Good day, ladies and gentlemen. Thank you for standing by and welcome to the Jiayin Group's Third 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 will now turn the call over to Mr. Shawn Zhang from Jiayin Group's Investor Relations. Please go ahead.

Hello, everyone. Thank you all for joining us on today's conference call to discuss Jiayin Group's financial results for the third quarter of 2023. We released our earnings results earlier today. The press release is available on the Company's website as well as from Newswire services. 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 US 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 figures mentioned during the conference call are in Chinese renminbi. With that, let me now turn the call over to our CEO, Mr. Yan Dinggui. Mr. Yan will deliver his remarks in Chinese and I will follow up with the corresponding English translation. Please go ahead, Mr. Yan.

Hello, everyone. Thank you for joining us today to discuss our outstanding results for the third quarter of 2023. We have achieved significant milestones this quarter in our financial and operational metrics. Our loan origination volume reached RMB24.2 billion, a 62.4% increase compared to the same period last year. Net revenue grew by 64%, while net income increased to approximately RMB324 million. These results highlight the health and sustainability of our development path and the practicality of our strategy. We are confident in our ability to create ongoing value for our investors and to become a major employer in the global fintech sector. However, both the global and Chinese economies are currently facing notable challenges. Despite the complexities and continuous shifts in the global economic landscape, we have observed a gradual recovery in China's economy. Although this recovery is not progressing as quickly as anticipated, it demonstrates the inherent strength and resilience of the economy. In the domestic financial sector, we've seen fluctuations in credit market risks, making asset quality and risk management critical issues recently. We recognize the importance of maintaining prudent and meticulous operations for our long-term health and stability. As we move forward into the upcoming quarters, we plan to continue our cautious business strategy while focusing on stable development and profitability. We will also closely monitor market dynamics, particularly in managing risks and tracking changes in asset quality. Over the past two years, our fintech business in China has grown steadily, enhancing our reach among financial institutions. By the end of the third quarter, our partnership network included 73 financial institutions, up from 69 in the previous quarter. As our business volume expands, the diversity of our partner institutions is evolving as well, with internet and private banks contributing significantly to the funds facilitated. We are currently in discussions with 76 financial institutions to extend our fintech capabilities and benefit more licensed partners in the future, while also deepening cooperation with key partners. Our model for supporting financial institutions with their self-operating business is progressing well, with six financial institutions already engaged under this model and more actively joining discussions. The proportion of non-regionally restricted funds facilitated remains over 60%, reinforcing our commitment to developing inclusive finance across China. We continue to prioritize optimizing our borrowing customer structure this quarter. We aim to refine our user stratification and provide high-quality lifecycle services to existing borrowers while investing in new borrower demographics with high-quality acquisitions. Since the year's beginning, market risk fluctuations have impacted the asset quality of licensed financial institutions. As a trusted business partner, we understand the importance of sustaining asset quality for long-term stability. As of September 30, 2023, our delinquency rate remained stable at 0.52%. With the economy slowly recovering, we will closely monitor market risks and adjust accordingly for our clients. We recognize the crucial role of artificial intelligence in fintech and have elevated the development and application of AI within Jiayin Group. In the third quarter, we launched the Jiayin AI season series of events, including our Jiayin GPT lab and various training sessions to enhance AI applications throughout our business processes. Major developments this quarter include an upgrade of our knowledge base and the launch of auxiliary functions for customer service agents in our CRM system, which have improved efficiency and accuracy. I am pleased to announce that our company will be changing its name to Jiayin Technology and adopting a new logo, reflecting our strategic focus on technology. This change emphasizes that technology will be foundational to our existence. Jiayin will continue to advance in AI technology and strengthen our fintech capabilities. Our international business has shown significant growth, particularly in Nigeria, where we have achieved net profit for the first time and improved our important risk indicators. Nigeria's large population and increasing mobile penetration present substantial opportunities for fintech, especially in cash credit services. In the medium to long term, we aim for sustainable cash flows in this region. In Indonesia, we have formed a promising collaboration and are closely monitoring the regulatory environment, which appears conducive for realizing our loan facilitation model. We've seen profitability improvements among our partners this quarter, making progress in accessing loan facilitation for the first local financial institution partner and engaging with several others. We are also expanding our analysis of potential implementation in other emerging markets in Africa, Southeast Asia, and Latin America, focusing on inclusive financial coverage. Consequently, we have set the loan origination volume guidance for the fourth quarter at RMB20 billion, with expectations for the full year's origination to exceed prior guidance. Moving forward, Jiayin is committed to risk management and addressing challenges for healthy long-term development. Lastly, I want to inform our long-term supporters that the plan for this year’s second dividend distribution is nearing finalization. We expect to pay a cash dividend of US$0.1 per share, or US$0.4 per ADS, with further details to be announced progressively in our disclosures.

