarter, we recognize the total of RMB 106.2 million in the share-based compensation expenses related to the employee options that were granted historically with the performance target contingent upon IPO and the new options granted under 2017 Share Incentive Plan to the management and executives in December 2017. Loss from operations increased to RMB 117.9 million in the fourth quarter of 2017 from RMB 43.1 million in the prior year period.
Income tax expenses were RMB 18.5 million in the fourth quarter of 2017, compared with nil in the prior year period. The rapid business development and improved profitability resulted in the growth of taxable income and consequently more tax expenses. Net loss increased by 216% to RMB 136.4 million in the fourth quarter of 2017 from RMB 43.1 million in the prior year period.
Non-GAAP adjusted net loss, which is excluded share-based compensation expenses from net loss, decreased by 28.2% to RMB 30.3 million in the fourth quarter of 2017 from RMB 42.2 million in the prior year period.
Non-GAAP adjusted EBITDA, which is excludes share-based compensation expenses, depreciation and amortization, and income tax expenses from net loss for the fourth quarter of 2017 was a loss of RMB 9.5 million, representing a decrease of 76.8% from a loss of RMB 41 million for the prior year period.
Net cash generated from operating activities was RMB 55.2 million for the fourth quarter of 2017, compared with net cash used in operating activities of RMB 8.2 million for the prior year period. As of December 31, 2017, the company had cash and cash equivalents of RMB 1,543.8 million and working capital of approximately RMB 1,511.9 million.
Now, I would like to briefly go over the company's full year 2017 financial results. Total revenues for the full year 2017 increased by 306% to RMB 1,445.8 million from RMB 356.4 million for 2016. Total revenues from recommendation services increased by 344% to RMB 1,348.4 million in 2017 from RMB 303.8 million in the prior year.
Revenues from recommendation services for loans increased by 369% to RMB 1,119.5 million in full year 2017, from RMB 238.8 million in full year 2016. The number of loan applications on the company’s platform was approximately RMB 89.9 million in 2017, representing an increase of approximately 434% from the prior year.
Revenues from recommendation services for credit cards increased by 253% to RMB 228.9 million in 2017 from RMB 64.9 million in 2016. Credit cards volume for recommendation services reached approximately RMB 2.5 million for 2017, representing an increase of approximately 182% from the prior year.
Average fee per credit card increased from RMB 74.17 in 2016 to RMB 92.78 in 2017. Revenues from advertising and marketing services and other services increased by 85.2% to RMB 97.5 million in 2017 from RMB 52.6 million in the prior year.
Cost of revenues increased by 116% to RMB 143.8 million in 2017 from RMB 66.7 million in the prior year. Gross profit increased by 3,049% to RMB 1,301.9 million in 2017 from RMB 289.7 million in 2016, gross margin was 90% for full year 2016, compared with 81.3% in 2016.
Sales and marketing expenses increased by 221% to RMB 1,227.9 million in 2017 from RMB 382.9 million in the prior year. Research and development expenses increased by 111% to RMB 153.9 million in 2017 from RMB 72.8 million in the prior year. G&A expenses increased by 475% to RMB 93.7 million in 2017 from RMB 16.3 million in the prior year. Loss from operations decreased to RMB 173.6 million in full year 2017 from RMB 182.6 million in 2016.
Income tax expenses were RMB 28.4 million in 2017 compared with nil a year before. Net loss increased by 11% to RMB 202.1 million in 2017 from RMB 182.1 million in 2016. Non-GAAP adjusted net loss, which excluded share-based compensation expenses from net loss decreased by 46.8% to RMB 94.9 million in full year 2017 from RMB 177.3 million in the prior year.
Non-GAAP adjusted EBITDA, which exclude share-based compensation expenses, depreciation and amortization and income tax expenses from net loss for full year 2017 was a loss of RMB 68.2 million, representing a decrease of 65.1% from a loss of RMB 172.7 million in 2016. Net cash used in operating activities was RMB 28.1 million for the full year 2017, compared with RMB 239.1 million for the full year 2016.
As David mentioned, the regulatory environment that Jianpu is operating in, is currently undergoing significant change. There is complexity both in terms of quality framework level and actual implementation. We are constructive in our outlook as we believe we will see increasing clarity very soon.
