Jianpu Technology Inc. (NYSE:JT) Q4 2021 Earnings Conference Call April 12, 2022 8:00 AM ET
Company Participants
Colin Cheung – Head of Corporate Development and IR
David Ye – Co-Founder, Chairman and CEO
Oscar Chen – CFO
Conference Call Participants
Alex Ye – UBS
Peter Lau – Bloomberg
Operator
Good day and welcome to the Jianpu Technology Incorporated Second Six Months and Full Year 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. Please note this event is being recorded.
I would now like to turn the conference over to Colin Cheung Head of Corporate Development and IR. Please go ahead.
Colin Cheung
Thank you, operator. Hello everyone and thank you for joining us today. Our second half and fiscal year 2021 earnings release were distributed earlier today and is available on our IR website at ir.jianpu.ai as well as on PR Newswire services. On the call today from Jianpu Technology we have Mr. David Ye, Co-Founder, Chairman and Chief Executive Officer and Mr. Oscar Chen, Chief Financial Officer. Mr. Ye will talk about our operations and company highlights followed by Mr. Chen, who will discuss the financials and guidance. They will all be available to answer your questions during the Q&A session that follows.
Before we begin, I’d like to remind you that this conference call contains forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict, and many of which are beyond the company’s control. These risks may cause the company’s actual results or performance to differ materially.
Further information regarding these and other risks, uncertainties or factors is included in the company’s filings with the U.S. SEC. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under applicable law.
Finally, please note that unless otherwise stated all figures mentioned during the conference call are in renminbi.
It is now my pleasure to introduce our Co-Founder, Chairman and Chief Executive Officer, Mr. David Ye. David, please go ahead.
David Ye
Thank you, Colin. Hello, everyone and thank you for joining us today. It has been a while since we have not spoken with some of you and for those of you who are new to our story, I would like to give a quick overview of our company. Jianpu Technology is a leading independent open platform for the discovery and the recommendations of financial products in China. We connect consumers, SMEs to the financial service providers in a convenient, efficient and secure way, providing consumers, SMEs with customized search results and recommendations, tailored to each user’s particular financial needs, and the profile through our proprietary technology.
We also provide financial institutions with digital sales and marketing solutions to reach and serve their customers more effectively and efficiently and enhance their competitiveness by providing them with the tailored data, risk management services and solutions. As an independent third party platform, we differentiate ourselves as being an asset light content company with a highly scalable business model that allows us to be nimble, and low risk fundamentals, where we do not take on credit risk, liquidity and or market risk. Our vision is to become everyone’s financial partner.
I will now walk through some key business highlights and the takeaways for 2021, before diving into further details on the business segments, and the new strategic initiatives that we have undertaken. I will then pass the call to Oscar to discuss our financials.
There are four key takeaways that we would like to highlight for 2021. First and perhaps the most important is that our business has resumed growth in 2021 with the revenue up 37.4% year-over-year, and we developed a more diversified and balanced business and revenue structure with now recommendations, revenue accounting for 28% of the mix.
Second, through leveraging our integrated marketing, and enhancing operating and technical capabilities, we have improved our business efficiency. We also expanded our business into other non-financial categories.
Third, we continue to expand our efforts in empowering financial institutions’ digital transformation. We now cooperate with 46 which account for 80% of our own credit card issuing bank in China enabling issuing over 23 million credit cards cumulatively.
We also achieved significant wins in our big data and system-based risk management services. Finally, our cost optimization initiatives continue to provide effective driving margin improvements and better cost performance leading to our narrowing of operating loss by 44%. These results were primarily driven by our experience navigating through turbulence, our readiness to make changes and executed well in a dynamic environment, and the effective execution of our omni-channel strategies, and the solid technological capabilities.
As part of our vision to become everyone’s financial partner, we are continuously innovating our tech knowledge and exploring new growth drivers as we push forth our mission to empowering users and enabling digital transformations of financial service providers to better serve them.
Now, let me go through our operations in 2021 in greater detail. I will begin with our recommendation services built upon one of our core digital transformation capabilities, which is digital marketing. Throughout the years, we have successfully expanded our traffic acquisition channel to cover online, offline and across mainstream media, social media and the private targeted traffic sources based on social and demographic.