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 earlier, we carried through our robust growth momentum over the past year to achieve new milestones in the quarter. Our loan origination volume grew by 62.4% to 24.2 billion, exceeding our previous guidance. Our net revenue was about 1.47 billion, up 54% as our other revenue grew to 529.8 million from 101.4 million in the same period last year, mainly driven by the growth in guarantee income from financial guarantee services. Moving onto costs. Origination and servicing expenses were 544.3 million, up from 148.4 million in the same period last year, driven by increased loan origination volume and expenses related to financial guarantee services. Allowance for uncollectible receivables, contract assets, loans receivable and others grew by 44.1% to 8.5 million from 5.9 million in the same period last year. However, as a percentage of net revenue, it decreased to about 0.6% from 0.7% in the same period last year. Sales and marketing expenses increased by 26.1% to 407.9 million, mainly reflecting higher borrower acquisition expenses. As a percentage of net revenue, S&M expenses decreased to 27.8% from 36.2% in the same period last year, demonstrating our improving efficiency in attracting and retaining high-quality borrowers. G&A expenses were 53.2 million, up 3.5%, primarily driven by higher staff costs as a result of increased expenditures for employee compensation and related benefits in the quarter. As a percentage of net revenue, G&A expenses reduced to 3.6% from 5.8% in the same period last year. R&D expenses were 70.5 million, up 25%, mainly due to higher employee compensation as a result of an increase in research and development headcount. As a percentage of net revenue, R&D expenses reduced to 4.8% from 6.3% in the same period last year. Consequently, our net income for the third quarter increased by 30.6% to 323.9 million from 248.1 million in the same period last year. Our basic and diluted net income per share were both RMB1.51 compared to RMB1.15 in the same period last year. Basic and diluted net income per ADS were both RMB6.03 compared to RMB4.60 in the same period last year. We ended this quarter with 180.3 million in cash and cash equivalents compared to 288.9 million at the end of the previous quarter. Regarding our stock repurchase program, as of September 30, 2023, we have bought back approximately 1.8 million of our ADSs for a total of US$5.5 million on our US$10 million share repurchase plan we announced in June 2022 and extended in June 2023. With that, we can open the call for questions. Ms. Xu, our Chief Risk Officer and I will answer questions.

Thank you. Your first question comes from Guarong with Jinyu Asset Management. Please go ahead.

This is Guarong from Shanghai, Jinyu Asset. First, congratulations on the strong results. I have two questions. The first is about your reported 62.4% year-over-year increase in loan origination volume in Q3, while you forecast single-digit growth in Q4 compared to higher growth rates in previous quarters. Is this slowdown only due to scaling, or are there other factors involved? How sustainable do you believe the current growth is, and what trends do you anticipate given the current market conditions? My second question is regarding the significant increase in your other revenue, which now makes up over a third of total revenues. Could you provide a breakdown of this segment and share your future plans for it? Thank you.

Okay. This is Xu Yifang, and I'll answer your first question about loan origination. There are several factors to consider. First, our scale has exceeded RMB40 billion, thanks to rapid development since 2022, particularly the quarter-over-quarter growth in the fourth quarter of that year. The growth expected in the fourth quarter of 2023 may not be as significant. Since the start of this year, the credit market has been very active, driven by the consumer economy's development after the COVID-19 period. We are focusing on the ample supply of funds while balancing performance development and risk management. We aim to maintain a cautious approach to ensure sustainable and healthy development across our platform. Additionally, the number of active borrowers is growing rapidly. Our refined operations and risk management strategies are closely monitoring changes in borrower demographics and assessing the effectiveness of operations and risk management at each level. We are accelerating the evaluation of our models to ensure we meet the needs of our active borrowers, especially high-quality ones, and to continually optimize our risk management indicators. This work is crucial for us right now. Lastly, regarding sustainability and forecasts, we are closely watching the domestic credit market and are optimistic about stable, orderly, and healthy growth for our company in the future. That concludes my answer to your first question.

