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Jianpu Technology Inc  (JT 1.92%)
Q4 2018 Earnings Conference Call
Feb. 25, 2019, 8:00 a.m. ET


Prepared Remarks:


Hello, and welcome to Jianpu Technology Inc.'s Fourth 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. 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 US 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 this discussion.

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 these 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 our fourth quarter 2018 earnings press 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. A live webcast and the 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's highlights from the full fiscal year. Mr. Chen will then provide updates on the Company's financial results and business outlook before opening the call for your questions.

Mr. Ye, Please go ahead.

Daqing (David) Ye -- Co-Founder, Chairman and Chief Executive Officer

Thank you, Qiuya. Hello, everyone. Thank you for joining us. We are very excited to share with you today another milestone in our eight year journey. In the fourth quarter of 2018, our revenue reached historically high and we also achieved breakeven for the first time. When we founded the Company in a three-bedroom apartment, back in October 2011, we don't think any of us at that time would have imagined the impact that our business has created for China's financial services ecosystem. Our mission is to become everyone's financial partner, empowering users to make smart choices and enabling financial institutions to make better decisions.

Today, we are the largest independent open platform in China, connecting more than 100 million users with over 200,000 financial products and 2500 financial service providers. Total cumulative number of credit cards issued on our platform has exceeded 10 million. Now, let me walk you through some of the key business highlights in 2018.

First of all, an expanded user base with rising using engagement with our platform. In 2018, we grew our registered user base to more than 100 million. At the same time, our user stickiness and brand awareness have been enhanced through our initiatives to expand product offerings, contents and tools. In Q2, we launched an initiative to further expand and penetrate into the affluent and underserved user base, engaging customers across a wide range of demographics, geographical locations, and the credit spectrum.

In Q3, we stepped up our efforts with the social media and the partnership initiative, targeting younger generations such as millennial and Generation Z, as well as users from lower-tier cities in the country side. Our financial content in various formats, including short video audio distributed through multimedia matrix with over 200 million followers. We have more than 10 series of popular financial products each generated more than 50 million viewership.

In Q4, number of credit approvals generated through the social media and the partnership network saw a triple-digit growth compared to Q3 and accounted for more than 15% of our total applications. In Q2, we launched a personal finance management tool. The tool and content increased user engagement and drive user retention.

Last year, we issued a close to 200 proprietary industry research reports and other educational contents, which continue to broaden brand awareness, as well as attracting organic traffic from consumers and SMEs seeking industry insights and financial knowledge.

Secondarily, we want to highlight our extended cooperation with financial service providers and our more comprehensive solutions provided to them. While, we have first mover advantage in this space continuously deepening our relationship with financial service providers remains at the core of our fast growing businesses.

As of the end of 2018, we had built a vibrant -- a vibrant network of over 2500 financial institutions and have also strengthened our collaboration with all five of the largest state-owned national banks and 11 Joint Stock banks out of the 12 nationwide. As mentioned above, our credit card recommendation businesses have achieved very strong growth momentum with the total number of credit card issued on our platform standing at more than 10 million.

We have the largest network of online credit card issuers, with 25 credit card banks on our platform. Recently, we introduced our first co-branded credit card, featuring Jianpu RONG360's mascots, deepening our collaboration with the bank.

The competitive landscape is evolving at a fast pace. Many large financial service provider -- proprietors have move online with strong product offerings, actively exploring new data source and third party services to do better acquisition and decisions. Taken these opportunity, we have developed our branded big data and risk management services, SkyKey, which has proven to be instrumental and transformational for our financial service providers.

As a bespoke service developed in-house, SkyKey is helping financial service providers reduced risk, lower cost and improve digital marketing and operating efficiencies. This is a high potential growth driver for us. Our big data risk management services recorded over 150% increase in 2018 as compared to the previous year.

Third, we want to reiterate our commitment to a strong technology infrastructure to enhance their insights and the user experience. We are building a closed loop of data ecosystem, including data from millions of registered user, thousands of financial service providers and data providers. All of these efforts allow us to obtain greater insights through access to a broader, more relevant, and timely data, further enhancing recommendation engine, data analytics as well as refine our algorithm and risk management decisions.

Our success is largely attributed to our ongoing ability to attract and retain talented employees and wins leaders. In 2018, we have almost doubled our R&D team size and the hired key talents, including our Chief Scientist. We launched our Artificial Intelligence Research Institute. We are continuing to invest in our people, strengthening our culture and organization and to further enhance corporate governance. I would like to now provide key updates on our results in the fourth quarter.