By leveraging our strong technical capabilities, we have equipped financial service providers on our platform with a suite of products and solutions, allowing them to digitally market their products through an omni-channel strategy. We have also been recognized by the media and other key traffic channel partners, bringing in more opportunities for us to move forward.
As a result of our persistent efforts, our recommendation services business returned to growth through their revenue up 71.4% year-over-year, and a 25 or 7% [ph] sequentially versus the first half of 2021. Our credit card recommendation business retained its industry leading position as we maintained strong relationships with 46 credit card issuers, representing over 80% of banks that issue credit cards online in China. As a part of our omni-channel strategy, our social media and the partnership program continue to deliver growth and improve efficiency contributing 54.9 of recommendation service revenue. We have also successfully expanded the program into other product verticals, which we will talk more later.
I will now move to our enterprise or to the product and solutions, i.e. big data and the system based Risk Management Services. Catering to financial institutions, increasing demand for digital transformation, we continue to invest in our enterprise business and developed more products and solutions to enhance the risk management capabilities of a financial ecosystem, including financial service providers, regulators and other ecosystem partners. Our tech-driven solutions allow us to utilize AI, big data to optimize risk control models according to the changing marketing environment and the consumer needs, which is one of the key driving force of helping financial institutions regulatory authorities to achieve their digital transformation initiatives.
Our products and solutions are highly recognized by financial institutions, regulators and industry. We received the National Certification in recognition of our work in data security. Our achievements in digital transformation in the financial sector landed us the top-10 Fintech Innovation awarded by the Banker magazine, an outstanding partner by leading Chinese financial institutions, such as the Pingan Bank, credit card centers, and Everbright Bank.
We entered into strategic partnership agreements with a top government backed credit bureau to cooperate on data, credit scoring and risk management initiatives. In addition, we supplied a new suite of financial regulatory technology software as a service based products to provincial governments and the financial regulatory authorities, helping them to assess, monitor and react to regulatory risk of financial institutions in their jurisdictions. We believe these products and services could potentially be a big area of growth for us in the future, especially as current regulatory policies are supportive of the digital transformation of financial institutions.
Now I’d like to discuss our new growth engines. To expand and diversify our revenue structure, the company has applied its omni-channel digital marketing solutions, social media and the top financial program in particular, and our recommendation capabilities toward adjacent categories and sectors with large, data-rich user base find great financial needs. The result of such expansion seems to be very promising. Revenue from the new business segments has more than doubled, compared to 2020, currently accounted for 12.3% of the total revenues. We are now extending this customer acquisition model together with our credit card business partners to help financial institutions develop other financial products and services.
We are also adopting the social media and the partner program for the development into non-financial sectors. In 2021, the revenue contributed by social media and partner program account for 46.6% of our total revenue, validating of our initial success of applying an omni-channel strategy across different financial and the non-financial categories. We have also seen development opportunities to apply our proven business models and the knowledge to exciting overseas markets. We applied and successfully obtained financial marketplace, credit scoring and E-KYC licenses in Indonesia, the largest country in terms of the population in Southeast Asia. Going forward, Jianpu will continue to finance drive including finance services overseas to benefit more consumers and SMEs around the world.
Finally, we have further advanced our cost reduction and efficiency optimization initiatives, which include closely assessing existing business lines, consolidating and the cost cutting overlapping resources. Our strategy has already seen some initial results from these initiatives as non-GAAP net loss was really narrowed by 44% year-over-year.
Let me also give a bit of a background of China’s macroeconomic environment and the latest regulatory dynamics. The business environment we are operating we saw a lot of policy change, with the Chinese Government implementing new rules and measures affecting the consumer finance industry, such as requesting all internet platforms to ensure data security and data protection for their users. New restrictions on direct transfer of borrower information to financial institutions by internet platform and the window guidelines issued to financial institutions for the lowering of interest rates on consumer finance products, the latter of which has prompted some financial institutions to adjusting their product portfolio and credit policy, which has moderated the growth in consumer finance product provided by the financial institutions.
