Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Jiayin Group's First Quarter of 2021 Earnings Conference Call. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. I will now turn the call over to Ms. Julia Qian, Managing Director of The Blueshirt Group, Asia. Ms. Qian, proceed.

Hello, everyone. Thank you all for joining us on today's conference call to discuss Jiayin Group's financial results for the first quarter of 2021. We released the results early today. The press release is available on the company's website as well as on newswire services. On the call with me today are Mr. Yan Dinggui, Chief Executive Officer; Ms. Shelley Bai and Ms. Julia Chen, Co-Chief Financial Officers; and Ms. Xu Yifang, Chief Risk Officer. Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor Provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Also, please note that unless otherwise stated, all the figures mentioned during the conference call are in Chinese RMB. With that, let me now turn the call over to our CEO, Yan Dinggui. Mr. Yan will speak in Chinese and then our Co-CFO, Shelley Bai, will translate his comments to English. Go ahead, Mr. Yan.

Hello, everyone. Thank you for joining our first quarter 2021 earnings conference call. We delivered solid business growth this quarter, leading us to a great start to the year. Loan growth, driven by our successful integration and the rapidly growing loans from institutional partners, reached RMB4.2 billion, representing a 44% increase year-over-year. Notably, net income was RMB93.7 million, a 137% year-over-year increase compared to RMB39.5 million from the same period in 2020. These strong business and financial results highlight our effective business strategy and execution capabilities. Now allow me to share our key strategies for 2021. First, we will continue to drive organic growth in China by deepening partnerships with financial institutions, utilizing our sophisticated risk management systems, and providing customized solutions. Thanks to our early advancements in process automation and system integration, our funding partners increased to 28 in the first quarter. We are in talks with another 46 institutions to further expand these partnerships. Our advanced credit assessment system uses behavioral analytics to guide our customer acquisition and retention efforts, enabling us to select high-quality borrowers while keeping existing customers. This resulted in a repeat borrowing rate of 74% in the first quarter of 2021, up from 70% in Q4 2020. We also published our sustainability report this quarter, showing satisfactory improvements and maintaining a positive trend. We will continue investing in technology, enhancing efficiency, and ensuring asset quality for the remainder of 2021. Secondly, we are pursuing cautious overseas expansions, entering markets where our technology stands out and can significantly impact. In Southeast Asia, we see Indonesia as a key market with large potential. Being the fourth most populous country, Indonesia has shown consistent consumption growth, expanding individual networks, a strong local stock market, and technological innovation. Through established partnerships with local businesses, we are customizing risk management models and the technology platform, making considerable progress and positioning ourselves for rapid growth once we receive the fintech online lending investments expected in the next one or two quarters. We are also entering the African market, which offers unique opportunities to develop our platform in the region, continuously advancing to the next generation of technology. We launched our first African operation in Nigeria after thorough research and observing the successful efforts of various early Chinese enterprises. We will roll out products and services cautiously and gradually. Moreover, South America is another important market, and we are performing well, maintaining our leadership position despite rising competition. We are focused on quality growth and continually optimizing our strategic execution and operations. Thirdly, we will keep investing in financial technology development and be a key player in the evolution of digital economics. Blockchain technology, founded on principles of transparency, security, and stability, is poised to significantly change society. As mentioned in our last earnings call, Bweenet focuses on cryptocurrency-related technology, covering everything from mining hardware design and distribution to mining management. There are limited risks since Bweenet does not mine cryptocurrencies directly. With our finance and operations integration progressing steadily, we anticipate completion within this month. Bweenet's business development and operations will be managed by a separate independent team. With more institutional investments and a greater number of use cases in the financial sector, we believe the growth potential is particularly significant. Our strategy is to remain flexible and engage in financial technology developments with minimal risks, ensuring no impact on our current operations. In conclusion, 2021 will be a year of accelerated growth. We have outlined our top initiatives to implement these strategies, and I am confident our team will deliver exceptional results. With that, I will now turn the call over to our Co-CFO, Julia Chen. Julia, please go ahead.

