Jianpu Technology Inc. (JT) Q2 2018 Earnings Conference Call Transcript

Jianpu Technology Inc. (JT -1.85%)
Q2 2018 Earnings Conference Call
Aug. 27, 2018 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello, and welcome to Jianpu Technology Inc.'s second-quarter 2018 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Qiuya Chen, Jianpu's investor relations manager. Ms.

Chen, please go ahead.

Qiuya Chen -- Investor Relations Manager

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 these 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 the reconciliation of GAAP to non-GAAP financial results, please see our second-quarter 2018 earnings press release issued earlier today via wire services and also posted in our Investor Relations section of our website. As a reminder, this conference is being recorded. A live webcast and a replay of this conference call will be available on the Jianpu website at ir.jianpu.ai.

Joining us today on the call from Jianpu's senior management are Mr. David Ye, co-founder, chairman, and chief executive officer, and Mr. Oscar Chen, chief financial officer. I will now turn the call over to Mr.

Ye, who will provide an overview of the company as well as performance highlights of the second quarter. Mr. Chen will then provide details on the company's financial results and business outlook before opening the call for your questions. Mr.

Ye, please go ahead.

David Ye -- Chairman and Chief Executive Officer

Thank you, Qiuya. Hello, everyone, and thank you for joining our second-quarter 2018 earnings conference call today. We are pleased to report yet another solid operating and the financial performance for the second quarter of 2018. We continued our strong growth momentum, recording revenue growth of 92% year over year and 46% quarter over quarter, benefiting from a healthy and a steady industrial recovery.

And at the same time, we remain focused on enhancing our operating efficiency, evidenced by our non-GAAP adjusted net margin reduced from minus 6.6% in the second quarter of 2017 to minus 5.8% in the second quarter of 2018. Being an open platform covering full credit spectrum and the multiple financial product categories and ideally positioned to capture the change in market dynamics and drives growth across the board, we benefited from a stronger consumer demand toward the credit card, consumer and SME lending product in the second quarter. We recorded solid growth in both our loan awarding and credit card. Our credit card volume increased 178% to 1.63 million credit cards year over year.

And the average fee per credit card increased to RMB 99.4 from RMB 71.8 in the same period of last year. Our number of loan application increased 76% to 21.2 million quarter over quarter, and unit price of our loan application also showed healthy increase. The strong growth in our credit card business illustrates deepening relationships with licensed credit card banks, as we bring to them not only sales and marketing solutions, but as -- whereas big data and risk management services. Take one of China's top-tier bank as an example.

After observing a growing multiple cardholder applications and increase the delinquency rate, the bank decided to optimize growth and improve asset quality. To address this issue, we have been working with the bank and leveraging our position as the largest third-party provider of loan and credit card recommendation to jointly build a risk model to identify and to selectively remove around 15% of the highest risk applications, which in testing has been shown to be successful -- successfully reduce the nonperforming rate by 50%. The model is now in use at the bank and has been proving to be very effective. In light of the more intense competition and the evolving regulatory framework, we had seen rising demand for big data and the risk management services among financial service providers.

This has allowed us to rapidly expand the penetration of our big data and risk management services. We have successfully applied big data and AI technology throughout the user journey for our user acquisition, recommendation, fraud prevention, pre-underwriting, and customer services. Leveraging our big data and AI technology, we combined application information with our own proprietary risk management system to construct the models that generate a series of comprehensive reports on a potential use of applications. Such reports include social, geographic, demographic, economic-financial information, and other transaction information for hundreds of data sources with over 10,000 data element.

Our efforts invested in big data and AI technology drove 191% year over year and 99% quarter-over-quarter increase in revenue of our big data and the risk management businesses. Before I turn the call to Oscar, I would like to briefly touch upon the recent regulatory involvement and the industry outlook. As I have just mentioned, Jianpu's Corporation with financial service providers is becoming more diversified with an increased depth and breadth to these collaborations. Despite the challenging and volatile marketing conditions, we see this as an opportunity to increase our investment to capture greater market share as a platform.

