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360 Finance Announces Third Quarter 2019 Unaudited Financial Results

SHANGHAI, China, Nov. 27, 2019 (GLOBE NEWSWIRE) -- 360 Finance, Inc. (QFIN) (“360 Finance” or the “Company”), a leading digital consumer finance platform, today announced its unaudited financial results for the third quarter ended September 30, 2019.

Third Quarter Operational Highlights

  • Loan origination volume*1 was RMB55,965 million, an increase of 108% from RMB26,925 million in the same period of 2018, and an increase of 16% from RMB48,378 million in the second quarter of 2019.
  • Outstanding loan balance*2 was RMB70,568 million as of September 30, 2019, an increase of 106% from RMB34,338 million as of September 30, 2018, and an increase of 15% from RMB61,289 million as of June 30, 2019.
  • The weighted average tenor of loans originated was approximately 7.90 months, compared with 8.57 months in the same period of 2018, and 7.76 months in the second quarter of 2019.
  • Cumulative registered users was 126.00 million, an increase of 90% from 66.35 million as of September 30, 2018, and an increase of 15% from 109.28 million as of June 30, 2019.
  • Users with approved credit lines*3 was 22.83 million as of September 30, 2019, an increase of 137% from 9.64 million as of September 30, 2018, and an increase of 19% from 19.23 million as of June 30, 2019.
  • Cumulative borrowers with successful drawdown, including repeat borrowers was 14.73 million as of September 30, 2019, an increase of 129% from 6.44 million as of September 30, 2018, and an increase of 17% from 12.54 million as of June 30, 2019.
  • 90 day+ delinquency ratio*4 was 1.07% as of September 30, 2019.
  • The percentage of funding from financial institutions*5 was 93%
  • Repeat borrower contribution*6 was 70.3%.

1 “Loan origination volume” refers to the total principal amount of loans originated through the Company’s platform during the given period.
2 “Outstanding loan balance” refers to the total amount of principal outstanding for loans originated through the Company’s platform at the end of each period, excluding loans delinquent for more than 180 days.
3 “Users with approved credit lines” refers to the total number of users who had submitted their credit applications and were approved with a credit line by the Company at the end of each period.
4 “90 day+ delinquency ratio” refers to the outstanding principal balance of on- and off-balance sheet loans that were 90 to 179 calendar days past due as a percentage of the total outstanding principal balance of on- and off-balance sheet loans on our platform as of a specific date. Loans that are charged-off are not included in the delinquency rate calculation.
5 “The percentage of funding from financial institutions” is based on cumulative loan origination during the given period.
6 “Repeat borrower contribution” for a given period refers to (i) the principal amount of loans borrowed during that period by borrowers who had historically made at least one successful drawdown, divided by (ii) the total loan origination volume through our platform during that period.

Third Quarter 2019 Financial Highlights

  • Total net revenue was RMB2,583.0 million (US$361.4 million), an increase of 98% from RMB1,302.7 million in the same period of 2018.
  • Income from operations was RMB942.4 million (US$131.8 million), an increase of 21% from 777.4 million in the same period of 2018.
  • Non-GAAP*7 income from operations was RMB 964.7 million (US$135.0 million), an increase of 15% from RMB841.4 million in the same period of 2018.
  • Operating margin was 36.5%. Non-GAAP operating margin was 37.3%, compared with 64.6% in the same period of 2018.
  • Net income was RMB733.5 million (US$102.6 million), an increase of 27% from RMB 577.4 million in the same period of 2018.
  • Non-GAAP net income was RMB755.8 million (US$105.7 million), an increase of 18% from RMB641.5 million in the same period of 2018.
  • Net income margin was 28.4%. Non-GAAP net income margin was 29.3%, compared with 49.2% in the same period of 2018.

7 Non-GAAP income from operations and Non-GAAP net income are non-GAAP financial measures. For more information on this non-GAAP financial measure, please see the section of “Use of Non-GAAP Financial Measures Statement” and the table captioned “Unaudited Reconciliations of GAAP and Non-GAAP Results” set forth at the end of this press release.