Thank you, Mr. Yan and Shelley, and thank you everyone for joining our call today. As Mr. Yan just mentioned, we kicked off 2021 on a strong note, with impressive financial growth and meaningful business progress, placing us firmly on track to achieve our growth target. Now, let me go through our financial highlights for the quarter. Before I go into details, please note that all numbers presented are in RMB and are for the first quarter of 2021 unless stated otherwise. All percentage terms are on a year-over-year basis, unless otherwise specified. In the interest of time, I will not walk through each item line by line on this call. I will just highlight some of the key points here. Loan origination volume was RMB4.2 billion, up 44.1% year-over-year, and 35.1% sequentially. This was remarkable and it was also the strongest growth since our IPO. This demonstrated the success of our rapid business transformation, which laid the good foundation for us to continue to achieve robust growth in the coming future. Net revenue was RMB343.1 million, up 9.4%. This increase was primarily due to the increase of revenue from loan facilitation services, which grew by 24.7% year-over-year to RMB320.9 million. Other business grew by 8.3% to RMB22.2 million. The increase was primarily due to the development of our overseas business. Moving on to costs. We continue to optimize our cost structure to further improve operating efficiencies. In Q1, total operating expenses were RMB229.3 million, down 12.6% from RMB262.4 million last year. Origination and servicing expense was RMB64.1 million, up 0.3%, primarily due to the increase in credit assessment expense resulting from higher loan origination volume, partially offset by reduced collection costs as the company no longer provides such services under its new business model. Allowance for uncollectible receivables, contract assets, loans receivable and others was RMB8.0 million, down 73.7% from RMB30.4 million in the same period of 2020. The decrease was primarily due to the relatively lower credit risk of the new business model. G&A expenses were RMB37.8 million, down 1.3%, primarily due to lower rental costs, partially offset by the increase in other business-related expenses. R&D expenses were RMB28.1 million, down 22.8%. This was mainly due to a more streamlined team in technology-related departments as we continue to improve our operating efficiency. Sales and marketing expenses were down 2.4% to RMB91.2 million, primarily due to the decrease in share-based compensation expense, partially offset by higher borrower acquisition expenses. We achieved attractive profitability through our loan volume growth and improved operating efficiency. We posted net income of RMB93.7 million, up 137.2% year-over-year and 15.5% sequentially. We ended this quarter with RMB123.3 million in cash and cash equivalents compared with RMB117.3 million as of December 31, 2020. Moving to our guidance. Given the recovery of the Chinese economy and a fast-growing consumer finance market, we expect our loan origination volume in the second quarter of 2021 will see over 160% growth year-over-year and a 35% to 45% growth sequentially. With that, we can open the call for questions. Mr. Yan, our Chief Risk Officer, Ms. Xu, and I will answer questions. Operator, please go ahead.

Certainly. Ladies and gentlemen, we will now begin the question-and-answer session. We have the first question from the line of Andrew Scutt from ROTH Capital. Please go ahead.

Hello, congrats on the strong results. And thanks for taking my questions. So the first question here that I have, the model is really showing the successful execution you guys are making with the transition to institutional partners, especially shown in the stronger gross margins you had in the quarter. Can you just maybe talk about the efficiencies you're realizing and you discussed on the call that are helping drive the strong results?

Yes. So, this is Julia and I will take this question. So, yes, - Andrew, hi. Hi, Andrew. As you have mentioned, we have successfully exited the P2P business. So to the loan facilitation models, so in the first quarter, we have seen a very strong increase in the loan facilitation volume. And also we have seen some cost savings under different expense items. So as we mentioned in the commentary, given the recovery of the Chinese economy and a fast-growing consumer financial market, we actually have a very good confidence to grow and expand the book, as we did in the first quarter. So we expect that our loan origination volume will grow continuously in the remaining quarters of this year. And we will continue to improve our operational efficiency and to maintain the very profitable - very good profitability. Yes, so…

Great. Thanks very much. Sorry, I didn't want to cut you off there. Second question for me, if I may. R&D expenses look like they were down substantially in the quarter. Can you kind of talk about your expectations there going forward?

Okay. So yes, the R&D expenses were down 22.7% year-over-year because we have successfully exited the P2P business. So we actually made some efforts to streamline our technology departments. And we optimized the personnel scheduling and related human resources. So in that way, we have a more streamlined team in technology. Going forward, we see some savings in the related salaries and compensations. And also the share - yeah, share-based compensation. So going forward, we plan to improve our R&D investment to continuously improve our technological capabilities and efficiency to propel further growth for the company. And if you look at the absolute number, I think it's a very good indicator for the remaining quarters of this year. So I think we are going from this level, and we plan to improve the R&D investment level from here. Hope that – yeah…

Yeah. Thank you. That was very helpful. Next one, if I may. I was very excited to see the credit quality numbers disclosed in the release this morning. And it definitely reflects the shift in institutional funding. So can you just provide some commentary on the numbers there and expectations going forward?

So thanks, Andrew, for the question. This is Xu Yifang taking on your questions on the credit results - the risk results. Yeah, as we are shifting our business towards an institution funding portfolio, we are facing a stronger desire from our partners to seek better quality customers as this has been our strategic intent starting from early last year 2020, if you recall. We're trying to position ourselves towards higher quality customers in anticipation of partnering with institutional funding partners. So as you can see, the credit number - the risk numbers continue to improve over time. We are attacking on multiple fronts. One is from customer acquisitions, so we are trying to target better customers just from a risk point of view. And ultimately, in addition, our existing portfolio customer strategy, we are focusing on the satisfactions of our long-term customers. As in fact, as we learn more about our own customers, we are able to really focus on the customers who have longer and better credit outlook, risk outlook. Just coupled with that, we also are - on loan collection capabilities also improved. So as our overall external risk environment, as we have seen from our peer companies has been improving over time, we are less - our 30-day collection rate has pretty much reached all-time highs and has been able to stabilize for almost over two quarters now. So that's something that I'd be happy to report. So just about – with all things in place, we are expecting our overall risk to improve even better, especially with our existing customers; repeat customer book continues to grow at a significant pace, and we expect our portfolio risk to improve even better. That will be all.