Hello, Guarong. This is Fan Chunlin, the CEO of the company. I will address your second question regarding the proportion of other revenue in relation to our total revenues, as well as the segmentation breakdown and future plans. Other revenue totaled RMB530 million, primarily from financing guarantee services, referral services, and overseas business, with financing guarantee revenue being the largest segment. This part of our revenue has experienced rapid growth this year, with the third quarter of 2023 approaching RMB400 million. Within our listed group system, there is a financing guarantee firm that, in response to requests from financial institution partners, will offer financing guarantee services for specific projects. However, looking at the overall business development strategy, our listed group will prioritize borrower acquisition and risk control services, while independent third-party financial guarantee companies will mainly provide guarantee services. As a result, the growth of this segment and its corresponding revenue will be relatively stable in the future. It's also worth noting that the margin from guarantee business is lower compared to borrower acquisition and risk control services, which will impact the overall operating profit margin of the listed group. Therefore, borrower acquisition and risk control services will continue to represent the majority of our revenue, and we will manage the balance of different business subtypes within our revenue structure. This concludes my response to your second question. Please let me know if you have any other inquiries. Thank you.

Guarong, did you have a follow-up?

Yes. Thanks.

Okay. Thank you. So, operator, we can get the next question, please.

Thank you. Your next question comes from Yuxuan Chen with Huatai Securities. Please go ahead.

Hello, management. Thank you for the opportunity to ask questions. This is Yuxuan Chen with Huatai Securities. I have two questions. The first is regarding your risk management strategy considering your stable delinquency rate. Can you provide insight into your risk management strategies and how they have evolved in maintaining this stability? Additionally, do you anticipate your risk profile will stay stable as we move into Q4 and 2024? My second question relates to your expenses. We have noticed a consistent decline in operating expenses as a percentage of revenue over the past year. Is this attributable to your cost control measures, efficiency improvements, or a combination of both? Should we expect this trend to continue in Q4 and 2024? Thank you.

Hello, Mr. Chen. This is Xu Yifang, and I will respond to your first question. You mentioned our strategies and stability, which are the goals and results of our risk management efforts. We approach this in several ways. Firstly, we focus on market development trends, particularly the overall income to debt ratio of our borrower group, their debt situation, and the willingness and activity in credit applications. Secondly, as our borrower group grows rapidly, it's crucial to speed up our monitoring processes and update our models and strategies, as their interrelation is significant. Thirdly, we believe risk management should not only occur at the decision-making stage but also strengthen management and operations across the entire lifecycle of our borrowers from a risk perspective. This approach has led to improvements in our risk indicators. After the loan facilitation process, we aim to tailor our strategies to enhance the experience of our high-quality borrowers, which will improve their retention and loyalty, further benefiting our risk indicators. For the fourth quarter of this year and throughout 2024, we aim to maintain and further optimize our risk management strategies, which is crucial for our team. These are some insights into our risk management efforts, and I'm happy to answer any other questions you may have.

Okay. Your second question is about our expenses. From the first quarter to the third quarter of this year, the proportion of our general and administrative expenses, sales and marketing expenses, and research and development expenses in relation to revenue has consistently decreased. In the third quarter, these proportions were reduced to 3.6% for general and administrative expenses, 4.8% for research and development expenses, and 27.8% for sales and marketing expenses. The main reasons for this decline are two-fold. First, there is a scale effect resulting from the growth in facilitation volume and revenue, where fixed costs remain relatively stable and variable costs are becoming more efficient. When compared to other expenses, the growth percentage of these expenses is much lower than the growth in revenue. Second, we have seen efficiency improvements from implementing AI technology and refining our operations. In the short to medium term, aligned with our strategy of pursuing high-quality growth and smart operations, we expect our proportion of general and administrative and sales and marketing expenses to remain relatively stable. We will also continue to increase our investment in research and development and enhance the application of AI technology across various business processes. As Mr. Yan mentioned, our company is now officially named Jiayin Technology, and we will continue to strengthen our technology focus. Through refined operations, we are confident in sustaining our non-profit margin at a sustainable and healthy level. Additionally, as Mr. Yan stated, our second dividend distribution plan is nearing completion, and we are optimistic about providing more returns to our investors in the future.

So Yuxuan, hope those will answer your question.

Jiayin Technology has been officially named, and we will continue to enhance our technological capabilities. Through improved operations, we are very confident in maintaining our non-profit margin at a sustainable and healthy level. Additionally, as Mr. Yan mentioned, our second dividend distribution plan is nearly finalized, and we are optimistic about delivering more returns to our investors in the future.

Thank you.

We've reached the end of the call. I will return the call back to Shawn for closing remarks. Please go ahead.

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

That does conclude our conference for today. Thank you for participating. You may now disconnect.