Starting in the second half of the second quarter, there have been a few headwinds, including overall credit tightening due to the macro theme of deleveraging across the financial sector. For the P2P sector, investors confidence was dampened due to some noncompliant companies exiting the market. In our view, the impact will be limited in the medium to long term. The regulators have been sending positive signals to promote the healthy development of the market.

For example, on August 18, China Banking and Insurance Regulatory Commission issued guidance or proposition 76 to further promote financial inclusion, promote the consumer finance and SME lendings. In the P2P space, guidance issued by the regulator -- financial regulator at -- three weeks ago that is called the 108 guidance, there are 108 guidances, basically clarifying the requirement for P2P platform and foreshadowing the acceleration of inspection and registration process. We strongly believe that such policies, guidances and regulations will help shape the industry into a healthier and a more sustainable form in the long run. In summary, Jianpu delivered yet another solid and strong performance during the second quarter of 2018, despite what many perceive to be a turbulent operating environment in this space in China.

What distinguishes us from most of the other market participants is that we are a technology-based, diversified platform, connecting transactions between consumers, SMEs and the financial service providers. As a enabler, we do not take on unnecessary credit risks -- market risks -- the credit risks, but possess the agility to capture opportunities created by shifting marketed dynamics. In this regard, we are optimistic about our development prospects and expect a continued strong growth trajectory in the medium to long term. In particular, I'm pleased to announce that our board of directors have approved a share repurchase program, which also -- which will authorize the company to repurchase an aggregate value of up to USD 20 million during the next 12-month period.

We believe this clearly demonstrates our confidence in our strategy of strong fundamentals and the long-term prospects as well as our commitment to maximize our shareholder value. With that, I'm now turning the call over to our CFO, Oscar Chen, who will discuss our financial results.

Oscar Chen -- Chief Financial Officer

Thank you, David. And hello, everyone. We are happy to report that despite the industry and the regulatory uncertainties, Jianpu has continued to experience robust growth and achieve strong financial results. For the second quarter of 2018, our total revenues increased almost 92% year over year and also up 46% sequentially.

The RMB 490 million quarterly revenue was notably higher than our previous guidance of RMB 460 million. Also worth mentioning, during the quarter, 91% of our revenue generated by our top 50 institutional clients was from licensed institutions and P2Ps that are likely to be registered, which position us well in light of the trends of increasing regulatory oversight of the industry. Our overall recommendation services increased more than 86% year over year and 52% from the first quarter of 2018. Our credit card business once again delivered a standout performance of 356% year over year in revenue.

This was achieved through healthy increase in both volume, which was up 238% year over year and average fees per credit card, which increased from RMB 73.7 in the second quarter of 2017 to RMB 99.5 in the second quarter of 2018. Our loan business also continues to show steady and healthy growth with total revenue increasing 43% year over year, both loan application volume and average fee per loan application, so clear growth year over year. The strong financial performance gives us the confidence that we are on the right business trajectory. Now I would like to walk you through more details of our second-quarter 2018 financial results.

Total revenue for the second quarter of 2018 increased by 92% to RMB 490.4 million from RMB 256 million in the same period of 2017, primarily due to the increase in revenues from recommendation services. Total revenue from recommendation services increased by 86% of RMB 441 million in the second quarter of 2018 from RMB 236.9 million in the same period of 2017. Recommendation services from -- revenues from recommendation services for loans increased by 43% to RMB 291.9 million in the second quarter of 2018 from RMB 204.2 million in the same period of 2017, primarily due to the increase in number of loan applications and average fee per loan applications. The number of loan application was approximately 21.2 million in the second quarter of 2018, representing an increase of approximately 11% from the same period 2017.

The average fee per loan application increased to RMB 13.8 in the second quarter of 2018 from RMB 10.7 in the second quarter of 2017. Revenues from recommendation services for credit cards increased by 356% to RMB 149.1 million in the second quarter of 2018 from RMB 32.7 million in the second quarter of 2017, due to the increase in both credit card volume and average fee per credit card. Credit card volume for recommendation services in the second quarter of 2018 was approximately 1.5 million, representing an increase of approximately 238% from the same period of 2017. The average fee per credit card increased to RMB 99.5 in the second quarter of 2018 from RMB 73.7 in the second quarter of 2017.

