Good day, ladies and gentlemen, thank you for standing by and welcome to the Jiayin Group's Third Quarter 2024 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 Investor Relations of Jiayin Group. Please proceed.

Thank you, operator. 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 2024. We released our earnings result 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 Security 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 corresponding English translations. Please go ahead. Mr. Yan.

Hello everyone. Thank you for joining Jiayin Group's third quarter 2024 earnings conference call. In the third quarter, China's economic fundamentals were at a critical stage of adjustment with several macroeconomic indicators showing positive changes. From the demand perspective, total retail sales of consumer goods increased 3.2% year-over-year in September, an improvement of 1.1% compared with August, reflecting marginal improvement. In the third quarter, we took a more proactive approach to driving growth, increasing investment in operations and borrower acquisition. We successfully achieved our established goals with a loan facilitation volume of approximately RMB26.7 billion, setting a new record. Correspondingly, revenue from loan facilitation services reached around RMB1.1 billion, representing a year-over-year growth of 18.1%, with our core business continuing to maintain steady growth. In terms of technology empowerment, we have continued to refine our technologies and optimize our services. In the third quarter, we further deepened the application of large language models and focused on strengthening the construction of our central data platform. This endeavor aims to fully enable intelligent operations while continuously improving work efficiencies and customer service experience. We successfully upgraded the Wenquxing knowledge base, launching a knowledge-driven operational model. We also introduced our self-developed MingYi automated machine learning platform, which significantly enhanced modeling efficiency in credit risk management and marketing scenarios. It has been nearly a year since Jiayin Group's rebranding and the technology aspect has now become the company's most distinctive attribute. Looking ahead, we will continue to leverage technological innovation as the driving force for our growth, deepening and expanding the application of technology to fully advance the company's digital and intelligent transformation. Regarding institutional partnerships, the company has been expanding its cooperation boundaries and actively exploring diverse and innovative collaboration models. By leveraging a high-quality and sustainable network of financial institutions, we are achieving more stable growth. As of September 30, we had established partnerships with 70 diverse financial institutions, building on the successful implementation of joint operation projects. In the second quarter, we collaborated with leading Internet platforms to successfully launch borrower acquisition channels for multiple niche products. In the third quarter, we also actively advanced the implementation of joint projects with two financial institution partners and two more are currently in discussion. By actively exploring and collaboratively developing innovative services, we look forward to achieving win-win outcomes and growing together with high-quality partners in the future. In response to the diverse credit demands arising from various consumption scenarios, we have adopted a more proactive approach in our business deployment and operational strategies. As part of that effort, we have significantly increased investment in acquiring new borrowers. On the one hand, we have focused on optimizing extensive operating borrower acquisition models in vertical domains, enhancing in-house acquisition capabilities and prioritizing user retention and long-term operational outcomes. On the other hand, we have collaborated with leading platforms in online streaming, e-commerce, and lifestyle services to explore different types of acquisition channels, uncover potential needs, and obtain differentiated supplements to our existing borrower base. In the third quarter, we obtained 826,000 new borrowers, representing a year-over-year growth of approximately 71.3%. These sustained efforts in borrower acquisition have yielded notable results. Thanks to our process and flexible risk management strategies as well as the continuous iteration of our risk control models, our asset quality improved steadily in the third quarter. The 61 days to 90 days delinquency rate was 0.55%, representing a downward trend for two consecutive quarters. Facing a large number of new borrowers, our strategies and models have played an active role across all stages from the pre-screening of borrower acquisition channels through the RTA model to risk management in credit applications and approval limits. We remain committed to a prudent operational approach, balancing growth in both quantity and quality. In addition, we fully upgraded our intelligent model architecture and continuously introduced richer data samples for model training. Through our self-developed LingXi AI engine and FuXi model platform, we significantly improved modeling and deployment efficiency. From the perspective of overseas markets, the demand for loan facilitation services continues to increase, with the number of new users for Jiayin's overseas business growing rapidly. In Indonesia, the quarterly loan disbursement, the quarterly loan origination volume, and new registered users for our local business partners further increased compared with the second quarter. Despite intense competition in the Indonesian market, leading participants dominate significant market share through their financial strength, technical support, and brand influence. However, overall market demand remains strong, especially among underserved populations, presenting vast opportunities for business groups. In Mexico, we have observed that local regulations regarding the listing of financial apps are becoming increasingly strict. We believe that a normalized and mature regulatory environment will benefit the industry by promoting greater compliance and sustainable development. Additionally, to better optimize our overseas business layout and focus resources on deepening and developing core markets, we strategically adjusted our business in the Nigerian market during the third quarter. Looking ahead, we are committed to providing even more exceptional services to our overseas clients. In late September, a series of proactive monetary policies and innovative tools introduced by the Chinese government boosted market confidence and expectations. Compared with previous quarters, we are more optimistic about future development. We anticipate that the loan facilitation volume in the fourth quarter will be no less than RMB25 billion, and we are confident in achieving our annual target. Additionally, to better coordinate company operations and manage cash flow, the Board of Directors approved a revision to the dividend policy, adjusting the distribution frequency. Under the revised policy, starting in the year of 2025, the company plans to declare and distribute cash dividends once per fiscal year, with the total amount being no less than 15% of the previous fiscal year's net profit after tax. Further details regarding the dividend distribution will be provided in upcoming disclosures. With that, I will now turn the call over to Mr. Fan Chunlin for financial remarks of the quarter. Please go ahead.

