Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Jiayin Group First Quarter 2023 Earnings Conference Call. Currently, all participants are in 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'll now turn the call over to Mr. Shawn Zhang from Investor Relations of Jiayin Group. Please proceed.

Thank you, operator. Good day, everyone, and welcome to Jiayin Group's 2023 first quarter earnings conference call. We released our earnings results earlier today via Newswire services. You may check the press release and sign up for the company's e-mail alerts by visiting our IR webpage. On the call with me today are Mr. Yan Dinggui, Chief Executive Officer; Mr. Fan Chunlin, Chief Financial Officer; 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 provisions of the U.S. Public 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 public filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Finally, we will post a slide presentation on our Investor Relations webpage soon, providing details of our results for the quarter. Also, please note that unless otherwise stated, all figures mentioned during the conference call are in Chinese renminbi. Let me now turn the call over to CEO, Mr. Yan Dinggui. Mr. Yan will deliver his remarks in Chinese, and I will follow-up with corresponding English translations. Please go ahead, Mr. Yan.

Hello, everyone. Thank you for joining our first quarter 2023 earnings conference call. I'm delighted to share with you today the exceptional performance of Jiayin in the first quarter of 2023. Our robust results this quarter are a testament to the steady recovery of the domestic economy and the solid foundation we have built through the consistent improvement of our operational efficiency. In the quarter, we achieved a record loan origination volume of RMB19.8 billion, surpassing our previous projections. Additionally, our net revenue for the quarter reached RMB1.12 billion, marking a year-over-year increase of approximately 119.5%. Our profit margins also remained strong, maintaining our robust growth trajectory. Looking at the first quarter from a broader perspective, the National Bureau of Statistics of China has reported a promising start to the year with a 4.5% year-over-year growth in China's GDP. This represents an increase of 1.6 percentage points from the fourth quarter of last year, marking an encouraging beginning to China's macro recovery in 2023. Particularly consumption contributed to 66.6% of economic growth with online consumption maintaining a strong momentum. The simultaneous recovery of urban and rural markets has led to a rapid release of consumer potential, indicating a swift recovery trend. Additionally, the People's Bank of China's financial statistics for the first quarter revealed a cumulative increase in the scale of social financing of RMB14.53 trillion, an increase of RMB2.47 trillion from the same period last year. Industry experts attribute this to the efforts of policies aimed at stabilizing growth and promoting development, which have significantly boosted market confidence, accelerated the recovery of effective financing demand, and solidified the trend of macroeconomic recovery. Amidst this macroeconomic environment, we have seen an abundant supply of funding and substantial market liquidity. As of March 31, 2023, we have partnered with 64 financial institutions and are currently in discussions with another 68. The diversification of our funding sources and ample credit lines provided by our partners formed the backlog of our rapid loan volume growth. Furthermore, the majority of our funding is not restricted by geographic regions. Moreover, we have deepened our relationships with key financial institution partners, leading to an improved structure of our loan facilitation funding sources. Notably, the contribution of loans we facilitated for banks has continued to increase in this quarter. These ongoing efforts have allowed us to continue reducing the average funding cost for the loans we've facilitated in the quarter. We are confident that the size and quality of our partnership network will provide a powerful guarantee for the medium- and long-term development of our domestic business. As we continue to enhance our fintech capabilities, we are also fostering more advanced partnerships. We are leveraging our technological progress to empower our partners, aiding them in their digital transformation. By the end of the first quarter, we have assisted five financial institutions in digitizing their in-house operations and are currently interfacing with another three. We are also in active discussion with five more institutions to explore potential collaborations. Leveraging the robust support of our current risk control system and capitalizing on the emerging borrowing needs spurred by the recovery in consumption, we continue to implement an active borrower acquisition strategy. This strategy is pivotal in maintaining our current trajectory of rapid growth. We added nearly 0.5 million new borrowers in the first quarter, representing a year-over-year increase of approximately 96.4%. At the same time, we have maintained a stable proportion of repeat borrowers at 67.8%, with the average borrowing amount