Revenues from advertising and marketing services and other services increased by 159% to RMB 49.4 million in the second quarter of 2018 from RMB 19.1 million in the same period of 2017, primarily due to the increase in revenues from big data and risk management solutions as well as an increase in advertising services provided to credit card issuers. Cost of revenue increased by 153% to RMB 59.1 million in the second quarter of 2018 from RMB 23.4 million in the same period of 2017. The increase was primarily attributable to the increase in traffic acquisition costs of advertising and marketing services, short message service fees, depreciation, online payment processing fees and bandwidth and server hosting costs. Gross profit increased by 85% to RMB 431.2 million in the second quarter of 2018 from RMB 232.7 million in the same period of 2017.

The increase was primarily attributable to the continuing growth in revenue. Gross margin was 88% in the second quarter of 2018. Sales and marketing expenses increased by 94% to RMB 421 million in the second quarter of 2018 from RMB 217 million in the same period of 2017. The increase was mainly due to the growth in marketing and advertising expenses and payroll-related costs.

Research and development expenses increased by 122% to RMB 52.5 million in the second quarter of 2018 from RMB 23.7 million in the same period of 2017, primarily due to the increase in payroll costs and share-based compensation, mainly related to the hiring of new R&D staff to further enhance our service delivery efficiency and effectiveness. General and administrative expenses increased by 397% to RMB 37.8 million in the second quarter of 2017 from RMB 7.6 million in the same period of 2017. The increase was primarily due to the recognition of share-based compensation as well as increase in payroll costs and professional fees for maintaining our listing status. Share-based compensation recognized in cost of revenues, sales and marketing expenses, research and development expenses and general and administrative expenses in the second quarter 2018 were RMB 32.6 million in total.

Income tax benefits were RMB 11.2 million in the second quarter of 2018, contributed by the change of cost and expenses structure, the annualized tax rate for 2018 was decreased. In addition, the company's domestic subsidiaries completed their 2017 annual tax filings with relevant tax authorities by the end of May 2018, which resulted in a change of tax position in income tax provision and deferred tax assets recognized as of December 31, 2017. The effect of change was RMB 12.5 million recognized in the second quarter of 2018. Net loss increased by 251% to RMB 61.1 million in the second quarter of 2018 from RMB 17.4 million in the same period of 2017.

The increase was primarily due to the increase in share-based compensation expenses. Non-GAAP adjusted loss, which excluded the share-based compensation expenses from net loss, was RMB 28.5 million in the second quarter of 2018, compared with RMB 16.9 million in the same period of 2017. Non-GAAP adjusted net margin improved to minus 5.8% from minus 6.6% in the same period of 2017. Non-GAAP adjusted EBITDA, which excluded share-based compensation expenses, depreciation and amortization, interest income and expenses, and income tax expenses or benefits from net loss for second quarter, was a loss of RMB 36.3 million.

As of June 30, 2018, the company had cash and cash-equivalents and short-term investment of RMB 1.34 billion and working capital of approximately RMB 1.44 billion. Now for the guidance. As a result of credit tightening across the board, we observed slowing down of lending activities in the past two months. At the same time, we noticed that the regulator had issued new policies promoting financial inclusion and the consumer finance as well as loosening trends of macroeconomic environment since the end of July.

We remain confident and positive in terms of outlook in mid- to long run. We currently expect our total revenues for the third quarter of 2018 to reach approximately RMB 415 million. Our quarterly progression during the year reflects our estimates based on the current market conditions and the regulatory environment and is subject to uncertainties and a change. With that, I will conclude our prepared remarks.

We will now open the call to the questions. Operator, please go ahead.

Questions and Answers:

Operator

[Operator instructions] Our first question today comes from Wendy Chen with Goldman Sachs. Please go ahead.

Wendy Chen -- Goldman Sachs -- Analyst

[Inaudible] So I'll repeat my question in English. So my first question is about our third-quarter guidance. So can management kindly share some insights about the breakdown between the credit card revenue as well as the loan business, especially as we see in the loan business and the P2P platform has been having some regulatory headwind in the third quarter starting from July? And my second question is about the user acquisition cost. Wondering if the management can give us some guidance on the traffic acquisition costs by different channel.