Revenue was at historically high, beating guidance and increased -- and have increased across the board. I'm very pleased to tell you that in the fourth quarter, our revenue reached a record high of approximately RMB742 million. With the fourth quarter being historically the best quarter, we have seen incredible growth across all three product lines, including Loan Recommendations, Credit Card Recommendations and Big Data Risk Management Services.

As mentioned in our previous earnings call, overall lending activities in China have resumed to strong growth since September 2018. More consumers and SME lending and financing activities are shifting from offline to online. Financial service providers have improved their digital marketing on the underwriting of KYC, data analytics, risk management and online servicing capabilities.

With the micro environment still applying some downward pressure on the credit market, recent ease in policies by Chinese State Council and the Central Bank have helped to boost the liquidity which, in some extend, have stimulated the growth at SME and retail financial service market.

Heading toward 2019, more positive signals were released by the government. President Xi made a remark that financial services feature toward a more inclusive with broadened financial products, emphasizing that China should deepen supply side structural reform in the financial sector and serve the real economy. These developments indicate that this uptrend for growth and innovation of the financial markets remain unchanged. Also, in our effort to improve operating efficiencies and to enhance operating leverage, we have achieved steady improvement in return on investment. We have reached the critical mass of scale, achieved quarterly breakeven for the first time in the Company's history.

Being an independent open platform empowers us to take the driver's seat role in China's rapidly evolving retail financial services or Fin-Tech sector. We are fortunate enough to be operating in a country that has witnessed a swift transition in technology to digital and mobile. Artificial intelligence, big data, cloud computing, and in the future, 5G are reshaping the competitive landscape correlating a digitally all-inclusive financial sector, propelling China's financial service industry to leapfrog, which are connecting Chinese consumers and SMEs closer, faster, easier and safer to the financial markets.

With that, I will now turn 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. Our strong result in the fourth quarter continues to demonstrate our growth momentum despite a challenging micro environment in the second half of 2018. We are pleased to have hit a record high in total revenues of approximately RMB742 million for the fourth quarter, a 37% year-over-year increase and 67% on a sequential basis in what is historically our strongest quarter.

Our continuous efforts to balance growth initiatives while improving operational efficiencies has paid off as we turned profitable in the fourth quarter, both on a GAAP and non-GAAP basis, achieving net income of RMB12 million and adjusted net income of RMB39 million.

Led by robust growth in our credit card business and the solid recovery of loan recommendation services, our total recommendation services revenues reported a 20% year-over-year increase to RMB659 million in the fourth quarter, mainly driven by a 144% year-over-year increase in credit card recommendation services, further illustrating the scalability of our platform model and the execution strength.

Combining the credit card business from both recommendation services and advertising, we recorded credit card volume of approximately 3 million in the fourth quarter of 2018, representing a year-over-year increase of approximately 123%.

As David mentioned previously, loan application volume experienced a meaningful sequential increase by around 86%. The average fee per loan application continues to grow to RMB15 from RMB14.5 in the third quarter of 2018. As a result, loan recommendation revenue reached RMB370 million in the quarter, decreasing 14% year-over-year, while increasing approximately 92% from the preceding quarter.

We believe that with a healthier regulatory framework, the overall lending market is in solid recovery trending upwards heading into early 2019. Additionally, loan recommendation revenue accounted for around 50% of our total revenue in the fourth quarter. Among the revenues generated from advertising and marketing services and other services, our big data and the risk management services maintains a strong growth trajectory, increasing 158% year-over-year. More and more financial service providers are utilizing our big data and the risk management services offering.

As we diligently move forward to fine-tuning our strategy and looking for balance between growth and efficiency, we achieved a significant improvement in our profitability. Our gross margin continued to improve to 91% in the fourth quarter of 2018 from 89% in the preceding quarter. Also, sales and marketing expenses, excluding share-based compensation as a percentage of revenue, significantly improved to 71% in the fourth quarter of 2018, representing approximately 11 percentage points and 5 percentage points down year-over-year and quarter-over-quarter respectively.

As we maintain strategically focused on strengthening our technological capabilities, while optimizing technology infrastructure, Non-GAAP R&D expenses increased by 91% year-over-year to RMB81 million. The increase is also attributable to the acquisition of a subsidiary and the front-load hiring of certain new process and new initiatives.

Our non-GAAP G&A expenses increased by 56% to RMB23 million in the fourth quarter from RMB15 million in the same period of 2017. The increase was primarily due to the increase in the payroll cost and other administrative expenses along with the expansion of back-end team to support our growth.

While looking at the R&D and G&A expenses as a percentage of revenue, it decreased to 11% and 3% in the fourth quarter from approximately 13% and 4% in the previous quarter, representing a sequential decrease, benefited from the economics of scale.