In addition as a business that does not assume any credit or liquidity risk we are not only less impacted given the advantages of our platform model with the diversified network, but also better positioned to capitalize on new opportunities in various market segments as they emerge. In fact, with strong performance of our credit card business during the past quarter is testament to the viability of our business model as the regulatory change helped shift demand for credit within the various products offered our platform.
Now for guidance, we have recorded solid growth since the beginning of 2018. We expect our first quarter 2018 revenue to reach approximately RMB 320 million, representing a year-over-year growth of about 133%. Our quarterly progression during the year reflect our estimate in the current market and regulatory environment and in fact seeing the seasonality in our business, which follows the Chinese New Year. Historically our first quarter represents the softest quarter of the year.
We remain very confident in our long-term outlook of both the industry and Jianpu, despite near-term pressure, we are prudently monitoring the shift in market trend and will provide investors with additional update as appropriate.
With that, I conclude our prepared remarks. We will now open the call to questions. Operator, please kindly go ahead.
We will now begin the question-and-answer-session. [Operator Instructions] The first question comes from Piyush Mubayi of Goldman Sachs. Please go ahead.
Thank you, David, Oscar for taking my question and congratulations on a decent set of numbers. Can I just ask you a few questions? Just going through the results, if you could talk through the revenue split between banks, non-bank, non-bank licensed FSPs and the other one in the fourth quarter? And how has that changed since the regulatory changes put in place in the fourth quarter.
Second, looking at the 133% revenue growth that you've forecasted you've shared with us, would you be able to talk through what is the loan growth assumption that is built into driving that revenue growth number as well the loan mix that underpins that forecast? And finally, if you could talk through the cost and how they are evolving in 2018 and if you could throw any light on path to profitability? Thank you.
Thank you, Piyush. To your question of the revenue split between banks and the non-banks financial institutions. In the fourth quarter as you can see we have a stronger than expected growth in the credit card business. So we have as a result we will have more revenue -- larger percentage of revenue coming from the banks, which accounts for -- including the credit card revenue and also the loan revenue, which accounts for around 40% of total revenue.
And the remaining part coming from the non-bank licensed financial institutions, as well as P2P tech enabled lenders and other financial service providers. Probably we can share more data about the revenue breakdown after the regulation takes place. So after the regulation came out in December we see our revenue breakdown as we have more than half of the revenue coming from the banks and the remaining coming from the non-bank financial institutions.
And also non-bank financial institutions including consumer finance company, micro-lending company, internet micro-lending companies and also P2Ps and a very small portion from the other financial service providers. I am not sure this is the answer to your questions now.
That’s good, thank you.
Go ahead Sir.
And I wondered if you could talk about the cost, marketing spend came in about 83% revenue in the fourth quarter.
And that clarify your second question is a mix of the credit…
Yes, if you could talk about first quarter growth assumptions any color on the mix that drive that…
The fourth quarter growth or the first quarter next year or this year.
First quarter 2018.
Sorry we had some technical difficulty on our side. I will start with -- I was curious if I answered on your question correctly, you are asking for Q1 2018 the growth of 133% you want to split that by the loan and the credit card by product, right? Is that the question, Piyush?
Yes. If you’re willing to share that.
Yes, we have -- we will see the growth from both the credit cards and the loan business grow more than 100% for Q1, and of course typically as you guys know Q1 for our business since our inspection six years ago has historically been low season. We definitely see a lower growth in Q1 compared to the rest of the quarters, we definite see a spike in Q4 you saw that last year, actually have seen that year-over-year.
So the good news is we will have growth compared to same period last year is over 100%, but it’s very similar keep in mind the regulation came out around December we have seen like more and more financial service providers they are adapting their product they are shifting to longer duration high quality loan product we see the growth we have loans for more than 100% but we saw the high growth of credit card in Q4 we will see much higher growth compared to last year same period. So the average is blended about 133%, but the those are more than 100%.
Yes, just add to your question about loan and the credit card revenues in the first quarter we would expect within our guidance around two-thirds of the revenue will come from the loan recommendation and around one third comes from the credit cards and minor portion will be the advertising and other services.
So, in conclusion we expect stronger growth in the credit card line as we are seeing a shift of demand for credit from the smaller size and short duration loans to both credit card and also the launch with large size and longer duration, under the current regulatory regime.
The next question comes from Julie Hou of Morgan Stanley. Please go ahead.