In addition to rules affecting the consumer finance industry, the Chinese Government has also rolled out other broader based policies, tightening rules and regulations across multiple sectors and industries, in particular, affects the internet companies, the tightening regulatory environment in conjunction with strict COVID control measures and overall macro weaknesses have dampened the general business sentiment.
To summarize, 2021 was a year where we made continuous progress. We are a firm believer in when there is a challenge there are always opportunities. Despite the ongoing regulatory and economic headwinds we have worked extremely hard throughout the year to navigating through these dynamics, in spite of the ongoing pandemic and volatile macroeconomic environment our businesses returned to growth, became more diversified and more efficient and we have set a strong foundation for further growth in 2022.
As for long-term, we remain positive about the economic outlook in China and the recent rhetoric [ph] from Vice Premier Liu He contained strong messages supporting the development of China’s economy, especially relating to us. Premier Liu mentioned that concrete actions must be taken to bolster the economy in the first quarter, including administrating appropriate monetary policies and promoting new laws for consumers and especially SMEs to facilitate economic growth. Furthermore, authority as well promote steady and healthy development of the platform economy and improve its international competitiveness. Premier Liu also stressed the importance of introducing market friendly policies and any policy that has a significant impact on the capital market should be coordinated with the financial regulatory authorities to smoothen the market expectations.
In addition, the government has more recently issued guidelines supporting consumers and SMEs credit loans, COVID related loans and promoting in rated [ph] financial service products. We believe that is the overarching theme of these policies to provide more sustainable economic growth and the healthier development of financial and capital markets. We are beginning to see a more supportive environment for the development of consumer finance, where additional measures shall be introduced to drive private consumption through the potential loosening of the monetary policy and strong loan growth, giving a positive tailwind for the industry in 2022.
There should also be a tremendous opportunity for financial institutions and tech companies like us to work together and accelerate the financial sectors digital transformation. Naturally in the short term, the resurgence of the Omicron variant in China recently has posted some challenges to our businesses due to the large scale lockdown in cities where we are operating. We have seen partial and full lockdown in cities, such as Xinjiang, [indiscernible], and of course more recently Shanghai, where the lockdown is still ongoing.
We expect a challenging first half in 2022, but this will not stop us from pressing forward. We will actively explore new product innovations, applications and services. We will embrace regulation, continue to deepen our cooperation with licensed financial institutions, support the digital transformation of financial service industry, and to further enhance operating efficiency. We remain hopeful that once the latest wave of the pandemic subsides, our business will resume moderate growth trends once more.
With that, I’ll now turn the call over to our CFO, Oscar Chen who will discuss our financial results. Thank you.
Oscar Chen
Thank you, David, and hello everyone. Our performance in the second half and the full year 2021 reflects our continuous efforts in business development and optimization as we continue to capitalize on the ongoing digitalization of the financial industry. Despite the tightening micro environment and ongoing pandemic, our business made a turnaround with second half total revenue up 62.7% year-over-year to RMB461.5 million and fiscal year 2021 revenue up 37.4% to RMB805 million.
More importantly, along with the resumption of growth we are pleased to see a more diversified and balanced revenue structure. 51% contribution from our credit card recommendation service, 21% from loan recommendations, 16% from big data and system based risk management services and 12% from our new business initiatives which proves the scalability and the resilience of our business model, as well as our team’s capability to navigate through and adapt to dynamic environments.
Total recommendation services revenue increased by 71.4% year-over-year to RMB320.3 million in the second half and 42.2% to RMB575.2 million for the full year 2021 on the back of 38.4% and 52.6% annual increase in credit card and the loan recommendation service revenues respectively as we continued to refine our business model, and strengthen our digital marketing efforts to acquire new customers. Revenue from big data and system based risk management services decreased by 10.4% to RMB 67.3 million in the second half, and 9.6% to RMB130.4 million for the full year 2021. Despite the unfavorable pressure from the ongoing pandemic and credit tightening in the past year, our continuous efforts on technology development, product innovation, and data compliance have won certain industry wide awards, and we believe such efforts will benefit us in the long run.