From all discussion above, we reached an inflection point and achieved profitability on both net income and non-GAAP adjusted net income. Non-GAAP adjusted net income reached RMB39 million in the fourth quarter of 2018 and net income was RMB12 million. At the same time, non-GAAP adjusted EBITDA turned positive this quarter at RMB54 million.

As of December 30, 2018, we maintained a strong balance sheet and cash position with cash and cash equivalents, restricted time deposits and short-term investments of RMB1.5 billion and working capital of approximately RMB1.4 billion. Now I'd like to briefly go over the Company's full-year financial results of 2018.

In spite of the micro slowdown and the rising challenges of an industry tightened regulatory environment throughout the year, total revenue for full year 2018 increased by 39% to RMB2 billion from RMB1.4 billion for 2017, primarily driven by our faster growing credit card business and the strong growth in big data and the risk management services.

Driven by technology, our diversified platform model has enabled us to navigate evolving market dynamics, successfully capturing shifts in user demand and achieving remarkable performance when facing tightening liquidity and credit across the retail financial services sector.

Revenues from Credit Card Recommendation Services significantly increased by 228% to RMB751 million from RMB229 million for 2017 driven by impressive increase in both credit card volume and the unit price. We grew our credit card volume from both recommendation and advertising services to over 8 million in the year. And in October, we proudly announced that our cumulative credit card volume had reached over 10 million.

Macro slowdown and the regulatory uncertainties impacted our loan recommendation business in 2018. Revenues from recommendation services for loans decreased by 9% to RMB1,015 million in 2018 from RMB1,120 million in 2017, primarily due to the decrease in the number of loan applications on the Company's platform, which was partially offset by the increase in average of fee per loan application.

The number of loan applications on our platform was approximately 71 million in 2018, decreased by approximately 21% from the prior year, mainly attributable to the slowdown in lending activities resulting from credit and the liquidity tightening in the third quarter of 2018, as well as market adjustments within the new regulatory framework since the end of 2017. The average fee per loan application increased to RMB14.2 in 2018 from RMB12.5 in the prior year.

Revenues from advertising and marketing services and other services increased by 152% to RMB246 million in 2018 from RMB97 million in the prior year, primarily due to an increase in the big data and the risk management services which increased 194% year-over-year as well as an increase in revenues from advertising services provided to credit card issuer and other advertisers.

The efficiency gain discussed above is also a major theme of the whole year of 2018 as we have continued to execute and deliver on our strategy, and at the same time, to strike a balance between growth and efficiency and in the fast changing industry dynamics. The improvement in operating efficiency, particularly on the front of traffic acquisition and matching capabilities resulted in sales and marketing expenses, excluding share-based compensation as a percentage of revenues, down to 77% in 2018 from 84% in 2017. Consequently, non-GAAP adjusted net loss, which excluded share-based compensation expenses from net loss decreased by 69% to RMB29 million for 2018 from RMB94 million in the prior year.

Non-GAAP adjusted net margins improved to minus 1.4% compared to minus 6.5% in the prior year. Share-based compensation recognized in cost of revenues, sales and marketing expenses, R&D expenses and the G&A expenses were RMB131 million in 2018 and RMB108 million in 2017 in total.

Share repurchase plan; previously we announced in August 2018 that our Board of Directors had approved a share repurchase program, which authorized the Company to repurchase an aggregate value of up to $20 million. As of February 22nd, 2019, the Company had repurchased approximately $15.1 million of shares under this program. We maintain our ultimate confidence in our business strategy, strong fundamentals and the long-term prospects. As such, our Board authorized another $10 million for the share repurchase to demonstrate our confidence as well as our commitment to maximize shareholder value.

Now, the last piece is outlook. Our guidance for the first quarter of 2019, based on the Company's current estimates; total revenues for the first quarter of 2019 are expected to be within the range of RMB600 million to RMB630 million.

With that, I will conclude our prepared remarks. We will now open the call to questions. Operator, please kindly go ahead.

Questions and Answers:


Yes, thank you. We will now begin the question-and-answer session. (Operator Instructions) And the first question comes with -- from Piyush Mubayi with Goldman Sachs.

Bill Liu -- Goldman Sachs -- Analyst

Hello, management. This is Bill on behalf of Piyush. Thank you for taking my question and congratulations on the solid quarter. My first question is about our revenue. So, I saw that there is a sequential improvement in our credit card volume, and to a lesser extent pricing. So I just wonder that based on the current guidance and the current outlook in Q1, do you expect this to continue in the next couple of quarters, given that we have seen some seasonality in historical years, but from the guidance, it appears that seasonality for -- at least for Q1 is no longer an issue.