Mr. Haisheng Wu, Chief Executive Officer and Director of 360 Finance, commented, “We continued to achieve healthy and solid growth as we remain committed to executing our strategies in place. We have firmly implemented our strategic transition from a traditional loan facilitator to a technology enabler through the ‘capital light’ model. This transition allows us to serve more financial institutions and steadily reduce overall operational risk. Recently, we have observed regulatory tightening and market volatilities. We have always prided ourselves on our market leading position and ability to maintain high regulatory compliance standards. We have been actively working with regulators, industry associations and other leading companies to advocate for operating in regulatory compliance and protecting customer privacy. For example, we jointed efforts with National Internet Finance Association of China to appeal for the establishment of an industry-wide anti-scam alliance. In response to the short-term market uncertainties, we expect to adopt a relatively conservative measure of customer acquisition, yet remain confident in meeting our full year guidance. In the long-run, we will continue to focus on the quality of growth and safety of operations, while maintaining a reasonable growth rate. We are committed to delivering greater value to all of our stakeholders. ”

Mr. Jiang Wu, Chief Financial Officer of 360 Finance, stated, “Our solid operating performance in the third quarter continued to generate healthy financial results. In this quarter, loans originated under the ‘capital light’ model accounted for 20% of total loan originations, a significant increase from 8% in the previous quarter. It not only frees up more cash to support our daily operations and pilot projects, but also provides us with more of a cushion against industry headwinds down the road. Meanwhile, our customer acquisition has become more efficient to offset, to some extent, a decrease in margin as a result of our strategic transition. We remain committed to originating more on-balance sheet loans to better match revenue with cash flow as long as the costs of consolidated trusts are reasonable. In addition, we have been trimming down overall funding costs through strengthening long term relationship with our financial institution partners and diversifying our fund sources, such as domestic ABS market. For example, in July, we successfully issued RMB 1 billion of ABS with an attractive comprehensive cost at about 5.6%, despite the challenging domestic ABS market. More importantly, we maintained our prudent attitude towards risk management to ensure sufficient provisions for estimated credit risks.”

Mr. Yan Zheng, Vice President of 360 Finance, added, “We maintained our market leading risk performance with 90 day+ delinquency ratio stood at 1.07%. We have implemented proactive measures in all stages of our operations to ensure full control over credit risk management in the long-run. These measures include raising requirement thresholds for loan applicants, offering loans with more flexible repayment schedules to increase the transaction volume of high quality borrowers, and recording additional provisions related to credit risk. In addition, we have received approval from People’s Bank of China to connect to its credit system, which will allow us to download and submit data on borrower’s credit profile. We believe this will enhance our risk management capabilities by increasing the effectiveness of credit underwriting and a borrower’s cost of default. Furthermore, we have adopted a stringent collection policy to ensure full regulatory compliance. With these measures in place, we are confident to elevate our overall business resilience and achieve more sustainable development.”

Third Quarter 2019 Financial Results

Total net revenues increased 98% to RMB2,583.0 million (US$361.4 million) from RMB1,302.7 million in the same period of 2018, primarily due to an increase in loan facilitation service fees, post origination service fees and financing income associated with an increase in loan origination volume.

Revenue from loan facilitation services increased 40% to RMB1,318.2 million (US$184.4 million) from RMB943.8 million in the same period of 2018, primarily due to an increase in loan origination volume through the Company’s platform.

Revenue from post-origination services increased 180% to RMB573.2 million (US$80.2 million) from RMB204.5 million in the same period of 2018, primarily due to an increase in loan origination volume and the cumulative effect of loans originated during prior periods through the Company’s platform.

Financing income*8 increased 439% to RMB409.8 million (US$57.3 million) from RMB76.0 million in the same period of 2018, primarily due to an increase in loan origination funded by our consolidated trusts. Financing income was recognized over the lifetime of the loans, therefore its growth rate lagged the growth rate of on-balance sheet loans.

Other service fee revenues increased 260% to RMB281.9 million (US$39.4 million) from RMB78.4 million in the same period of 2018, primarily due to an increase in revenue from referring borrowers to other platforms and an increase in release of guarantee liabilities upon expiry of the underlying loans and late fees from borrowers.