Thanks very much.

Oscar Chen -- Chief Financial Officer

Thanks, Wendy. Let me take your question firstly. So regarding to your first question of potential decrease year over year of our third-quarter guidance. So I think, firstly, I want to comment that the third-quarter impact has across our board resulted from the tightening credit and the monetary policies implemented earlier this year under the theme of deleveraging.

So we observed the slowdown of lending activities in July and August. So it's not just about the P2P activities. Of course, P2P is part of it, but overall, we have seen the tightening credit and monetary policies. So -- but again, we want to emphasize the policy trend turned more positive recently, which I have explained in the guidance.

So regarding the revenue split, so I want to give some -- so for the first-quarter guidance, we think the credit card revenue will continue to grow year over year and quarter over quarter, which may be a bit less than 50% of the total revenue. And the loans and loan recommendation and the other advertising, big data, and risk management services will contribute the another half. That's a rough ballpark about the revenue split of the third quarter. So about your -- sales and marketing expenses, you are asking about the unit acquisition costs.

So in the second quarter, so you can see, we view that sales marketing as a percentage of revenue is a proxy measure of our marketing and acquisition efficiencies. In the second quarter, it was about 85% of total revenue, which is in line with the same period of last year and a bit lower than the first quarter of '18 -- of 2018. So as we mentioned in our previous earnings call, so only lending activities has been recovering in the second quarter this year. So as a result of increasing activities, we saw sequential increase in quarterly traffic acquisition costs.

So back in first quarter because it is a combination of slow season and the regulatory impact, we scaled back our marketing spending a bit, so which you can see we can keep the flexibility in terms of the marketing spending. In the second quarter, alongside with recovery of the industry, we turned back into the strategy of managing all our ad margin to expand our user base. In the second quarter, our total number of registered users reached over 100 million. For the Q3, given the industry uncertainties, we will be more disciplined in terms of margin expanding, as such we would expect better ROI in the third quarter.

Wendy Chen -- Goldman Sachs -- Analyst

Thanks very much.

Operator

The next question comes from Richard Xu with Morgan Stanley. Please go ahead.

Richard Xu -- Morgan Stanley -- Analyst

Hi, and thank you very much for taking my questions. Two questions. One is, could you talk about the fee rates now that you're able to charge both the credit card issuers and P2P lenders, any new client there? For some industry, you're able to raise the prices, is that more across the board, or particular platforms at the moment? Secondly, obviously, the regulator had issued some guidance in terms of the pace of registrations. Are you seeing stabilization of activities? Any industry trends that you're seeing in the past two weeks or so? Obviously, you're giving relatively conservative guidance in the third quarter, but what's the actual trends at the moment? Thank you very much.

Oscar Chen -- Chief Financial Officer

OK. Thank you, Richard. I will take your question. And -- so firstly, about your question about the average fee about of loan -- of credit card and the loan.

So yes, I think, given our strong market -- strong position in this market, we successfully increased the fee per credit card and per loan applications in the last quarter. I think the increase in fee in credit card -- in average fee of credit card is a combination of several factors. Firstly, in the annual contract we signed with the banks of this year, we see the average fee increase given our larger volume contributed to the banks and also our better conversion rates and approval rates by leveraging our data and -- big data and technology to help the banks to further enhance their credit card operation efficiency and then lower the delinquency rate. So David has provided some comments in one case study of how we work with banks.

Not only directing traffic to them but also help them to manage the risk. So I think this is the volume -- larger volume market position and better operating efficiency are the reasons we can increase our price with the banks. So for the fee per loan application, as we explained before, so for the first quarter and the second quarter, we are seeing more loan applications -- more loans with larger ticket size and a longer duration, which is a -- which was a result of the December regulation in terms of cash loans. So all the lenders become fully compliant with the regulations and the launch with their products on our platform with larger ticket size and the longer duration.

So we don't price our loan application based on the duration or the size, but there are some correlations between the price and the loan size and the duration. So you see the migration of loan, duration of size, the price increase naturally. OK. So...