And then my second question is about our expense, especially sales and marketing. So I wonder, what is the rough -- are there any color on the mix between the traffic i.e. the organic traffic and the any platform, how we acquire external traffic and what is the sort of expense implication from that mix change? Thank you.

Oscar Chen -- Chief Financial Officer

Okay, thank you, Bill and let me take your questions. So firstly, regarding our revenue guidance of RMB600 million to RMB630 million provided for the first quarter. I think a couple of things, firstly, for the -- firstly I think for the loan recommendation services, we are seeing strong recovery starting from the -- not only the fourth quarter, but also as we mentioned earlier, starting from the September last year, as we are seeing more and more positive signals from the regulators and also the -- more liquidity is injected into the real economy.

The governments encourage the financing to the SMEs and to the consumers to further grow the economy. So this is why we are seeing strong sequential recovery of the loan recommendation platform, both in terms of the volume and also in terms of the unit price. I think this strong momentum will continue into early 2019.

So we would expect strong -- we would expect -- but anyway, first quarter is -- we also have the seasonality impact in terms of the Chinese New Year and some other factors. So, year-over-year, we think the first quarter also have a strong growth. But sequentially, I think everyone should expect there will be a dip compared to the first quarter last year.

And also back to your question. On credit card, we will also expect a quite -- we will have a nice quarter for the first quarter of 2019. But there are also some seasonality factors for the credit cards, because the banks, particularly the larger banks, they're still fine-tuning their annual budgets in the first quarter, so that's another impact on our credit card business. But anyway, year-over-year, we expect a growth. But sequentially, we would expect a reduced compared to the fourth quarter.

Regarding the revenue mix, I think I can provide more color in terms of the annual number, because for quarter-over-quarter, there could be some fluctuations between the different business lines. But for the outlook, and for the full year 2019, I think it will be -- the mix for the 2019 will be similar or comparable to the fourth quarter -- to the fourth quarter of 2018. Because during the last year, although there is -- it's a quite a volatile year, but we as a platform connecting users with financial service providers, we have our revenue mix. Just a healthier structure compared to the before.

I think this would be a solid foundation to fuel our future growth. So, this is, I think, the question about the revenue, the sequential trend into the first quarter and our estimate of the outlook, the revenue mix going forward.

And secondly, to your questions, the acquisition -- the sales and marketing expenses, so in the fourth quarter, our organic traffic was around the 40% of our total traffic, which is the main driver for our efficiency gain in terms of user acquisitions. And we can share a bit more about the traffic distribution among different channels.

So in addition to the total -- in addition to the organic traffic, so we also deployed our sales marketing budget into info feeds, app stores, search engine and social media and social media partner program and some other alliance, some other marketing alliance.

So, a rough breakdown into these categories is that info feeds may account for 15% of the total traffic in fourth quarter; app stores is around 15% -- another 15%; search engine around 10% to 12%; and our social media partner program and other marketing alliance that means the long tail channel, marketing channel we've developed over years, that accounts for around 18% to 20%.

That's a rough distribution of our traffic -- traffic distribution in the fourth quarter. I think the efficiency gains, as we mentioned that's firstly, we should thanks to -- we should thank to our technological capability, which improves -- which help us to improve our matching capabilities into the fourth quarter. The matching capabilities means how many percentage of traffic that we can convert into a loan application, a credit card application, so that we can monetize.

So into the -- in the fourth quarter, our conversion rates from our monthly active users to the number of loan and credit card applications is roughly 12%, and secondly of course the traffic acquisition costs, the media always want to charge higher price. So in terms of single user acquisition cost, in a bullish market it's always going up. So the first -- the efficiency gain for us is firstly to improve our matching capabilities, and also, you may noticed that our unit price for credit card and loan recommendations also increased in the -- increased sequentially in the fourth quarter.

That means we can help our financial service providers to broader the coverage in terms of the user acquisition and also help them to improve their efficiencies. So, better monetization also contribute to our efficiency gains. I think that's -- yes, that's my answer to your two questions, revenues and expenses. I'm not sure whether it's helpful to you or not.

It's very helpful, thank you.


Thank you. And the next question comes from John Bright with Morgan Stanley.

John Bright -- Morgan Stanley -- Analyst

Hi management, thanks for the updates and congratulations on the strong quarter. I have a few questions. I think, first one is on the loan recommendation revenue and the number is strong in the fourth quarter and I just wonder if you can share some breakdown by institutions, i.e., how much are from P2P and how much are from licensed institutions.

And obviously with the tightening on the P2P industry, how would that impact our loan recommendation revenue outlook for 2019? And in general, what was the management's assessment on the P2P industry under this regulation and in general for the online lending industry. So that's the first question.