Total operating costs and expenses increased 212% to RMB1,640.7 million (US$229.5 million) from RMB525.3 million in the same period of 2018.

Origination and servicing expenses increased 114% to RMB374.3 million (US$52.4 million) from RMB174.8 million in the same period of 2018, primarily due to an increase in loan origination volume and the associated costs incurred to originate and service loans through the Company’s platform.

Sales and marketing expenses increased 274% to RMB902.9 million (US$126.3 million) from RMB241.4 million in the same period of 2018, primarily due to an increase in advertising expenses to promote the Company’s brand and attract users to the platform.

General and administrative expenses increased 84% to RMB113.7 million (US$15.9 million) from RMB61.7 million in the same period of 2018, primarily due to an increase in salaries and benefit and related expenses for employees engaged in general corporate functions.

Provision for loans receivable increased 1268% to RMB151.0 million (US$21.1 million) from RMB11.0 million in the same period of 2018, primarily due to an increase in loan origination funded by consolidated trusts and the company’s proactive increase of provisions related to credit risk.

Provision for financial assets receivable increased 243% to RMB44.6 million (US$6.2 million) from RMB13.0 million in the same period of 2018, primarily due to an increase in loan origination volume.

Provision for accounts receivable and contract assets increased 133% to RMB54.2 million (US$7.6 million) from RMB23.3 million in the same period of 2018, primarily due to an increase in loan origination volume.

Income from operations increased 21% to RMB942.4 million (US$131.8 million) from RMB777.4 million in the same period of 2018.

Non-GAAP income from operations increased 15% to RMB964.7 million (US$135.0 million) from RMB841.4 million in the same period of 2018.

Operating margin was 36.5%. Non-GAAP operating margin was 37.3%, compared with non-GAAP operating margin of 64.6% in the same period of 2018.

Income before income tax expense increased 18% to RMB922.4 million (US$129.1 million) from RMB783.2 in the same period of 2018.

Income tax expense was RMB189.0 million (US$26.4 million), compared with RMB205.7 million in the same period of 2018.

Net income increased 27% to RMB733.5 million (US$102.6 million) from RMB577.4 million in the same period of 2018.

Non-GAAP net income increased 18% to RMB755.8 million (US$105.7 million) from RMB641.5 million in the same period of 2018.

Net income margin was 28.4%. Non-GAAP net income margin was 29.3%, compared with non-GAAP net income margin of 49.2% in the same period of 2018.

8 “Financing income” is generated from loans originated through the Company’s platform funded by the consolidated trusts and Fuzhou Microcredit, which charge fees and interests from borrowers.

M6+ Delinquency Rate by Vintage

The following chart displays the historical cumulative M6+ delinquency rates by loan origination vintage for all loans originated through the Company’s platform:

http://ml.globenewswire.com/Resource/Download/70cdf60b-e72c-4667-98de-79d940f7a93c

Recent Development

  • On November 27, 2019, FountainVest Partners (“FountainVest”), through its investment arm Ruby Finance Investment Ltd., acquired an aggregate of 11,521,266 ADSs of the Company from certain holders of the Company’s ADSs, upon the completion of which, FountainVest became a significant shareholder of the Company and a person designated by FountainVest was appointed as a director of the Company.
     
  • In August, 2019, Fuzhou 360 Online Microcredit Co., Ltd., one of our wholly owned PRC subsidiaries, received approval from the People’s Bank of China to connect to its Financial Credit Information Basic Database.

Business Outlook

360 Finance currently expects total net revenue for fiscal year 2019 to be in the range of RMB 8,000 million to RMB 8,500 million. This forecast reflects the Company’s current and preliminary views, which are subject to change.

Conference Call

360 Finance’s management team will host an earnings conference call at 8:00 AM U.S. Eastern Time on Wednesday, November 27, 2019 (9:00 PM Beijing Time on November 27, 2019).