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. Echoing Mr. Yan's remarks, despite the significant impact of ongoing macroeconomic shifts, we have constantly met the performance benchmarks we aimed for. Notably, our loan facilitation volume reached RMB26.7 billion in the third quarter, a 10.3% increase compared with the same period last year. Our net revenue was RMB1,444.9 million, representing a decrease of 1.5% from the same period in 2023. Moving on to costs, facilitation and servicing expenses were RMB419.1 million, compared with RMB544.3 million for the same period in 2023. This was primarily due to decreased expenses related to financial guarantee services, which was partially offset by increased loan facilitation volume. Allowance for uncollectible receivables, contract assets, loans receivable, and others was RMB11.6 million, representing an increase of 36.5% from the same period in 2023, primarily due to increased balances of receivables arising from loan facilitation. Sales and marketing expenses amounted to RMB550.3 million, representing an increase of 34.9% from the same period in 2023, primarily due to an increase in borrower acquisition expenses. G&A expense was RMB56.1 million, representing an increase of 5.5% from the same period in 2023, primarily driven by an increase in expenditures for employee compensation and related benefits. R&D expenses reached RMB95.9 million, representing an increase of 36% from the same period in 2023, primarily driven by an increase in expenditures for employee compensation and related benefits. Consequently, our net income for the third quarter was RMB269.6 million, representing a decrease of 16.8% from RMB323.9 million in the same period in 2023. Our basic and diluted net income per share were both RMB1.27 compared with RMB1.51 in the third quarter of 2023. Basic and diluted net income per ADS were both RMB5.08 compared with RMB6.04 in the third quarter of 2023. As of September 30, 2024, our cash and cash equivalents were RMB741.2 million compared with RMB880.2 million as of June 30, 2024. With that, we can open the call for questions. Ms. Xu, our Chief Risk Officer, and I will answer your questions.

We'll now take our first question. Your question is from Yuxuan Chen from Huatai Securities. Please go ahead.

Okay. Let me translate. I have two questions. First, I've noticed that net revenue for this quarter decreased by 1.5% and net profit dropped by 16.8% year-over-year. Could management explain the underlying reasons related to the company's revenue structure and the competitive cost? Also, can you provide a forecast for the future trend of the company's profit margin? My second question is about the company's loan facilitation volume for the third quarter, which was RMB26.7 billion, showing growth both quarter-over-quarter and year-over-year. Looking forward to the next few quarters, does management expect this growth rate to continue or is there a possibility for further acceleration? Thank you.