And my second question is on the cash size, so obviously we turned profitable in this quarter and potentially with the efficiency gain, we might have better cash flow going forward. So we've have like more than a billion cash on the balance, what's your plan on that?

And the final question is more generic, is on the strategy side. So on -- I've heard the note that we want to balance the growth and efficiency. So just wonder, does that mean we can maintain at the current efficiency i.e., maintain profitable while continuing to grow our business looking forward. Thank you very much.

Oscar Chen -- Chief Financial Officer

Thank you, John, for your questions. So, first question -- first question is regarding the revenue breakdown among the different financial, different type of financial institutions. So as a practice, we always -- in the previous quarters, I think we discussed this breakdown several times. So we will -- I will follow the same practice and best knowledge to discuss the numbers. So firstly, in terms of -- so first, I will give out the number of our total revenue breakdown. So, in the fourth quarter, we have around 52% of our revenue coming from the banks. So keep in mind that the majority of this part is contributed by the credit card. So the total credit card is around 40% of total revenue in the fourth quarter. So -- and then we will have the P2P part. I think everyone has the interest to know the numbers, so as of the fourth quarter, the P2Ps contribute to around the 16% of my total revenues.

And then the remaining revenues come from -- comes from the non-banking licensed financial institutions including consumer finance company, micro lending company and other licensed players. So this is same as the -- as we discussed before, so this is the distribution number and there's also a statistics of our top 50 revenue contributors. I think it's representative of the Company's overall revenue stream. So that's a rough number. Yes, I think it's quite similar -- changed not that much compared to the third quarter 2018. So that's your first question.

And also you want us to discuss particularly about the revenue from P2P and any regulatory impact in terms of the outlook into 2019. I think, the regulation is already out there and different people have different expectations of the P2P industry. I'm not an expert in this regard. But, I want to focus more on the impact on us, so that we took into our major P2P revenue contributors. And also, you know that we, our -- we have our own research institute published the P2P rating report every month, every quarter.

So we consulted with our experts and further looked into the names of the P2P guys working with us. So among the P2P revenues -- so our best guess is around three-fourths, I mean 75% of the revenue, underlying the P2P companies have the large probability to get registered in the future. And probably the remaining one-fourth of the revenue probably is adequate. I don't have the answer, because, as far as we know, currently they submitted the self-inspection reports and waiting for the regulatory inspection and the regulatory further inspection.

So that account for less than 5% of my total revenue. So that will be an impact going forward. And also, in terms of the regulatory impact into 2019, I think first quarter, it's already January and the February, we have strong confidence to deliver the number we provided in our guidance. But entering into the second and third quarter, there might be more stringent regulatory implementation, because at that time, there could be the pre-registration process for the P2P guys and there could be more regulations published in terms of the industry. So I think -- but I think overall, in terms of the regulatory environments in 2019, we would expect 2019 would be a better year in terms of the visibility and the stableness.

Okay that's -- and your third question is about the cash flow. Yes, we still maintain a strong cash balance sitting on our balance sheet. I think for 2019, in terms of the efficiency gain, I think the management strive to continue to deliver our strategy and at the same time to have -- to deliver the efficiency or operating efficiency down the road. But at the same time, we should also -- yes, please be reminded that there are certain initiatives we would like to -- we will like to launch in the 2019, including the branding, the user engagement and also some new product offerings.

So, we may have some upfront investments into these new initiatives. So I think for the existing product and the business lines, we will continue to deliver the efficiency. But in terms of the new initiatives, we don't have a clear view for now, but we will keep the -- keep you guys and the investors updated, when we have any progress in that regard.

Daqing (David) Ye -- Co-Founder, Chairman and Chief Executive Officer

John. Hi, John, this is David. You asked a very good question. We have a RMB1 billion in our balance sheet, over RMB1 billion, you're right, and looks like it's a big number. You asked a good question how we're going to use it. I mean if you to compare RMB1 billion, RMB1-billion-plus compare to our mission, our mission is to become everyone's financial partner, right. And we have just little over 100 million registered users right.

We want to grow the business to 200 million Chinese consumers SME, maybe 500 million, maybe 1 billion worldwide, right. If you compare RMB1 billion with 1 billion users I mean down the road 10 years, maybe 5, maybe 10. That's not sufficient enough in our view, so that's why, Oscar, he also mentioned -- I mean couple of initiatives we have planned for this year. We have also long-term plans.

Let me just mention couple of them; first is user acquisition, right. How to grow this business into just little over 100 million registered users, less than 10 million SMEs to 5x maybe 10x? That's number one. Number two, we don't invest heavily, strategically in our big data risk management service including talents, including like strategic data partnership. We are going to maintain high growths. That necessarily mean we're going to generate positive cash flow for this big data risk management.