Dial-in details for the earnings conference call are as follows:

United States: 1-888-346-8982
Hong Kong: 852-3018-4992
China: 4001-201-203
International: 1-412-902-4272
Passcode: 360 Finance

Please dial in 15 minutes before the call is scheduled to begin and provide the passcode to join the call.

A replay of the conference call may be accessed by phone one hour after the end of the conference call until 7:59 AM ET on December 4, 2019 at the following numbers:

United States: 1-877-344-7529
International: 1-412-317-0088
Passcode: 10137194

Additionally, a live and archived webcast of the conference call will be available on the Investor Relations section of the Company’s website at ir.360jinrong.net.

About 360 Finance

360 Finance, Inc. (NASDAQ: QFIN) (“360 Finance” or the “Company”) is a leading digital consumer finance platform and the finance partner of the 360 Group. The Company provides tailored online consumer finance products to prime, underserved borrowers funded primarily by its funding partners. The Company’s proprietary technology platform enables a unique user experience supported by resolute risk management. When coupled with its partnership with 360 Group, the Company’s technology translates to a meaningful borrower acquisition, borrower retention and funding advantage, supporting the rapid growth and scaling of its business.

For more information, please visit: ir.360jinrong.net

Use of Non-GAAP Financial Measures Statement

To supplement our financial results presented in accordance with U.S. GAAP, we use non-GAAP financial measure, which is adjusted from results based on U.S. GAAP to exclude share-based compensation expenses. Reconciliations of our non-GAAP financial measures to our U.S. GAAP financial measures are set forth in tables at the end of this earnings release, which provide more details on the non-GAAP financial measures.

We use non-GAAP income from operation and non-GAAP net income in evaluating our operating results and for financial and operational decision-making purposes. Non-GAAP income from operation represents income from operation excluding share-based compensation expenses, and non-GAAP net income represents net income excluding share-based compensation expenses. Such adjustments have no impact on income tax. We believe that non-GAAP income from operation and non-GAAP net income help identify underlying trends in our business that could otherwise be distorted by the effect of certain expenses that we include in results based on U.S. GAAP. We believe that non-GAAP income from operation and non-GAAP net income provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making. Our non-GAAP financial information should be considered in addition to results prepared in accordance with U.S. GAAP, but should not be considered a substitute for or superior to U.S. GAAP results. In addition, our calculation of non-GAAP financial information may be different from the calculation used by other companies, and therefore comparability may be limited.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB7.1477 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System as of September 30, 2019.

Safe Harbor Statement

Any forward-looking statements contained in this announcement are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. 360 Finance may also make written or oral forward-looking statements in its reports to the U.S. Securities and Exchange Commission ("SEC") on Forms 20-F and 6-K, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including the Company’s business outlook for 2019, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement. Further information regarding such risks and uncertainties is included in 360 Finance's filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and 360 Finance does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For more information, please contact:

360 Finance
E-mail: ir@360jinrong.net

Christensen

In China
Mr. Christian Arnell
Phone: +86-10-5900-1548
E-mail: carnell@christensenir.com

In US 
Ms. Linda Bergkamp
Phone: +1-480-614-3004
Email: lbergkamp@christensenir.com

         
360 Finance, Inc   
Unaudited Condensed Consolidated Balance Sheets   
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("USD") except for number of shares and per share data, or otherwise noted) 
         
  December 31, Sep 30, Sep 30,  
  2018   2019 2019  
  RMB RMB USD  
ASSETS        
Current assets:        
Cash and cash equivalents 1,445,802   1,844,413 258,043  
Restricted cash 567,794   1,429,251 199,960  
Security deposit prepaid to third-party guarantee companies 795,700   1,078,862 150,938  
Funds receivable from third party payment service providers 142,622   149,762 20,952  
Accounts receivable and contract assets, net 1,791,745   2,740,005 383,341  
Financial assets receivable, net 1,193,621   1,802,780 252,218  
Amounts due from related parties 484,286   763,943 106,880  
Loans receivable, net 811,433   7,969,621 1,114,991  
Prepaid expenses and other assets 109,016   685,258 95,871  
Total current assets 7,342,019   18,463,895 2,583,194  
Non-current assets:        
Accounts receivable and contract assets, net-non current -   424 59  
Financial assets receivable, net-non current -   29,660 4,150  
Property and equipment, net 6,869   16,769 2,346  
Intangible assets 847   3,794 531  
Deferred tax assets -   163,132 22,823  
Total non-current assets 7,716   213,779 29,909  
TOTAL ASSETS 7,349,735   18,677,674 2,613,103  
         
