Earnings Call Transcript - JFIN Q3 2021

Operator, Operator

Good day ladies and gentlemen. Thank you for standing by and welcome to the Jiayin Group’s Third Quarter of twenty twenty one 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. I will now turn the call over to Ms. Susie Wang, Director of The Blueshirt Group, Asia. Ms. Wang, please proceed.

Susie Wang, Director

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 twenty twenty one. We released the results earlier today and 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. Xu Yifang, Chief Risk Officer; and Ms. Jin Chen, Co-Chief Financial 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. Private Securities Litigation Reform Act of nineteen ninety five. Forward-looking statements involve inherent risks and uncertainties; as such, the company’s actual results may be materially different from 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 statement 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, Yan Dinggui. Go ahead Mr. Yan.

Yan Dinggui, CEO

Hello everyone. Thank you for joining our third quarter twenty twenty one earnings conference call. We delivered another outstanding quarter with impressive financial results, reflecting the success of our growth strategies execution. As we continued to diversify our funding resources and broaden our collaborations with institutional partners, our loan origination volume has doubled from last year to surpass U.S. Dollar 1 billion, with a forty-three point eight percent increase in our net revenue. We believe we are on the right track for our next stage of growth, leveraged by our continuous efforts in expanding our funding resources while maintaining risk management excellence. In quarter three, our funding partners increased to thirty-six, with another forty-two institutions in discussion. We are confident we will have continued top line growth and will capture massive opportunities in the growing consumer market. In this quarter, we resumed our marketing program and have begun acquiring new customers at a more accelerated pace that is focused on higher credit quality customers. We have maintained delinquency rates by sustaining rapid portfolio growth. We started the loan program for small business owners. Small businesses are the backbone of our country’s economic development and a common prosperity initiative that allows access to growth presents a great opportunity for us. However, we are very cautious about what we are offering, considering the use of low interest rates and repayment capabilities. We are gradually rolling out this program and will gather more data to develop differential risk underwriting criteria to ensure our loans are for borrowers of quality and good credit. Today, a large portion of our loan volume continues to go to our existing borrowers with higher quality, with our repeat borrowing rate for this quarter at sixty-nine point one percent. We believe serving higher quality borrowers will improve our credit risk profile and ensure excellent quality. We remain dedicated to maintaining credit quality with our improved credit scoring system and advanced technology capabilities. Last, I want to mention our efforts in corporate social responsibility, or CSR, which is one of the most important aspects of our corporate culture. Since Jiayin was founded, we have been dedicated to creating value for society, adhering to the charitable spirit of helping others to help yourself. One of our many initiatives is the schools program designed to provide better school environments for children in need. So far, Jiayin has made donations to forty schools across the country, including donations of school supplies, books, cash awards, and more. In addition to the aforementioned initiatives, we are actively engaging in various events to improve people's lives and contribute to better health. We remain committed to launching more initiatives and continuously promoting CSR awareness by participating in a wider variety of social and public events. In conclusion, we achieved yet another solid quarter with impressive financial growth. We will continue to advance our technological capabilities and solidify our operations in China and overseas markets while working with our institutional partners to further explore opportunities that will enable us to diversify our business model. We are confident in maintaining momentum in the quarter ahead and resuming robust, consistent, long-term growth.

Jin Chen, Co-CFO

Thank you, Mr. Yan, and thank you everyone for joining our call today. As Mr. Yan mentioned, we ended another great quarter on a strong note. Total loan origination volume maintained a strong growth trajectory, reaching six point seven billion RMB, representing an increase of one hundred point two percent year over year and seventeen point seven percent sequentially. Net income came in at one hundred and twenty-four point eight million RMB, a forty-one point two percent year over year increase compared to eighty-eight point four million RMB in the same period last year. With the clearance of P2P balance and the diverse financial institutional partners, we are able to continue our upward trend in this quarter, and we are confident to resume high-quality growth in the years ahead. Now, let me go through our financial highlights for the quarter. Please note that unless stated otherwise, all numbers quoted are in RMB, and changes refer to year-over-year comparisons. Net revenue was RMB five hundred seventy-seven point one million, up forty-three point eight percent. Revenue growth was primarily driven by the significant growth in loan origination volumes, which increased one hundred point two percent. Other revenue was RMB forty point three million, down forty-seven point seven percent. This decrease was primarily due to reduced revenue from P2P related services as the company no longer supports a legacy P2P lending business, partially offset by the sales of hardware by Shanghai Bweenet since the integration in May. Moving on to costs, we have stepped up overall spending on customer acquisition since last quarter. In the third quarter, our total operating costs and expenses increased sixty-eight point four percent year over year, reaching four hundred and twenty-three point two million RMB. The increase was aligned with our top line growth, as well as the significant increase in spending on sales and marketing as we began to attract new customers at a more accelerated pace. Total operating costs and expenses as a percentage of revenue was seventy-three point three percent versus sixty-two point six percent in the same period last year. Our origination and servicing expenses were eighty-eight point three million RMB, up forty-eight point four percent, primarily due to the increase in credit assessment expense resulting from a higher loan origination volume. We incurred costs of sales compared with nil from the same period of twenty twenty. The increase was primarily due to the cost of hardware sold by Bweenet. Allowance for uncollectible receivables, contracted assets, loans receivables, and others were RMB six point two million, down sixty point eight percent from the same period of twenty twenty. The decrease was primarily due to the decrease in estimated bad debt under the current business model since we no longer support the legacy P2P lending business. G and A expenses were forty-five point three million RMB, up twenty-one point four percent, primarily due to increased expenditures in employee benefits and professional service fees. R and D expenses were thirty-seven point one million RMB, down four point five percent. This was primarily due to the increased utilization and productivity of our facility and our employees allocated to the research and development department, which has been partially offset by the increase in professional services expenses as the company continues to enhance research and development capabilities. Sales and marketing expenses were RMB two hundred and thirty-six point nine million, up one hundred and thirty-eight point one percent, primarily due to our new online advertising and marketing strategy, which has resulted in higher customer acquisition expenses. As we intend to continuously grow our origination volumes, we began attracting new customers at a more accelerated pace with our superior marketing algorithm, converting them into our loyal customer base. We achieved another objective of profitability through our loan volume growth with a net income of one hundred and twenty-four point eight million RMB, up forty-one point two percent year over year. We ended this quarter with one hundred and seventy-eight point five million RMB in cash and cash equivalents, compared with one hundred and forty-one point four million RMB as of June thirty, twenty twenty one. Our improved cash position gives us greater flexibility while enabling us to invest in initiatives that will drive long-term growth. Moving to our guidance. Due to the slower than expected growth from our loan origination volume, our full-year twenty twenty one loan origination volume is being revised downwards to between twenty billion RMB to twenty-three billion RMB, representing seventy-two percent to ninety-eight percent year over year growth. As we follow our long-term growth objectives, we are still confident in our business model and our ability to bounce back strongly. With that, we can open the call for questions. Mr. Yan, our Chief Risk Officer, Mr. Xu, and I will answer questions.

Operator, Operator

Your first question comes from the line of Andrew Scott, ROTH Capital Partners. Please ask your questions.