reaching RMB9,913, marking a 13.5% increase year-over-year. These figures underscore our commitment to expanding our borrower base and extending the reach of inclusive finance. To further this goal, we have strengthened our collaborations with several mainstream information platforms, diversifying our user engagement scenarios and enhancing the precision of our target customer identification. Our focus on high-quality borrowers who demonstrate superior loan demand and repayment capabilities contributes to a healthy and sustainable borrower structure as we continue to scale our business. We remain committed to investing in high-quality borrower acquisition channels, ensuring continuous optimization of our borrower structure amid rapid business development. In managing our borrower base, our tech-enabled risk control capabilities continue to be a cornerstone of our operations. These capabilities have proven effective in managing risk fluctuations and fostering robust healthy business growth. As of March 31, 2023, our 61 to 90 day delinquency rate has remained stable at 0.63% compared to 0.51% at the end of 2022. Recognizing the fluctuations in our risk metrics, we will persist in refining our borrower stratification process, striking a balance between asset growth and quality improvement. This approach is designed to foster a virtuous cycle of enhanced asset quality, reduced funding costs, and improved borrower quality. Turning to our international business, we have been vigilantly observing and adapting to the evolving dynamics in Nigerian and Indonesian markets. The Nigerian market encountered some risk fluctuations in the first quarter. These fluctuations served as a significant task for our robust risk control team and our continually refined advanced risk control models. The outcomes in the regional markets have reaffirmed our risk control progress in international markets and we can now utilize this successful case study to bolster our steady growth in other regions. By the end of the first quarter, our Nigerian operations had achieved a substantial scale, thereby solidifying the foundation of our future expansion objectives in the African market. Concurrently, we are strategizing to diversify our customer acquisition channels further, reduce our reliance on any single acquisition channel, and persistently enhance our customer acquisition efficiency. This strategic approach is designed to foster the sustained and healthy growth of our Nigerian operations. In Indonesia, we kept our investment in the market over the past few quarters, seeing an accelerated growth rate in the regional business goal. We will persistently monitor the Indonesian market environment and adjust our strategies accordingly. Finally, on the policy and regulatory front, the China Internet Finance Association is presently spearheading the creation of the risk control guidance for long collection of personal online consumer credit in Internet finance, also known as the National Collection Standards. We view post-loan services as a crucial component of the comprehensive loan facilitation service cycle. The establishment of these standards will offer a definitive regulatory framework for the industry standardization. We are also actively strengthening our dedication to ensuring the compliance of post-loan services and safeguarding consumer rights. In February this year, we published the 2022 Consumer Rights Protection White Paper, which provides a detailed account of our consumer protection initiatives, accomplishments, and plans over the previous year. We are confident that a regulated industry environment will substantially contribute to the sustained development of both the industry and our business. Moreover, in response to the regulatory mandate to terminate direct data connections, we have proactively engaged with credit institutions to establish collaborative plans and have successfully completed all necessary technical and system preparation. We are confident in our ability to meet the regulatory requirements ahead of the deadline, ensuring a seamless transition in our business operations. As a frontrunner in the fintech industry, Jiayin remains committed to safeguarding consumer information, upholding data security within the industry, and delivering high-quality financial services. Compliance has always been at the forefront of our operations, and we will persist in this commitment as we continue to bolster the growth of inclusive finance. In conclusion, the first quarter of 2023 has been a period of significant progress and robust performance for Jiayin. Our remarkable performance this quarter is a testament to the efficacy of our strategic initiatives, which have enabled us to expand our business operations, navigate risk fluctuations, optimize our borrower base structure, and extend our reach in international markets. We are confident that these concerted efforts will allow us to maintain our growth trajectory in the medium- to long-term and deliver outstanding results in the coming quarters. As such, we reiterate our full year guidance for 2023 and are setting a new loan origination volume target ranging from RMB23 billion to RMB24 billion for the second quarter of 2023.