Hi, David and Oscar, thank you for taking my questions. I have two questions. The first question is about is that from your communication and observation with online lenders, what is the progress of the online lender cleanup? And my second question is about the cost. Could you share with us some data, such as cost per active user and ROI of credit card for the third quarter and fourth quarter 2017 and what is the outlook on costs to help us on the projection? Thank you.
On the credit card. Okay, this is David, I’ll answer the first question and Oscar will answer the second question about financial numbers outline and the credit card ROI. Okay, the first question is about the -- our observation about the feedback from financial service providers. So, couple of points, so definitely in the past couple of -- in the past few months especially in the last few weeks, we definitely have seen in the guidance from the policies of the online lending industry has gradually unveiled.
So we have seen the provincial, the local finance offices are actually giving out guidance and conducting reexaminations of all online macro loan licenses financial service providers to ensure they are fully incompliant. That’s the first point I’ll make.
And the second point is about peer-to-peer lender registration, it’s currently underway, we have actually seen policies from Beijing, Shanghai and different provincial or municipal provincial finance offices. So, we have what we have heard that Q2 really last quarter the peer-to-peer lenders is going to go through the licensing process and we are closely monitoring the progress the change in terms of the -- from the user side, we definitely have seen -- we have seen dip actually last in December for the macro loans.
However we had seen nice recovery in January, of course February is a Chinese New year, we have seen financial institutions are adjusting their products, and their policies and adjusting the capabilities to carefully incompliant.
For other bank, non-bank finance company and credit card issuers, we actually have fund those licensed bank and non-bank license financial institutions, they are actually a seasoned opportunity to launching revolving or longer duration higher ticket product to fully compliant with -- to meet the need of the consumers. And we believe the worst has over, I mean, in Q4 in December, January we expect more will comeback in March and in the second quarter also more and as I said earlier more and more banks and licensed players coming into the market to serving the under privileged, the underserved consumers in terms of consumer credit and SME credit.
And just always consider, following this run of regulation, tighten regulation, we do expect to see an overall healthier online lending development with more capable financial service providers. And so more specifically for the product side, as I mentioned the FSP side the product side, financial product side, we have seen noticeable product mix shift, shifting up for non-bank finance companies actually shifting down for top tier banks. So as a result of government regulations, we definitely seemed the larger size in some along credit card steadying up to fulfill the demand of the financial online and consumer credit business.
And lastly I just want to highlight. At the end of the day it's not the number of financial service providers that makes the difference. We have seen like more capable financial service providers in terms of the online capabilities, their customer acquisition, their big data, their risk management capabilities they have better risk management models, they have more professional team, they have product with better user experience.
They are actually taking the volume, making better decisions, offer superior product to financial service providers. So that's why we have seen even one of the top five banks, they've ramped up their capabilities hugely in December and in January that give us virtually unlimited budget, we have sign up more like regional banks, other even large top non-bank finance companies, they're ramping up, they're meeting the needs of consumers. So that's I just want to summarize we definitely see the comeback each company last two months and more come back in March and Q2. Does that answer your question?
Yes, thank you.
Oscar, go ahead second part of the question.
Hi, Julia, regarding the second question about the customer acquisition costs. So in the fourth quarter, our overall ROI defined by revenue divided by the sales and marketing, hedging and marketing expenses, which is a large portion of our sales and marketing expenses. The ROI is around 125%, which is quite consistent with number in the third quarter 2017.
So a couple of reasons, firstly, we had better monetization on the credit cards. So for the credit card payment, which has the higher ROI than the blended ROI for the loan recommendation services. As everyone know there is after the regulation came out in December the volume our platform take a hit. So the ROI would be a bit lower, somehow lower than the 125% of total ROI.
Regarding the customer acquisition cost as we discussed before. When the regulation came out, we see that the unit customer acquisition costs reduced a bit, because the margin on lenders exit from the market. So there is a less competition at the traffic side. So some fulfillment performance based channels were seeing the unit cost even lower than 50% than our original.
But as we explained before, because we -- in addition to the performance based channel from where we acquired the traffic we also have some long-term channels where we signed annual or quarterly contracts. So the overall unit cost of the customer acquisition may not scale back as soon as we expect.