David Ye -- Chairman and Chief Executive Officer

OK. Richard, I just want to just add a few more points, I guess, to David. So we do see the unit sales price for both credit card and the loans increased across the board. We have seen the increasing trend in the last couple of years.

We do expect to see this continue going forward. If we further segment the unit sales price by loan or credit card or for credit card, if we put a second buyer by super prime or prime card, we do see that has been increased for each higher-quality segments or medium-quality segments. And if you look at a single issuer -- a credit card issuer, we do see that a contract renewed on annual basis, we were able to -- definitely able to raise the price, 10%, 15% or -- so we view -- expect that this trend of increase around 15% year over year we're having, at least for the next 12 months, maybe longer. For the -- for loans, for example, we have like mortgage lease say for a few hundred bucks per lease -- a few hundred RMB per lease, we've seen increasing trends.

For nonsecure credit, nonsecure credit, there's a credit limit of RMB 30,000, RMB 50,000. We have seen that also increased from RMB 60,000, RMB 70,000, RMB 80,000, and to close to RMB 80,000, RMB 90,000. So the primary drivers of increasing the unit sales price is there's a more about quality of the lease with better conversion rates, higher approval rate and in the medium to long term, it's a higher credit quality or less fraud or less charge-off rate. So by applying big data risk management solutions, we were able to negotiate higher unit sales price in a month -- in a annual basis.

So -- and also second driver of the unit sales price is by the volume or the quantity because larger financial service providers, they do want to issue a large volume or quantity to work with -- as top partners. So that's why a combination of quality of the loan or a credit card and the volume which put us in a good position to provide better services to financial service providers and have a higher unit sales price.

Oscar Chen -- Chief Financial Officer

OK. Richard, regarding your second question about the P2P regulation, so our observation is that we see both risks and opportunities in the recent crackdown against the P2P companies. So starting the second quarter, so China's overall tightened credit and the monetary policy and I think the monetary policy and the resulting liquidity crunch I think, indirectly led to the crackdown of certain P2P platforms. But more importantly, we view that it's more important.

It's more about the noncompliant P2P platform. The majority of the problematic P2P platforms who were not P2Ps by definition. Instead of serving as pure information platform, matching individual borrowers and the lenders, these platforms were directing funds to related parties forging assets or investing in larger ticket size assets with mismatched cash flows. So that's where the risks are.

So the closing down or crackdown of certain P2P platform led to shortage of investor confidence and the funding supplier, which impacted the -- contributed to the part of the lending activities, particularly, the online part. But we view that this impact will be limited in the long run, as we observe that financial inclusion is still encouraged by the regulators and the P2P funds will stay -- P2P funds will -- in the future, the P2P funds will stay away from the mismatched assets and they're looking for smaller size and diversified assets. So the loan issued to the consumers and SMEs will be a perfect match. So although the overall P2Ps, the size of the overall P2P industry may shrink, but we see more focus and resources of funds will be put into the smaller size and diversified assets.

For example, the individual loan -- the individual consumption loans or the SME loans. So -- OK.

David Ye -- Chairman and Chief Executive Officer

Yes. So Richard, I just want to paint some color on this issue. Actually, in the last two to three weeks, we definitely have seen at the macro level or at the industry level, we see the tightening of credit or credit crunch is making a positive return. Couple of things happened at the government level, or for example, on July 31, President Xi Jinping had a conference -- had a meeting and basically, with the central political bureau which is the government decisioning body.

One of the policy he mentioned is try to help SMEs to solve their difficulty in terms of financing and also try to reduce the cost of financing. That's July 31. On August 7, Vice Premier Mr. Liu He, he actually, also in one of the meetings he host, basically want to make sure licensed financial institutions to support the micro SME as sole proprietors.

Also, I mentioned earlier, in August, like, 18 that the China Banking Insurance Regulatory Commission basically want to promote the consumer finance, try to solve the SME lending. So we see that now that there's more liquidities either provided by the Central Bank or the licensed financial institutions such as banks. And also, as I mentioned earlier, the guidance. The 108 rules basically -- that 108 rules is to basically help P2P companies to get a registration, get a self-inspection, and to get most of provisioning and also basically providing a more -- like a confidence to the individual investors.