Thank you, Mr. Yan, and hello, everyone, for joining our call today. I will now review our financial highlights for the quarter. Please note that all numbers will be in RMB and all percentage changes refer to year-over-year comparisons unless otherwise noted. As Mr. Yan mentioned, we delivered exceptional results in the first quarter. Our loan origination volume surged 142.9% to RMB19.8 billion, exceeding our forecast made last quarter. Our net revenue was RMB1.12 billion, up 119.5%, driven by a 94.1% increase in our revenue from loan facilitation services. Other revenue grew significantly to RMB255.7 million from RMB64.7 million in the same period last year, mainly driven by the revenue from individual investor referral services and the guarantee income from financial guarantee services. Moving on to costs. Origination and servicing expenses were RMB274.2 million, up 193.6%, driven by the increased loan origination volume and post-loan services related expenses. Allowance for receivables and contract assets grew by 67.5% to RMB6.7 million, primarily due to the increased loan volume from overseas markets. Sales and marketing expenses increased by 155.9% to RMB380.8 million, mainly reflecting an increase in borrower acquisition expenses and commission fees for partnership referrals. As a percentage of net revenue, sales and marketing expenses increased to 33.9% from 29.1% in the same period last year as we continued our investments to attract and retain high-quality borrowers. General and administrative expenses were RMB46.4 million, up 14%, primarily driven by higher staff costs in the quarter. As a percentage of net revenue, general and administrative expenses reduced to 4.1% from 8% in the same period last year. Research and development expenses were RMB64.8 million, up 55% from RMB41.8 million, mainly due to increased employee compensation benefits expenses and professional service fees. As a percentage of net revenue, research and development expenses reduced to 5.8% from 8.2% in the same period last year. As we continue to prudently manage our costs, our profitability remains strong. Our net income for the first quarter increased by 93.4% to RMB279.7 million from RMB144.6 million in the same period last year. Our basic and diluted net income per share were both RMB1.31 compared to RMB0.67 in the same period last year. Basic and diluted net income per American Depository Share were both RMB5.23 compared to RMB2.68 in the same period last year. We ended this quarter with RMB340.6 million in cash and cash equivalents, up from RMB291 million as of December 31, 2022. As of March 31, 2023, we have bought back approximately 1.5 million of our American Depository Shares for US$3.5 million on our US$10 million share repurchase plan we announced in June 2022. In addition to that, the company's Board of Directors just approved to extend the share repurchase plan for a period of 12 months on June 7, 2023. The extension will commence on June 13, 2023, and end on June 12, 2024. Pursuant to the extended share repurchase plan, the company may repurchase its ordinary shares through June 12, 2024, with an aggregate value not exceeding the remaining balance on the share repurchase plan. With that, we can open the call for questions.

Thank you. We will now begin the question-and-answer session. We have a question from Martin Chen from Ten Asset. Please proceed.

Let me translate first. Hi, management team. Congratulations on the very strong results. This is Martin from Ten Asset. I have two questions. The first one is regarding the guidance. The loan volume guidance in the second quarter is about RMB23 billion, combined with RMB20 billion in the first quarter, which accounts for around 60% of the RMB70 billion full year guidance. Does this suggest that the volume in the second half of the year will decrease compared to the first half?

Okay. This is Shawn from the Investor Relations team of Jiayin Group, and I will translate for Ms. Xu. Thank you for your question. We believe that the loan volume we facilitated in the second half of 2023 will not be simply constrained by the annual guidance we previously provided. Although we have affirmed our full-year guidance, we are confident in our ability to meet this target this year. While there may be some fluctuations in risk during the year, we still perceive the economic environment as generally stable. The loan volume will primarily depend on two factors. First, it will rely on the total volume supplied by our partners. Second, it will be influenced by our asset requirements and our objective to balance risk metrics with sustainable growth in the latter half of the year.