LIABILITIES AND EQUITY LIABILITIES        
Current liabilities:        
Payable to investors of the consolidated trusts-current 300,341   3,839,285 537,136  
Accrued expenses and other current liabilities 518,955   921,741 128,956  
Amounts due to related parties 78,767   54,393 7,610  
Short term loans -   1,535,000 214,754  
Guarantee liabilities 1,399,174   2,338,719 327,199  
Income tax payable 432,066   806,312 112,807  
Other tax payable 164,478   244,194 34,164  
Total current liabilities 2,893,781   9,739,644 1,362,626  
Non-current liabilities:        
Deferred tax liabilities 15,758   - -  
Payable to investors of the consolidated trusts-noncurrent -   2,194,000 306,952  
Total non-current liabilities 15,758   2,194,000 306,952  
TOTAL LIABILITIES 2,909,539   11,933,644 1,669,578  
Ordinary shares 20   21 3  
Additional paid-in capital 4,866,756   5,031,458 703,927  
Accumulated (deficit)/retained earnings (430,263 ) 1,641,416 229,643  
Other comprehensive income 3,683   69,629 9,741  
TOTAL 360 FINANCE INC EQUITY 4,440,196   6,742,524 943,314  
Noncontroling interests -   1,506 211  
TOTAL EQUITY 4,440,196   6,744,030 943,525  
TOTAL LIABILITIES AND EQUITY 7,349,735   18,677,674 2,613,103  
         



                   
  360 Finance, Inc                
  Unaudited Condensed Consolidated Statements of Operations   
  (Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("USD") except for number of shares and per share data, or otherwise noted) 
                   
    Three months ended September 30,   Nine months ended September 30,  
  2018   2019   2019     2018   2019   2019    
  RMB RMB USD   RMB RMB USD  
  Revenue from loan facilitation services 943,812   1,318,164   184,418     2,039,075   3,965,335   554,771    
  Revenue from post-origination services 204,473   573,194   80,193     396,850   1,494,353   209,068    
  Financing income 76,036   409,763   57,328     232,047   724,223   101,323    
  Other service fee revenues 78,368   281,918   39,442     212,582   635,055   88,847    
  Total net revenue 1,302,689   2,583,039   361,381     2,880,554   6,818,966   954,009    
  Origination and servicing 174,838   374,311   52,368     503,487   906,402   126,810    
  Sales and marketing 241,434   902,869   126,316     844,668   2,432,804   340,362    
  General and administrative 61,731   113,716   15,909     460,080   357,909   50,073    
  Provision for loans receivable 11,038   151,010   21,127     35,693   205,808   28,794    
  Provision for financial assets receivable 12,996   44,607   6,241     32,454   101,517   14,203    
  Provision for accounts receivable and contract assets 23,261   54,156   7,577     54,685   183,149   25,623    
  Total operating costs and expenses 525,298   1,640,669   229,538     1,931,067   4,187,589   585,865    
  Income from operations 777,391   942,370   131,843     949,487   2,631,377   368,144    
  Interest income(expense), net 2,886   (25,546 ) (3,574 )   6,470   (27,478 ) (3,844 )  
  Foreign exchange loss (3,145 ) (64,793 ) (9,065 )   (3,145 ) (67,521 ) (9,447 )  
  Other income, net 6,019   70,409   9,851     7,695   94,305   13,194    
  Income before income tax expense 783,151   922,440   129,055     960,507   2,630,683   368,047    
  Income tax expense (205,707 ) (188,952 ) (26,435 )   (361,927 ) (559,077 ) (78,218 )  
  Net income 577,444   733,488   102,620     598,580   2,071,606   289,829    
  Net (loss) attributable to noncontrolling interests -   (73 ) (10 )   -   (73 ) (10 )  
  Deemed dividend (3,097,733 ) -   -     (3,097,733 ) -   -    
  Net (loss) income attributable to ordinary shareholders of the Company (2,520,289 ) 733,561   102,630     (2,499,153 ) 2,071,679   289,839    
  Net (loss) income per ordinary share attributable to ordinary shareholders of 360 Finance, Inc.                
  Basic (12.71 ) 2.55   0.36     (12.60 ) 7.20   1.01    
  Diluted (12.71 ) 2.45   0.34     (12.60 ) 6.88   0.96    
  Weighted average shares used in calculating net income per ordinary share                
  Basic 198,347,168   288,054,825   288,054,825     198,347,168   287,788,219   287,788,219    
  Diluted 198,347,168   299,107,729   299,107,729     198,347,168   301,306,666   301,306,666    
                   