Revenue from advertising and marketing services and other services increased by 240.6% to RMB73.9 million in the second half, and the 167.2% to RMB99.4 million for the full year 2021, primarily due to the growth of insurance brokerage service, and successful category expansion of the social media and the partner program into non-financial service areas as David outlined. In light of the business development, we newly added a line item namely cost of promotion and acquisition, which mainly consists of the expenditures read into our marketing efforts and activities. Cost of promotion and acquisition increased by 72.5% year-over-year to RMB334.9 million in the second half, and 48.2% increase to RMB562.1 million for the full year 2021 which was in line with the growth of our revenues from recommendation services, advertising and marketing services and other services.
Due to our continued cost optimization measures, cost of operations decreased by 11.4% year-over-year RMB45.1 million in the second half of 2021 and 4.2% to RMB88 million for the full year 2021. Also, the cost optimization efforts led to the reduction of sales and marketing, R&D and the G&A expenses measured as percentage of total revenue to 45% in the second half of 2021 compared with 76% in the prior period, and a decrease of 20 percentage points for the full year 2021.
In 2021 we divested the investment in a decentralized applications blockchain solution provider and realized investment gain of RMB51.2 million. As a result, our non-GAAP adjusted net loss continued to narrow sequentially decreasing by 55% to RMB96.7 million from RMB215.1 million in the second half of 2020 and decreasing by 44% to RMB186.7 million for the full year 2021. As of December 31, 2021, we maintained a strong balance sheet with cash, cash equivalents and short term liquidity of RMB762.8 million.
With that, I will conclude our prepared remarks. We will now open the call to questions. Operator, please go ahead.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question is from Brian Lee from Spica [ph] Capital. Please go ahead.
Unidentified Analyst
Hey, David, hey Oscar thanks a lot for taking my questions and congrats on all the progress made. First of all, you guys mentioned quite a bit your digital marketing capabilities and how it seems to be a key competitive advantage. So, I wanted to first of all, get some more color on what exactly are these competitive advantages in terms of your digital marketing capabilities? And how are you using these to drive value to the financial institution customers? And then related to these capabilities, you mentioned that you were leveraging these capabilities to expand into other categories or growth engines. So how exactly are you guys doing that and what are your future strategies and kind of outlook on that segment?
And then secondly, my question is related to the cost optimization program. And so, I mean, you guys have any specific targets that you’re trying to achieve or how should we be looking at your cost base down the road? And then for these initiatives, how do you guys perceive the cost and resources are being allocated between the existing businesses and the new growth engines and initiatives? Thank you.
David Ye
Thank you, Brian. I will go ahead and answer the first question, so Oscar can answer the second question related to the cost optimization. Okay? Yes, your first question about the digital marketing capability also the value provided though financial institutions and also expansion to other sectors. So, I mean, there’s two or three questions, they are connected. So, let me start with what we have done in the last 18 months to two years, I mean, I will start with the recommendation services.
So basically, at Jianpu we are well positioned as the leader in the area of financial institutions, digital marketing transformation. So we continue to be — the recommendation services continues to be our most important revenue line with their contribution nearly 70% in 2021, and the entrance of the digital marketing services for our credit cards businesses, which has contributed around 51% of our revenues.
We combined omni-channel digital marketing capabilities with our big data and the system based risk management solutions. So in the past two years, we have some efforts and initiatives in our recommendation engine in our products, you know, take knowledge and also we have also seen the compliance for example in Shanghai with the data security, user privacy, and also we have developed a strategic partnership with one of the leading government backed credit bureaus. And we have also received industry-wide awards, and recognitions.
So all those initiatives, we have, we are helping our financial service providers, including 46 of the largest online credit card issuers, other licensed financial institutions such as banks, non bank finance companies, consumer finance companies, and the FinTech companies. So they are better able to acquire customer in this turbulent market, and they are also able to manage their credit and manage their risk better in this challenging economic environment.