So with this, yes, we are going to invest for growth for next year and the year beyond, right. And also there are other financial products in the -- like reaching our financial products, such as wealth management, we haven't really done much yet.

But for loans, we're doing pretty well in retail loans; SME loans, we're going (inaudible), auto loans right, and also even for consumer loans with high credit limit. We launched our initiative, we call (Foreign Language) I mean the translation in China -- in English, we say is expand and penetrate into affluent and underserved user base. We still have a few remaining underserved user base in China of course worldwide we're having to penetrate. So that's the part, we're going to invest in innovation some like insurance, wealth management, other loans, we're going to have substantial project investing in that.

And tenants, I mentioned that. We had close to a 1000 people, we're going to invest a lot of money in our HRIS (ph) corporate governance of infrastructure, our training program, and lastly not least, we spent a little bit money last year in strategic investment. We acquired a big data risk management company, I mean high growth. I mean we are strengthening our position in the sector. And as we -- as you could see, we have good data company, IR (ph) company of good team. We don't mind to spend a little more money on that half. So for this year, I mean that why I paid in Renminbi, I mean it's not enough, you know I mean that's how I take, our management take for this question.

Oscar Chen -- Chief Financial Officer

So John, do you have any follow-up questions?

John Bright -- Morgan Stanley -- Analyst

So, yeah, just a quick follow-up on -- then obviously, there is plenty growth opportunity out there and I think in the press release, you also mentioned, growth and efficiency. So basically do we expect like continued profitability down the road, while maintenance growth, obviously?

Oscar Chen -- Chief Financial Officer

I think, in the -- it's part of our answer to your cash flow question, so I think for the existing product and business lines, the management strive to continue to deliver our efficiency for 2019 and the years beyond. But we -- as David mentioned, we may have some -- we may have some expenses. We may incur some -- certain expenses for our headcount or some other related expenses, our new initiatives. So we're not sure the new initiatives will bring how much revenue in -- its new initiatives. No one have the answer. So yes, I think that's the best answer we can provide for now.

Daqing (David) Ye -- Co-Founder, Chairman and Chief Executive Officer

Yes, we have -- we will have positive cash flow for some business we're leading in the marketplace, right? We are increasing our operating efficiency. However, we do invest in technology and people, a strategic investment into talents, user growth, right. And also -- actually I forgot brand. We want to build loan facility of Jianpu as brand -- as the ultimate brand, if we want to be everyone's financial partner; if every Chinese consumer and SME, if they're looking for financial product, they think about our brand. I mean that's also the part we want to invest really on that part as well. So profitability, I would say, I would put that behind all other things I just talked. We do want to invest strategic first.

John Bright -- Morgan Stanley -- Analyst

Okay, sure. That's very helpful. Thank you very much and congratulations again on the strong quarter.

Oscar Chen -- Chief Financial Officer

Yes, thank you John.

Daqing (David) Ye -- Co-Founder, Chairman and Chief Executive Officer

Thank you, John.


Thank you. And the next question comes from Alex Yao with JPMorgan.

Alex Yao -- JPMorgan -- Analyst

Hi, Good evening, management. Thank you for taking my question. I have two. Number one is regarding your business momentum. What exactly is driving the strong growth momentum, and how sustainable is it? I think in the prepared remarks, you guys talked about even in regulatory environments coming from the government to encourage the financial institution to lend out some more money to the individual consumers and SMEs and how exactly that this government message transmit to the financial institution and to the consumer behavior?

If I understand correctly, the legal tab of 36% annual interest rate remains unchanged. So has the financial institutions changed any of your product structure and how exactly does this policy even in environment improve your business momentum and how should we think about the gross momentum in the coming quarters.

And then, secondly, now that you guys have reached the first profitable quarter, how should we think about the path to profitability in the next one to two years, maybe perhaps you can share with us to the unique economics between the loan business and the credit card business, and also what are your margin most sensitive to, the ARPU or revenue mix or user retention rates? Any color would be helpful. Thank you.

Oscar Chen -- Chief Financial Officer

Okay. Thank you, Alex. Let me answer your question first. So, for the recovery, I think you mentioned a strong gross momentum at the loan recommendation business and how sustainable it is. So I think this question, we shared a bit of color from the macro level. I think, of course, still the macro -- the underlying drivers from the -- I think you may noticed that in June, that the overall bank's credit extended to the enterprise and the consumers reached the historical high. And also the so-called social financial model (inaudible) also is a record high in the January.

So I think behind that, I think the two -- I'm not an economist. But normally, the activities, lending activities our platforms are, to some extent, strongly correlated with liquidity and credit facility available in the market. Where there is more liquidity because as we analyzed before, the users demand is always there. The consumers, SMEs they want to borrow money to fund their lifestyle and to fund their business, the user demand is always there.