You mentioned refining your borrower base and focusing on high-quality borrowers. How do you define high quality, and what strategy are you using to attract and maintain these borrowers in the future?

To reach better quality borrowers, one of the strategic goals of Jiayin Group, since completing our business transformation, is to shift our funding sources from individual investors to financial institutions. High-quality borrowers are also a requirement from our funding partners. Essentially, high-quality borrowers possess better credit standings. We notice common traits among these borrowers, such as being younger, caring about their credit standings, and using loans responsibly. These attributes lead to less over-borrowing from multiple sources and result in a stronger personal balance sheet. To attract these higher-quality borrowers, we are strategically selecting borrower acquisition channels like other platforms, offering competitive products when needed, and focusing on borrowers with good credit who can grow with us in the long term. With over 10 years of business experience, Jiayin is also working to appeal to these borrowers through our services during the loan process, providing better products and lower rates. Thank you.

Thank you for the questions. Please hold on for the next question. The next question is from Lin Yang from Huafu Securities. Please go ahead.

I will translate for myself. I'm Lin Yang from Huafu Securities. My first question is about the increase in sales and marketing expenses. Can you provide some details on this quarter's rise in those expenses? Thank you.

So, the sales and marketing expenses in the first quarter of 2023 reached RMB380 million, which is over 150% higher year-over-year and slightly increased from the previous quarter. These expenses mainly cover borrower acquisition costs, employee compensation, and other related expenses. The significant year-over-year growth was driven by the rise in the volume of loans we facilitated. After changing our business model, we implemented a proactive borrower acquisition strategy and invested more in the acquisition process to efficiently secure high-quality assets. The proportion of new borrowers on our platform has remained strong. We aim to increase our investment in high-quality borrower acquisition channels to enhance the lifetime value of our borrowers and continually refine our borrower base as our business grows rapidly. From an operational and financial standpoint, we will conduct a comprehensive review of the ratio of sales and marketing expenses to our revenue and implement budget controls to ensure our sales and marketing efforts are accurate and effective. In the first quarter of 2023, our sales and marketing expenses represented 33.9% of our revenue, which is similar to 33.1% for the entire fiscal year of 2022. Compared to 35.5% in the fourth quarter of 2022, this shows a slight decline. Therefore, thanks to our strong management of sales and marketing expenses, we are maintaining high-quality development, and we are confident in our ability to grow sustainably in the future.

Again, I will translate for myself. Thank you for your response. My second question is regarding accounts receivable. We have observed that accounts receivable currently represents a significant portion of the company's total assets, approximately RMB200 million. Could you clarify the primary reasons for this?

At the end of the first quarter of 2023, the company's accounts receivable stood at RMB1.93 billion, representing around 45% of our total assets. This figure has been steadily increasing each quarter. Most of our accounts receivable come from acquisition and risk control service fees related to our loan facilitation services. Under current accounting principles, as loans are issued, we recognize the rights and obligations from our facilitation services, which means the related accounts receivable and income are recorded as soon as the loan is issued to the borrower. As our loan facilitation volume grows and the projects we recently signed are typically collected within 12 months over the loan term, it's expected that our accounts receivable will continue to rise. With our current business model, as our facilitated volume increases, the absolute value of our accounts receivable will also rise accordingly. It's important to note that the collection of our accounts receivable is very effective. Since our shift from personal to institutional funds in 2022, we have seen almost no bad debts in our domestic loan facilitation business, and we have not incurred any bad debt losses to date. Our management team and auditors closely monitor the recovery of accounts receivable. Overall, the company's profitability remains robust, and our balance sheet is consistently improving, providing a strong foundation for the future healthy development of our business.

Thank you for the questions. We have no more questions at this time. I will return the call back to Shawn for closing remarks. Please go ahead.

Thank you, operator, and thank you all for joining our call today. If you have further questions, please feel free to contact our Investor Relations team. We appreciate your interest and look forward to reporting to you again next quarter on our progress.

That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.