           
  360 Finance, Inc        
  Unaudited Condensed Consolidated Statements of Comprehensive (Loss)/Income  
  (Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("USD") except for number of shares and per share data, or otherwise noted)   
           
    Three months ended September 30,  
    2018   2019   2019    
  RMB RMB USD  
  Net income 577,444   733,488   102,620    
  Other comprehensive income, net of tax of nil:        
  Foreign currency translation adjustment 3,741   68,476   9,580    
  Other comprehensive loss 3,741   68,476   9,580    
  Total comprehensive income 581,185   801,964   112,200    
  Net (loss) attributable to noncontrolling interests -   (73 ) (10 )  
  Deemed dividend (3,097,733 ) -   -    
  Comprehensive (loss) income attributable to ordinary shareholders (2,516,548 ) 802,037   112,210    
           
    Nine months ended September 30,  
    2018   2019   2019    
    RMB RMB USD  
  Net income 598,580   2,071,606   289,829    
  Other comprehensive income, net of tax of nil:        
  Foreign currency translation adjustment 3,741   65,946   9,226    
  Other comprehensive loss 3,741   65,946   9,226    
  Total comprehensive income 602,321   2,137,552   299,055    
  Net (loss) attributable to noncontrolling interests -   (73 ) (10 )  
  Deemed dividend (3,097,733 ) -   -    
  Comprehensive (loss) income attributable to ordinary shareholders (2,495,412 ) 2,137,625   299,065    
                 



         
360 Finance, Inc        
Unaudited Reconciliations of GAAP and Non-GAAP Results      
(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("USD") except for number of shares and per share data, or otherwise noted)   
         
  Three months ended September 30,  
  2018   2019   2019  
  RMB RMB USD  
Reconciliation of Non-GAAP Net Income to Net Income        
Net income 577,444   733,488   102,620  
Add: Share-based compensation expenses 64,016   22,320   3,123  
Non-GAAP net income 641,460   755,808   105,743  
Non-GAAP net income margin 49.2 % 29.3 %    
         
Reconciliation of Non-GAAP Income from operations to Income from operations        
Income from operations 777,391   942,370   131,843  
Add: Share-based compensation expenses 64,016   22,320   3,123  
Non-GAAP Income from operations 841,407   964,690   134,966  
Non-GAAP operating margin 64.6 % 37.3 %    
         
  Nine months ended September 30,  
  2018   2019   2019  
  RMB RMB USD  
Reconciliation of Non-GAAP Net Income to Net Income        
Net income 598,580   2,071,606   289,829  
Add: Share-based compensation expenses 530,024   164,702   23,043  
Non-GAAP net income 1,128,604   2,236,308   312,872  
Non-GAAP net income margin 39.2 % 32.8 %    
         
Reconciliation of Non-GAAP Income from operations to Income from operations        
Income from operations 949,487   2,631,377   368,144  
Add: Share-based compensation expenses 530,024   164,702   23,043  
Non-GAAP Income from operations 1,479,511   2,796,079   391,187  
Non-GAAP operating margin 51.4 % 41.0 %    
             

Source: 360 Finance