Even in July and August in 2018, the overall -- it's a very tightening of the liquidity and the credit. So we still observed the users' activities on our platform, but unfortunately at that time, because of the shortage of funding across the board, among the banks, P2P guys and other financial service providers, there is a shortage of product, product offering. So the users demand cannot be met at that time.

Now with a sufficient liquidity and more products on our platform, our -- the lending activities on our platform naturally grows. So regarding how sustainable it is, so we believe the retail financial services industry is still a growing sector down the road, particularly in terms of digitalization, in terms of financial inclusion, so that means opportunities to us.

Of course, the outside environment, the regulations may have impact on us, in terms of the -- they have impact on the financial institutions that offer products -- who are open product platform and indirectly that would have impact on us. So as we discussed -- as we answered the first question from Goldman's analyst, so we would expect -- there could be some uncertainties or challenges around the time of the P2P registration or pre-registration or whatever inspection down the road.

So it could be the second quarter or it could be the third quarter, because it is a largely expected -- the P2P registration, the deadline into June this year, probably would be further pushed back by another few months. So that could be the impacted, but we still believe this will be the short-term volatilities -- short-term impact on us.

Looking to the long term, we still strong believe the retail financial services sector in China would further, further grow. And we as a platform, we can capture the trend, we can help the financial service provider to do better job in terms of digitalization and so we will benefit from the overall trend in the long run.

So your -- I think the question regarding the profitability, so I think -- you want us to drill down further into the potential drivers that could impact on our profitability. So I think, to your question, if you look into the trend in the past four quarters, I think our profitability comes from a few facts -- factors or driven by a few factors, firstly it's still our efficiency of traffic acquisition.

So that means, if we have more -- if we have more organic traffic or more -- or more business, that will be helpful in terms of the traffic acquisition. Because we still believe the unit traffic acquisition cost is always trending up. So as long as we can have more organic traffic and more repeat customers -- repeat users, that will be helpful. And secondly is the conversion, so that depends on our technological capabilities, how we can match the users' demands with their proper age, financial service products.

So another impact on this is -- another thing that would contribute positively to the so called conversion is that we have more -- if we can have more products online, we can help users to find out -- to meet user's demand better, so this is why we are -- David said, we launched some new initiatives. So we want to bring more financial products online.

So every single -- that means for every single user, we can provide more services -- more product and more services to them that will also be helpful to the profitability. So it will also be helpful to ARPU.

And thirdly is as the unit price we can take from the financial service providers, you can view the upward trend in the last two years on both credit card and the loan recommendations. So we are quite confident, we can keep up the upward trend. That means we can further grow the unit price for credit cards and the loans. And also the reason behind that is that we think we bring -- we continue to bring more value to the financial service providers, not only the user acquisition, but also we can help them to do pre-filtering, prerequisite, pre-segmentation, so that all help them to lower their acquisition costs.

And also in terms of your questions about the product offerings available on our platform, we didn't see much change in the fourth quarter this year; so yes Alex.

Alex Yao -- JPMorgan -- Analyst

That's very helpful, thank you very much and congrats on a strong quarter.

Oscar Chen -- Chief Financial Officer

Yes, thank you.


Thank you. And the next question comes from Julie Hou with UBS.

Julie Hou -- UBS -- Analyst

Hello management. Congratulations on the good results. I have two questions. First, could you provide some color on the growth outlook for credit card business in 2019? And my second question is on big data and risk management, could you give us an update on what kind of services you provide to financial service providers and how do you charge them? Thank you.

Oscar Chen -- Chief Financial Officer

Okay. Thank you, Julie. So, the growth outlook for the credit cards; so yes, for the credit cards, throughout the year in 2018, we see -- we saw the great momentum and great demand from the banks. So, in the fourth quarter we add another three banks onto our platform to help them to acquire credit card users. So that -- so as of now, we have the 25 credit card issuers working with us; so I think we are the largest online platform of network, in terms of online credit card issuance.

So that added -- we added, in the fourth quarter, including one of the state-owned banks and the two -- one joint stock bank and the one city commercial bank. So nowadays, we have 25 banks. We have all the five state-holding bank, 11 out of 12 joined stock banks. But yes, unfortunately, now it's published by the governments, now the state own banks turns to six, right, adding the postal savings banks. So we have to say, we have five out of six state-owned banks, 11 out of 12 joint stock bank's with national presence and a couple of city or rural commercial banks.