Okay. I will answer your first question. In this quarter, the facilitation volume reached RMB26.7 billion, reflecting a year-over-year increase of 10.3% and a quarter-over-quarter increase of 11.25%. Our loan facilitation service volume also hit RMB1.105 billion in the third quarter, setting a new quarterly record with an 18.1% year-over-year increase and more than 16% quarter-over-quarter. For guarantee service-related revenue, which has a lower profit margin, we have been gradually reducing this type of revenue's proportion recently. This quarter, guarantee-related revenue was RMB252 million, down by RMB146 million compared to RMB398 million in the same period last year. We anticipate a further decline in this revenue proportion in the fourth quarter. From the perspective of service revenue types, the proportion of loan facilitation services revenue in total revenue rose from 56.3% in the first quarter to about 76% in the third quarter. Conversely, the share of guarantee service-related revenue decreased from around 35% in the first quarter to approximately 17% in the third quarter. This revenue structure aligns with our strategic expectations for high-quality growth. Regarding the decline in our net profit year-over-year, our net profit fell from RMB324 million last year to RMB270 million in the third quarter, a drop of RMB54 million. The Q3 net profit margin was 18.7%, down from the same period last year but showing a quarter-over-quarter increase of 13.2%. The primary reason for this shift is our strategy of pursuing high-quality growth and increased costs. Specifically, borrower acquisition and credit costs rose significantly compared to last year, with borrower acquisition costs alone climbing by over RMB100 million. The proportion of new borrowers in Q3 reached 32.2%. The company will continue to work on enhancing the conversion and retention rates of high-quality borrowers while exploring user value. This investment will bolster our future performance growth and contribute to the long-term sustainable development of the business. Also, concerning our strategic investment in R&D, our R&D expenses rose by over 36% year-over-year as we launch new systems and applications to implement AI technology in our business scenarios and enhance efficiency through intelligent operations. Concerning your last question about our expectations for the net profit margin, in the first three quarters of 2024, the net profit margins were 18.5%, 16.1%, and 18.7% for the most recent quarter, respectively. Going forward, as guarantee-related service revenue, which has suppressed profit margins, continues to decline, and as our earlier investment in new borrower acquisition improves retention and conversion, contributing to mid- and long-term growth, we believe that our economies of scale and operational efficiency will further improve, leading to better profit margins.

Okay. Yuxuan, I will address your second question. Generally, we are very confident in the market's growth potential and the development of our platform business. When discussing the potential for growth acceleration, it’s important to acknowledge that the credit business is influenced by both economic and seasonal cycles. Moving forward, we will carefully assess our operational pace in light of broader macroeconomic trends, the demand for credit from borrowers, and our risk outlook. Internally, considering our team's proven abilities in business and risk measurement, their sensitivity to market dynamics, and the overall market outlook shared earlier by Mr. Yan, we are confident that in the upcoming quarters and into 2025, we can maintain a strong growth trajectory. This will enable us to provide even better long-term returns for our investors and exceed expectations in the future. That will be my response to your second question.

Okay. Operator, I think we can take the next question.

Thank you. Your next question is from the line of Hua Rong from Jinyu Asset. Please go ahead.

Hello, management. I have two questions. First, I noticed that the accounts receivable balance at the end of Q3 exceeded RMB2.8 billion, which is an increase of nearly RMB400 million compared to the end of Q2. Could you provide more information regarding this significant increase in accounts receivable for Q3 and the status of its recovery? My second question is that we also observed a 10.3% year-on-year increase in revenue from loan facilitation services during the period, but the average borrowing amount per transaction decreased by 30.5% year-on-year. What is the main reason for this? Does it indicate that users are currently preferring smaller loan amounts? Thank you.

I will answer your first question. The increase in our accounts receivable balance at the end of the third quarter compared to the previous quarter is mainly due to the growth in our facilitation volume and corresponding revenue during this period. Our loan facilitation service revenue reached RMB1.105 billion, which is a new quarterly record. This revenue has increased by over 16% compared to the last quarter, aligning with the growth of our accounts receivable balance and the company's collection efforts. That gives you an understanding of our accounts receivable position. Additionally, we acknowledge that for a company like ours, with an asset-light business model, the proportion of accounts receivable to our total assets has surpassed 50%. We will continue to closely monitor the recovery of our accounts receivable. Historically, our collections have been in strong condition, and going forward, we will enhance our control processes to further improve the company's cash flow.

Yes. Regarding your second question about the average borrowing amount for this quarter, you are comparing it to the same quarter last year. If you look at our average borrowing amount each quarter, you will notice a decrease in average amounts over consecutive quarters. The changes in the average borrowing amounts are primarily due to our optimized business strategy and structural shifts prompted by recent developments. First, let’s discuss our existing borrowers. We have consistently focused on retaining high-quality borrowers and enhancing their overall experience. We have improved the convenience of credit line withdrawals to better address their needs, thus reinforcing our relationships with premium borrowers whose credit demands range from large amounts to smaller ones. For new borrowers, we have increased their access to our services, which positions us for future growth. However, this group typically starts with lower initial credit levels. Our ongoing efforts to acquire new borrowers have refreshed our average borrower base, indicating stronger long-term growth potential. When you combine these perspectives, you will see that our efforts have resulted in an increase in the overall borrower base utilizing credit, alongside a decline in the average borrowing amount. This concludes our response to your question about the average borrowing amount. Thank you.

Okay. Thank you. Thank you, operator.

Thank you. There are no further questions on the line, so I will hand back to the speakers.

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. Thank you.

Thank you all again. This concludes the call. You may now disconnect.