Great, thanks. That was extremely helpful. Also appreciate the update on the Bweenet acquisition that you provided on the call. Can you maybe just talk through some of the next steps you guys have moving forward, integrate the company, and anything else that needs to be done over the next few quarters?

Yes. This is Julia. So currently we are in the middle of integrating the functions of finance, operations, and other supporting functions. We expect to complete this consolidation within this month by the end of June. In the next year or for the full year, we estimate that Bweenet would contribute an additional 20% of net income if we can stick to the current business strategy. And as we have been highlighting in the commentary earlier, Bweenet is primarily focused on cryptocurrency-related technology, mining hardware design and distribution to mining management. So actually, Bweenet doesn't directly engage in cryptocurrency issuance, mining, or exchanges. So from that point of view, currently, we are operating this business fully compliant with the regulatory requirements. We will observe and watch closely and make sure to adjust our business if necessary and equip our operations within the regulatory framework. So that is basically the status of our M&A deal.

Thank you very much. And then last one, if I may, the 30% to 40% sequential loan origination growth was great here, that's very exciting for Q2. Can you just talk through your expectations for year-end? And if you have, it looked like you acquired some new customers this quarter, so any commentary you could provide on adding people to the platform as well would be great?

This is Xu Yifang. Andrew, I am going to take on your question. Can you repeat the second half of your question again?

Yeah, so the repeat borrower percentage was down sequentially, it looks like you successfully added new customers to the platform. So any commentary you have there would be great.

Sure. So we are disclosing our next quarter's outlook, which is in a range from 30-40% sequential growth, which is even better than what we have seen this quarter. So I don't - we don't have a number for the overall yet, but I'm definitely expecting a stronger growth for the second half of this year. So we just want to take the numbers out a little bit, just looking at the Q1 growth. The growth primarily came from two sides. One is, as we are transitioning – really closed our P2P book in November last year, we are seeing our institution partners have gained significant confidence and interest in our portfolio just because of our past performance on the risk metrics. So we are seeing more traction from our institution partners who are coming on board. We're seeing typical growth from the number of institutions that we are planning today and the healthy pipeline in place. Thus, with a strong funding supply that we are seeing, our loan originations are doing similar traction as well. So in Q1, we were in full speed in terms of our repeat customers portfolio, as you can see our percentage of loans from repeat customers has grown compared to last quarter. Similarly, we are starting to expand our new acquisition portfolio in the middle of Q1. It's very likely that in Q2 we will see a higher percentage from the book coming from new origination customers mostly because that is a decision driven by growth. I will talk about risk a little bit. So we are fully aware while our new acquisition and our new book, at the same time with our repeat customer book, we are still looking for ways to grow that as well from several assets from product diversification, by offering the right range of both rate as well as the product terms, and in our triple-based marketing capabilities, we are expanding to the full spectrum of the customer lifespan. Lastly, but more importantly is also the customer experience. We are getting into every detail as to how we are interacting with the customers and trying to improve the further customers’ engagement rate. So on the new customer acquisition front, as I said earlier, starting in mid-Q1, we are gaining more traction from booking more new customers, and that has been dropping through for our Q2 activities. So we are signing customers through a full spectrum of marketing channels, including information-based marketing or partnerships with other Internet-based platforms, etc. We are talking with our key customers throughout all spectrums. In the second half of this year, we are expecting that we will focus a little more on optimizing our acquisition costs from these marketing channel metrics. So that even while we are booking – as I said earlier, we are also on full speed in Q2 in terms of new customer acquisition, we are taking a prudent view on how in terms of portfolio risk management, which has always been the core of our lending customers. We take a very critical and slightly conservative view, and we will maintain a very healthy buffer in terms of our risk expectations. Thus, all underwritings are changed, and we aim for a more comprehensive portfolio and channel-specific deals, trying to make sure that we are gaining the growth but not at the cost of deteriorating credit risk. So that is our overall view on what we expect from a lending perspective in terms of volume. Hopefully, this will be fully supported by our continuous growth with our institution partners. In the second half of this year, we are definitely going to see a much stronger second half compared to the first half.

Thank you very much. And once again, congratulations on the strong quarter.

Thank you. Seeing no more questions, I will return the call to Ms. Chen. Please go ahead.

Thank you, operator. And thank you all for participating in today's call. Thank you for your support. We appreciate your interest, and I look forward to reporting to you again next quarter on our progress.

Thank you. Ladies and gentlemen, that concludes our conference call for today. Thank you all for your participation. You may disconnect now.