So basically, what we -- what our understanding is the Central Bank Regulatory Commission and the China Internet Financial Association try to make sure the top tier or the two marketplace lenders, or P2P companies, they will have a safe operation. They will just grow more steadily and healthier in the medium term -- in the short, medium term, long term. So that's what's happening in the regulation, in the industry. And data wise, because reminder, we do work with top credit card issuers, top marketplace lenders, and working with hundreds of like small microfinance companies and the consumer finance company, we do see the business modeling has been growing in the last -- especially in the last two weeks.

So I just want to summarize, yes, there was a turning point in the last two or three weeks ago, and it's gradually climbing, but again, so that is we're giving in very cautious way. We view the -- we would say Q3 earnings where we'll be better. Next month will be definitely better than July -- the end of July and -- July and June. But Q4, we would see a much better compared to Q -- Q4 will be much better than Q3.

Thank you. Richard, did that answer your question?

Richard Xu -- Morgan Stanley -- Analyst

Yes. Yes. Very good. Thank you.

Thank you very much.

Operator

The next question comes from Alex Yao with J.P.Morgan. Please go ahead.

Alex Yao -- J.P.Morgan -- Analyst

[Inaudible] I have a few follow-up questions. No. 1 is, how do you think about the long-term direction of online think tank or more specifically online lending regulatory environments? Do you see the likelihood that from supply side, the online lending service provider will increasingly become a oligopoly market, i.e. the market participants will reduce in number of participants and potentially hurt our value proposition in the market as a marketplace? And then secondly, given the current regulatory environments and the future potential developments, how do you think about the growth strategy to drive medium- to longer-term growth? I'll stop here.

Oscar Chen -- Chief Financial Officer

Yes. Thanks, Alex, for your questions. So regarding the first question about the regulatory evolvements, in the future, I think we always expected that the licensing requirements will continue to be in the center of the regulatory framework because the lenders handles money. It's a financing.

So worldwide, all the financing activities needs a license. So P2P is going through the registration process, although that their line has been postponed twice. But there has been already a very clear timeline in terms of the P2P registration in the next -- by the year-end and the final registration or licensing, I'm not sure, could be something happened in the next 12 to 18 months. So yes, of course, with the stringent regulation in this regard, they won't be over 2,000 P2Ps down the road.

So after the P2P companies crackdown in the -- since the mid-June to late July, it is reported that hundreds of the P2Ps disappeared or closed down their business. So nowadays, the P2Ps -- the number of P2P companies is around 1,500 to 1,600. So I think every banks has -- you guys are smarter than us. You have a best estimate of the number of P2Ps down the road.

Someone estimates 10%, 15%, but whatever, it could be a number between 100 to 200 P2P companies. So again -- so the P2P companies we are working with, and we have the relationship with -- business relationship with are all the P2P companies, not a big number. So we have a very stringent and strict on-boarding process. So we only work with the top P2P guys, focusing on provide individual consumer loans to the consumers, not the noncompliant P2P platforms.

So we see the consolidation in the P2P, but one thing, I think everyone should keep in mind. So the China's financial services industry is not only P2Ps. There is a pyramidal structure of the overall financial services, including banks, consumer finance companies, microfinance companies, P2P companies and some other. They are the multiple types of the lending product providers in the market.

And they are serving the consumers of different credit spectrum. So it's a very diversified market. Even though there will be some consolidation of the P2P industry, we are seeing more licensed players, including banks, consumer finance companies entering to the online lending space. And that they are doing -- they are implementing their digitalization strategy.

They apply customer online. They do the KYC online, and they do the risk assessment online, underwriting online. So as a platform, definitely, we are connecting users with financial service providers. We are matching them with the financial product, appropriate financial product.

So I think we are well-positioned in this market to grow our business further.

David Ye -- Chairman and Chief Executive Officer

See Alex, this is David. You asked a very good question. I believe this $10 billion, maybe $50 billion question. The simple answer to you is, there will be no monopoly or oligopoly here in China.

I'm going to answer your question in a couple fronts. The first, from the government standpoint, I mean, in the regu the recent August 18, the CBIRC issued document No. 76 or Proposition 76, OK, let me read this, expedites the development of consumer finance, strengthen the impact of consumption and economic growth to add diversified products. Diversified products with different level of consumption needs to provide or improve the differentiated financial product and service to support consumer finance.