So, as a result, we have seen our overall unit economics or the efficiencies we have improved year-over-year, and also the omni-channel the partnership program we have developed we have been seeing tremendous growth. We have expanded that to other sectors, such as e-commerce. So basically, we extended our social media or partnership program into new sectors, including other financial and non-financial categories. So, this new sector, you saw the growth in 2021 was 160% quarter-over-quarter. And we also see our total revenue driven by our social media and the partnership program now comes to about 47% of our total revenue.
So, in the end, we believe the digital transformation of the financial institution is a big trend in the financial sector and other non-financial sectors. So, our investment in the past two years, we have seen a huge payoff will put us in much better competitive position, enabling our financial service providers and e-commerce and other providers, to better serve their customers in this growth, but challenging environment. So did that answer your question, Brian, the first one? If yes, I will turn it over to Oscar, then. So, Oscar for the second part of the question.
Oscar Chen
Yes sure, David. Brian, thank you for the questions and for the second question about the cost optimization. Firstly, I want to emphasize that the growing scale and efficiency gain played a more important role than cost optimization to our business. Leveraging our digital marketing capability, we definitely see an improvement of our recommendation service, advertising and the marketing service and other service. The improvement is 4 percentage points for the full year and 11 percentage points in the second half.
At the same time, considering the uncertainties and the challenges around the ongoing pandemic and the regulatory change, we have continued to execute cost optimization initiatives in the past two years, that means we are closely monitoring and evaluating the resources allocated among the existing business alliance and the new business initiatives and consolidating overlapping resources to enhance operating efficiency and optimize the cost structure that resulted in a reduction of operating expenses.
So, the other total operating expenses as a percentage of revenue in 2021 decreased by 20 percentage points compared with the same percentage of 2020. That doesn’t include our efforts in fixed cost reduction and headcount optimization and the resources allocation, a balance between the existing business lines and the new initiatives.
But I want to emphasize that at the same time we continue to explore and invest in new business to find new growth engine. A significant part of our loss attributable to the upfront investment in the new business, so down the road we will continue to closely monitor and evaluate our cost structure and resources allocation. Along with the growth recovery, we expect our operating efficiency will further improve the cost optimization measure adopted in the past two years and we also expect that will continuously benefit our operations in 2022. Hopefully that answers your question, Brian.
Unidentified Analyst
Yes, thanks David. Thanks Oscar.
David Ye
Okay, thank you.
Operator
Our next question comes from Alex Ye from UBS. Please go ahead.
Alex Ye
Hi good morning. Thanks for taking my questions. I guess, I have two questions here. Number one is on your credit card and loan recommendation business. So, I guess the lockdown will surely cause some headwinds to your growth in the first half, but I’m wondering if you could share with us some more general trends that you have seen on customer demand over the past year or so? So that’s before the lockdown because we have seen different moving factors on the one hand, the [indiscernible] data on consumption has remained quite weak, and on the other hand, there has been multiple rounds of industry tightening, so many small players may have affect the market and some bigger players, they may see some constraint on growth.
So have you also seen the softened demand from the loan products and credit cards or is it the other way around that you are seeing stronger demand from customers because people just find it hard to borrow elsewhere? So yes, that’s the first one.
And secondly, on the regulation front, so given the ongoing regulation on the credit bureau, so FinTech platforms they are not allowed to directly transfer the customer data to the bank. So I’m wondering how has that affected your business model and what kind of changes do you need to make in order to stay compliant? Thanks.
David Ye
Okay, thank you, Alex. I understand you have two part of the question. I’m going to take a stab. If — I think, Oscar then can followup.
So the first question about the overall loan markets, the impacts about the COVID situation and lockdowns, right? So you saw the data. Last year, we had growth. The turnaround and we managed growth. I think it’s a dynamic market. I mean, the demand is strong. Consumers need to borrow. They need money, right? The SMEs also need liquidity, need to borrow. So demand is strong. No question about it, right?
On the other hand, we actually have found out like for the retail side of the banking business, that’s consumer finance company, credit card issuers, the non-scale credit type of products or even some of the FinTech companies. I mean, we are — actually, we have seen the whole year last year, there are enough, I think there are sufficient liquidity or credit available for those financial institutions. But we do see some shift because of the lockdown, because of the COVID, and financial institutions, they’re shifting their line of credit, their credit — the available credit from our friend branch from traditional direct sales channel towards online. So that’s where I would say the supply of the online credit, the light assets or the loans offered through Internet or through mobile form through like WeChat and micro program, they’re planning. So that’s getting interesting.