We are -- so I think the -- in 2019, we expect to add more banks onto our platform, and also, at the same time, in terms of the -- we get more and more knowledge in terms of our credit card business. We are -- for this year's initiative, we will not work with only -- work with credit card center, Ka zhongxin only; we will work with -- so we will also work with the branch, provision level branch of the big banks to further help them to penetrate the credit card issuance, because we understand some marketing budget also allocated from the centralized credit card center to the provisional level branch.

So we also want to help them to fulfill their targets. So we will go deep into the market to grow our credit card business. And also, you may noticed that there are quite some press release and news regarding the quality of credit card users, say, there are some risks in terms of the aggressive issuance of credit card, something, that -- actually that's an opportunity for our big data and the risk management services. We are already working with a couple of banks to help them to do online acquisition better. That means we will -- for one bank, we have the joint modular reefforts with them to help them to target more precise credit card users and at the same time to lower risk, we will promote this kind of model to more banks.

To us, it's cross-selling efforts. And another thing, in the fourth quarter is that we launched our co-branded cards with one of the banking partners. That's -- David just introduced, that's a card with RONG360's logo and master card (inaudible). So that will also be helpful to our credit card business, and also to our brand.

And we will continue to take this kind of initiatives to cooperate widely and deeply with our banks. So this will provide this -- all of these things, I think, will benefit our growth into the 2019. So big data and the risk management services, we provide -- in main category, we provide three level of the services to the financial service providers, including data inquiry, profile inquiry and the modeling exercise.

So all these revenue -- all these data for filing and the modeling, we charge per inquiry. So for every inquiry initiated by the financial service providers, we charge them at a certain amount -- at a fixed the price. So that's actually a SaaS-based services we provided to the financial service providers to do a better job in terms of risk management and online decisioning. So we can talk later offline, if you have interest in our big data and the risk management services. We believe this part will also be a strong growth driver for our business in 2019.

Daqing (David) Ye -- Co-Founder, Chairman and Chief Executive Officer

But Julie, about this credit card growth and the market potential of our growth, in a nutshell, we are going to grow our credit card business at a very high speed. In terms of the overall market, I want to just share with you a couple of data points. I mean like in China, average credit card per adult is 0.5 and also last year, Chinese urban family credit penetration rate was only 32% -- 31.6%, it's much lower compared to US', 77%.

In county side, in Chinese countryside, third, fourth Tier countryside, the penetration rate is way much lower. So I actually, personally I started my career in a US credit card company called Capital One 20 plus years ago. I also worked at American Express more than 10 years ago. If we compare China to credit market or retail or consumer credit market, this stage or the look at adoption, it's like a US maybe in 1995. Of course, the digitalization online and China is like today, is like -- maybe US in early 2000.

So that's why we will see the Chinese banks, they would allocate more of their capital to the retail businesses in the credit card business. So credit card -- in some retail bank, credit card account for over a third of banks' total profits, so and also -- that's the overall market -- we are broad, there are more users who need access to credit.

And of course a second growth driver will be online, shifting from branch network direct sales shifting from offline to online, and also smaller banks, we see the Rural Commercial Bank, local banks have started to launching retail businesses, launching like credit card businesses. We have signed up 25 largest online credit card issuers in China. Last quarter, we signed China Construction Bank, which is one of the top four bank, we're going to keep signing up more large banks and medium sized bank.

And also keep in mind, we have started -- we have been invested heavily in the matching recommendation and the conversion risk management capabilities. We have reached the scale, so the scale, the networking effect and we have increased efficiency in terms of approval rate, in terms of helping credit card issuers manage their, like fraud detection better or risk management better. That's why you have seen the positive improvements (ph). Our economics, unit price is much better compared to other smaller like platforms, because we have the scale, we have the efficiency, we have the quality. So that's why we are very confident we're going to grow the business, I mean at a relatively high speed.

Julie Hou -- UBS -- Analyst

Yes, very helpful, thank you.

Oscar Chen -- Chief Financial Officer

Thank you, Julie.


Thank you. And that concludes the question-and-answer session. I'd like to return the conference back to management for any additional 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.

Daqing (David) Ye -- Co-Founder, Chairman and Chief Executive Officer

Thank you.

Oscar Chen -- Chief Financial Officer

Thank you.

Daqing (David) Ye -- Co-Founder, Chairman and Chief Executive Officer

Have a good day; have a good night.


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

Duration: 73 minutes

Call participants:

Qiuya Chen -- Investor Relations Manager

Daqing (David) Ye -- Co-Founder, Chairman and Chief Executive Officer

Oscar Chen -- Chief Financial Officer

Bill Liu -- Goldman Sachs -- Analyst

John Bright -- Morgan Stanley -- Analyst

Alex Yao -- JPMorgan -- Analyst

Julie Hou -- UBS -- Analyst

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