So common keywords the government says diversified, different level, differentiate financial products. OK? So we as a platform in the last six and a half years, we have been working with 2,500 financial institutions as different peers. Keep in mind, in China, we have 15,000 financial service providers. We have 4,500 banks, serving the top 30% of the more affluent super prime people, right? We have 9,000 microfinance company licensed.

We have a consumer finance company. We have about 30 licenses. We have about 200 internal microfinance licenses. At the bottom, there are about 1,700, 1,800 P2P companies.

We believe about 10% will be around a year, maybe two years later. So we are working with different credit spectrum, which really is the different tier of financial service providers. We are offering diversified product and service, credit card and mortgage, SME loans, consumer finance, like, etc., right? We have further expanded to other products. So different segments, credit spectrum given the level of consumer and also different products.

Keep in mind that now we've been talking China -- in China, in the consumption upgrade or downgrade. It's been very controversial. We believe for the financial product, most of the Chinese consumer SMEs still want better financial product, it's upgrading. So that's why we don't want to worry about the monopoly, oligopoly at all.

Even that we had -- the government will make sure that we're not having. I think that's one thing. The second thing, we are -- we have started -- like we actually had seen like each product or each segment, keeping in mind in China, we have -- our search engine is a geo-based in each city. We actually finance something very interesting.

If at each segments, each geographical region, if we had about five or six players competing fiercely, we don't worry about monopoly at all. It's the same like U.S. Remember, in the good old days, in U.S., we had thousands of credit card issuers. Now U.S., the top issuer is less than 10, right? We have Chase, the JPMorgan Chase.

We have Capital One. We have Bank of America and Citibank or American Express, right? So as those top few guys are competing, we don't worry about monopoly. So that's why I say, this is a $10 billion, maybe $50 billion question. So platform, in China, we always had value to make sure the Chinese consumers, SMEs have the best values, finds the best financial products at the best price.

Did that answer your question?

Alex Yao -- J.P.Morgan -- Analyst

Yes. So very insightful. Thank you, guys. One more follow-up on the near-term momentum, if I may.

During the current environment on the relatively larger, more credible, higher-quality lending providers on your platforms spending more to drive market share gain or volume gain, or they are also seeing pressure from liquidity or pricing size, so they also have to reduce their user acquisition efforts and consumption on your platform?

Oscar Chen -- Chief Financial Officer

Alex, so in the -- during the near term, I mean, back in the last two months, I think liquidity -- it's a liquidity issue, and it's also a investor confidence issue. I mean, the P2P investors. So if you ask a credible large-size, I mean, lender spending on our platform. Probably, my answer will be in the past two months, we see the across board slowdown of lending activities, not only the P2P platform but also the other financial institutions.

But as David commented, in the last week and the one week before, starting one week before, we see the -- we are seeing the volume recovery on our platform.

David Ye -- Chairman and Chief Executive Officer

Yes. The credit crunch in June or July, we see the tightening in customer finance company. And some of the licensed microfinance company and you guys probably heard even like, MyBank, those big bank has also actually have some credit crunch due to stop of ABS and regulator want then to increase the leverage ratio, reduce the leverage ratio basically. So that's why Q2, Q3, early Q3, but we definitely had seen a good trend of -- in the last two weeks.

Operator

The next question comes from David Guo with China Renaissance. Please go ahead.

David Guo -- China Renaissance -- Analyst

Hi, management. Thanks for taking my questions. I'm representing Bo Pang from China Renaissance to ask a question. And it's actually a follow-up question as management mentioned that we have really diversified products.

So we want to understand what's the share structure of our -- the debt and consumer finance, SME loans in our operation? That's my first question. And then the second one is that we already have a good start of the credit card business start from last year and that's majorly because the banks are rapidly shifting to retail finance. So we want to understand what is the characteristics of our top customers? And do we have any like strategy to better track user data and engage risks to borrowers on a timely basis, so that we can as well as some of the cross-selling opportunities in the future?