Demand is strong. Both supply of SME consumer and online is not big, right? Then what’s the problem. But we do see there’s huge like information asymmetry or inefficiency between the demand side and the supply side. I mean, as we know, the financial institutions, they are adjusting their credit policies, and they’re tightening their credit cards policy overall. They have more stringent underwriting or fraud detection or risk management criteria. They are also shifting their marketing in like channel.
So that’s why our omni-channel strategy combined with our strong recommendation capabilities, also combined with our experience and expertise, cultivating risk management and credit and also give a rep tech and also collection technology. Our whole suite solution really helps enable the financial institutions to accomplish growth and also increase their marketing efficiency and also enhancing their risk management capability.
I just want to give you one example. Our largest customer in the credit card digital marketing and also recommendation business we had, we saw exponential growth of the revenue from these credit card bank exponential growth. They’ve increased from below top five to top number one in just 12 months. And we are also the qualified recommendation or the new cards issued by this credit card bank; we are the largest like recommendation service provider, owner recommendation service provider for this company. So that’s the reality.
So of course, this year, this quarter, we definitely will see more impact of lockdowns, especially full lockdown like Shanghai and so the management has been very cautious in terms of our strategy, our growth strategy. We are optimizing our marketing spend. We’re also closely monitoring our costs in all aspects. And we are also working even closer with financial institutions in terms of their dynamic change, acquisition and the marketing policies, their credit risk management policies and strategies to further optimize our omni-channel digital marketing capabilities with also with our recommendation capabilities.
So that’s the first part of the question. Let me go ahead to answer the second part. And okay, and second part you asking about regulation and also specifically, you also mentioned about the direct transfer of data or the credit bureau would have impact to the industry or to us in general. So last year, we entered a strategic partnership with leading credit bureau, and that’s government-backed credit bureau in China, in terms of risk management and data initiatives. So we — so basically this credit bureau would work directly with financial institutions in terms of credit scoring, data and other initiatives, and we are a strategic partner providing risk, analytical and digital marketing services with these government-backed credit bureaus. We are also working with other bureaus together.
I think for this type of strategic partnership, our goals or our vision are the same, to become financial institutions partner. So that’s why the vision — I mean, our vision initiatives are really truly aligned. So we definitely have seen this part of the business has been stable. And we also like to see, we also love the fully transparent or more clear regulatory environment or guidance that makes financial tuitions, make partners like us, also make, also authorize the government-backed credit bureau to grow the business forward. So that’s my three cents for you, Alex.
Oscar, you have anything to add in terms of regulation and in terms of the COVID impact?
Oscar Chen
Yes, I think maybe you are well covered. Yes, I don’t have any further comments.
David Ye
Okay. Okay, Alex, I will turn over to you.
Alex Ye
Okay, thanks very much for the color. Thanks.
David Ye
Thank you, Alex.
Operator
[Operator Instructions] Our next question comes from Peter Lau from Bloomberg. Please go ahead.
Peter Lau
Thanks management for the introduction and congrats team, for your stellar results. Just a quick question on the gross margins. Very glad to see there’s a slight improvement in the gross margins of different business lines. Do you mind sharing what’s the big driver behind the margin improvement? For example, is it coming from loans or credit card condition, I want to hear more on that front?
And second question is, obviously, we have the RMB20 million regulatory curve coming in. Obviously, I think Jianpu has done pretty well encountering this regulatory headwind. Just wanted to know if there is any impact on the fee rates front? For example, would the regulation change be pricing dynamics? And would that pose any benefits or cause headwind to Jianpu’s fee rates, say the loans commission suite? I would love to hear more about that. Yes, that’s the questions. Thank you.
David Ye
Okay. Thank you, Peter. So Oscar, go ahead, I think with the margin and some financials, and I will ask if committed?