Yes, I just want to add one more point about the credit card business, actually in Q4 we have seen great quarter for both loan businesses and credit card businesses. In credit card we have seen the volume growth, high volume growth and also the ticket size that's averaged sales per order per opening increased from RMB 99 to RMB 103 and that's -- and we actually we maintained the high return on investment. The ROI as Oscar said earlier the 126% we have seen the high warning growth, high ticket size growth also keep the high ROI growth. We actually have seen that trend, it's a very nice that’s exactly what we expected and we actually exceeded our expectations.
The next question comes from Daniel Chen of JP Morgan. Please go ahead.
Hi David, hi Oscar, this is Daniel Chen on behalf of Alex, congratulation on solid quarter. My question is on the user profile, post the regulation change; could the management provide some color on the latest loan size and also the retention rate of the user? Thank you.
Firstly, I think we still keep growing our user base in the last quarter. So, the total registered users on our platform increased from 67 million to 84 million by the year-end. So, we are still adding 3 million to 4 million new users every month. So that's the user growth on platform.
So talking about the user profile, we didn't see much change about the user profile, but we did see that users demand for credit shift from the cash loans to credit card and also the loans, the installment loans with longer duration and large size. So as we want to emphasize again, so we are a platform covering the full spectrum of users and also the financial products. We further developed our -- we will continue to develop our data and technology to match the need from the users with financial product and financial service providers.
And also, I think in the fourth quarter, the retention rate of our user base is around 35% of our total users. That means the 35% of users are repeating users.
And just clarify the number 35% are the repeat customers they came before I think this number we have been training up.
And the next question comes from David Ha [ph] of China Renaissance. Please go ahead.
Hi, thanks for taking my questions. I'm asking on behalf of Ella Ji from China Renaissance. I'm just wondering as the P2P platforms are required to comply with latest regulation letters for approval which are local authorities by June in 2018. So what was the influence on the operation structures that you should fulfill and also the costs from acquisition? So what was the outlook for that in going forward into the -- when all of the platforms are ready to service the local government?
And also we realized that the first quarter, you talked about the seasonality decrease, but also you said that there is regulation influence on that aspect. So how you see the influence is going on in 2018 and how are you going to change your operation to face this kind of challenge? Thank you.
Thank you, David. Let me take your question first. About your first question regarding the structure change may happen to our platform in spite of the regulations, I think as we talk about in our scripts and also answers to other analyst questions. we do expect the users -- firstly we don’t think the user profile will change that much, but the users demand for credit will definitely shift from the cash loans to credit cards and other longer term larger duration side -- lager size, longer duration installment loans.
So to our business I think a couple of things, so we will see strong growth in our credit card business and also for our loan recommendation business. Firstly, we will have all the financial service providers to adapt the product to be fully compliant with the regulation and we were still seeing great demand there. So I think the supplier will come later. So that’s a potential change about the impact to our platform.
Regarding to your second question, thank you for the calculation of the sequential change of our guidance compared to the fourth quarter. So, I think the majority impact will come from the seasonality to less extent it will be from the regulatory change.
Yes, you are absolute right and we believe mostly due to Chinese New Year holiday that have experienced the business to jump are is kind of across the board. So -- and as Oscar, we shared with you guys earlier we see the high growth across the board for our product line like the high growth from bank product, bank related bank issued loans, SME, consumer loans, credit cards. Also non-bank finance companies such as consumer finance company, local micro-finance company, inter micro-finance company we have seen high growth and of course the peer-to-peer lenders keeping in mind we are working with top 10, we are talking about among 1,800 I guess the number we saw last quarter maybe little bit more, the top ones top pear-to-pear lender they are in process of working with government to get registered in Q3 or later.
So we have very high standard very selective in terms of that we do expect less growth compared to last year in terms P2P lender, but we feel like market is there, there is a lot of consumers still need access to credit, SMEs need access to credit and we have seen the acquisition volumes, I mean, grow year-over-year.
So we are confident really this is more demand user I think consumer driven and we are confident that our improved recommendation engine, leveraging most third party our own internal data with better deploying up with artificial intelligence recommendation engine we can match the users, match the borrowers to the financial service providers better, we are able to provide the better user experience with better monetization going forward.
And that concludes the question-and-answer session. I would like to turn the conference back over to management for any additional closing remarks.
Thank you once again for joining us today. If you have any further questions, please contact us at ir.rong360.com or TPG investor relations at email@example.com. Thank you for your attention and we hope you have a wonderful day.
The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.