Oscar Chen -- Chief Financial Officer

OK. Thank you, David. So regarding the first question, the structure of the financial products on our platform. So we may not be able to provide the detailed data regarding the SME loans or some other loan products.

But a ballpark number I can share with you is about -- because we mentioned earlier that we are seeing the loan size and the duration shifting our platform. So as of second quarter this year, so we have seen that the loan size within RMB 10,000 to RMB 50,000 loans, the number of applications of such loans accounts for around 60% of our total loan applications. And the loan size less than RMB 10,000 is around one-fourth of our total loan applications. And the remainings are the loans with a size larger than RMB 50,000.

So that's a breakdown we shared with investors in the first quarter and also we are willing to share that with -- in the second quarter. So anything to add.

David Ye -- Chairman and Chief Executive Officer

Yes. So just, David, I will give you a couple of maybe flavors in terms of the profiles of our products or customers. So it's really -- mostly a customer play, 90% are customer-related loans or credit cards, about 10% SME loans. Of course, there's some overlap.

Some of the SMEs actually came to our -- come to our platform apply mortgage or even a large ticket size of nonsecured credit as individuals. So I would say the 90% of the customer play and Oscar mentioned, the loans below RMB 100,000 that's -- to consumer that's a majority. So as a microloan, and for credit card, we cover more than 23 of the largest Chinese credit card banks in China. We have over 4,000 products.

Basically, that covers the full credit spectrum. That's super-prime cards, prime card, lifestyle card, and some of the newly issued card. Recently, there are some new lifestyle cards and geographically, we cover 380 CDs as I mentioned earlier, in China, lendings in credit card issuance really to -- constrained by geographic regions. Of course, with the Internet, we pretty much cover most of the online applicants.

So there's no such a thing as a typical user profile because we are positioned as a platform, we -- so I would say the demographic-wise, age-wise, like 22 years old above, we see a high concentration between 25 to 34-ish and 34 to 40, and so it's a better curve. That's the characteristic of our platform -- profile of our platform.

Oscar Chen -- Chief Financial Officer

So regarding your second question, David, so the -- our credit card customers, so we are now working with 21 nationwide banks in terms of credit card online issuance. So among that, three out of four state-owned banks and almost all the joint stock venturing -- joint stock banks and a few city and rural commercial banks working with us on the online credit card issuance. So our top revenue contributed in terms of credit card are joint stock banks. They are more advanced in terms of online acquisition and online decisioning.

If the banks want to do online credit card issuance, the most important capability for them is to -- they can do online decisioning in a very short time frame. So -- and also you ask about the question about the user data and whether we can view more cross-selling opportunities. So I will like to give you an example. So one of the credit card issuers now is working with us on the incomplete application, which means that the credit card issuers will give us -- following the compliance rules, they will give us the incomplete application, online applications for us to follow-up and to cross-sell some other products.

So originally, we already have the cross-selling opportunities between our loan and the credit card business, which is around a bit more than 20% users. They are both our credit card and loan applicants. So there's already some cross-selling opportunities on our platform, given we have the data. We own the process of the application.

We are further develop our relationship with the financial institutions. We believe with our advantage, we will have more cross-selling opportunities down the road. David, did that answer your question?

David Guo -- China Renaissance -- Analyst

OK. Thanks.

Operator

And that concludes the question-and-answer session. I would like to turn the conference back over to management for any additional or closing comments.

Qiuya Chen -- Investor Relations Manager

Thank you once, again, for joining us today. If you have any further questions, please contact us at [email protected] or TPG Investor Relations at [email protected]. Thank you for your attention, and we hope you have a wonderful day.

David Ye -- Chairman and Chief Executive Officer

Thank you.

Oscar Chen -- Chief Financial Officer

Thank you.

Operator

[Operator signoff]

Duration: 63 minutes

Call Participants:

Qiuya Chen -- Investor Relations Manager

David Ye -- Chairman and Chief Executive Officer

Oscar Chen -- Chief Financial Officer

Wendy Chen -- Goldman Sachs -- Analyst

Richard Xu -- Morgan Stanley -- Analyst

Alex Yao -- J.P.Morgan -- Analyst

David Guo -- China Renaissance -- Analyst

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