Oscar Chen
Okay, yes. I’ll take the first part to discuss about the margins. The second part I think it’s still about the regulatory something. So I will answer the first part. Yes, so thank you, Peter for your questions.
Yes, I think the overall the margin improvement is as I’ve said also in the last questions, I think it’s a growing scale. You can see our top line have close to 40% year-over-year growth for the full year and more stronger growth for the second half of 2021. So it’s — our business is still — it will have large scale, you can have better — you still can have better volume power to discuss the price, to negotiate the price and the terms with the financial institutions.
So we are seeing the price increasing trend for our credit card business. But for the loan recommendation business, we are seeing a declining pricing trend and that’s mainly because the credit tightening limited the loan product available on our platform. And at the same time, when the scale grows, we can — we achieve the efficiency gain from our core marketing capabilities mainly from the omni-channel marketing strategy, the social media and the partner program. That product accounts for almost more than 50% of our CapEx source for the recommendation services. And also leveraging that, we enter into the new business, that’s the advertising and the marketing services and other services.
So with that, we are seeing an improvement if you divide the revenue by the cost of promotion and acquisition, we can see a higher margin — or we can see an efficiency gain. That is 4 percentage points for the full year and 11 percentage points in the second half. So I hope that answers your questions about the margin improvement.
Peter Lau
Yes, it does. Thanks a lot.
David Ye
Okay. Yes, Peter, I mean, about your second part about the regulation about the fee rates, here is the regulatory dynamics overall. We have some headwinds. We also have strong tailwinds. And I mentioned earlier that there are restrictions in terms of direct transfer of the burn data and also, we have COVID-related lockdown, right? But the tailwinds I mentioned earlier, the digital transformation of the overall financial sectors, financial institutions actually are shifting more of their acquisition on marketing or risk management capability for online channel and also, we have seen in banks, large and also even medium-sized like shareholder-owned banks or even some of the regional banks, the rural commercial banks, they have been really truly beefing up their loan and decisioning capabilities. And so the way we price our product is based on quality in terms of marketing quality and risk quality.
So technically really we priced our say, loan recommendation or even credit card approvals based on — it’s a strong proxy, it is only quoted with a pool rate and charge-off rate or the risk rate. So banks are willing to pay more in terms of, if they see a higher pool rate from us versus the lower application for the rate and the lower delinquency rates. That’s how we, as the AI-driven, data-driven, analytical-driven recommendation platform, we truly like to optimize the omni-channel acquisition stage digital marketing capability with the recommendation engine, which we optimize both approval with approval rates with risk management rate.
And of course, lockdowns, regional lockdowns, lockdown are regional curbs on travel. For example National Bank, they may have to tend to re-suspend some of the user application in Shanghai area, for example, right? And so we were truly able to dynamically adjust our national-based recommendation into quickly turnover to a regional based optimization engine to shifting our volumes based on different region or different banks product and also the dynamic credit policy and the marketing policy and their budget.
That’s how we are able to actually achieve the better prices. We have seen in better pricing, I mean like I just use credit card, like recommendation fee as an example. If you look at the quarter-over-quarter or in some cases, if you look at a specific credit card issuer quarter-over-quarter, we were able to, last year, we were able to see our recommendation like credit card recommendation fee per approval or actually we were able to see medium to long-term increased trend.
So that’s why I have given you to summary, the regulatory dynamic really has less or little impact in terms of our pricing or our fee actually unit economics. It’s more driven by our capability, our dynamic insight, adopting the market change and also our relationship, our strong partnership with our financial institutions and also our customer insights for our consumers and SME customers.
Peter Lau
That’s very comprehensive. Thanks management.
David Ye
Yes, thank you Peter.
Operator
There are no more questions in the queue. This concludes our question-and-answer session. I’d like to turn the conference back over to Colin Cheung for any closing remarks.
Colin Cheung
That’s right. Thank you for everyone for joining the call today. Thank you, David, Oscar, for presenting our remarks. So there are no further questions. With that, I will conclude the call. Thank you for your support. We appreciate your interest, and look forward to speaking to you again in the near future.
David Ye
Thank you and goodbye.
Oscar Chen
Thank you, everyone.
Operator
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
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