Jiayin Group Q1 2023 Earnings Call Transcript

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Provided by Quartr
June 8, 2023

There are 5 speakers on the call.

Operator

Good day, ladies and gentlemen. Thank you for standing by, and 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.

Operator

If you have any objections, you may disconnect at this time. I'll now turn the call over to Mr. Sean Zhang from Investor Relations of Jiayin Group. Please proceed.

Speaker 1

Thank you, operator. Good day, everyone, and welcome to Jiayin Group's 2023 Q1 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.

Speaker 1

Yanding Gui, Chief Executive Officer Mr. Fan Chun Lin, Chief Financial Officer and Ms. Shuyifang, 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.

Speaker 1

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 public filings with the SEC. The company does not assume any obligation to update any forward looking statement, except as required under applicable law.

Speaker 1

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 Dingwei. Mr.

Speaker 1

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 Q1 2023 earnings conference call.

Speaker 1

I am delighted to share with you today the exceptional performance of Jiayin in the Q1 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 remain strong, maintain our robust growth trajectory.

Speaker 1

Looking at the Q1 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 Q4 of last year, marking an encouraging beginning to China's macro recovery in 2023. Particularly, consumption contributed to 66.6 percent 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 Q1 revealed a cumulative increase in the scope of social financing of RMB14.53 trillion, an increase of RMB2.47 trillion from the same period last year.

Speaker 1

Industry experts attribute this to the efforts of policies aimed at the stabilizing growth and promoting development, which have significantly boosted market confidence, accelerate the recovery of effective financing demand and solidify 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 the ample credit lines provided by our partners form the backlog of our rapid loan volume growth. Furthermore, a majority of our funding are not restricted by geographic regions.

Speaker 1

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 costs for the loans we 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.

Speaker 1

We are leveraging our technological progress to empower our partners, aiding them in their digital transformation. By the end of the Q1, we have assisted 5 financial institutions in digitizing their in house operations and are currently interfacing with another 3. We are also in active discussion with 5 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.

Speaker 1

We added nearly 500,000 new borrowers in the first quarter, representing a year over year increase of

Speaker 2

approximately 96.4%.

Speaker 1

At the same time, we have maintained a stable proportion of repeat borrowers at 67.8 percent with the average borrowing amount reaching RMB 9,913, 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.

Speaker 1

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 borrowers stratification process, striking a balance between asset growth and quality improvement. This approach is designed to foster a virtuous cycle of enhanced asset quality, reduce funding costs and improve borrower quality.

Speaker 1

Turning to our international business, We have been vigilantly observing and adapting to the evolving dynamics in the Nigerian and Indonesian markets. The Nigerian market encountered some risk fluctuations in the Q1. These fluctuations serve 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 Q1, our Nigerian operations had achieved a substantial scale, thereby solidifying the foundation of our future expansion objectives in the African market.

Speaker 1

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 the regulatory front, the China Internet Finance Association is presently spearheading the creation of the risk control guidance for loan collection of personal online consumer credit in Internet Finance, also known as the National Collection Standards.

Speaker 1

We view post loan services as a crucial component of the comprehensive loan facilitation service cycle. And 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 or called in Chinese, we have proactively engaged with credit institutions to establish collaborative plans and have successfully completed all necessary technical and system preparation.

Speaker 1

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 front runner in the FinTech industry, Jiaying 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 foster the growth of inclusive finance. In conclusion, the Q1 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.

Speaker 1

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 1,000,000,000 to RMB24 1,000,000,000 for the Q2 of 2023. With that, I will now turn the call over to our CFO, Mr. Fan Chun Lin. Please go ahead.

Speaker 2

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 our percentage changes refer to year over year comparisons unless otherwise noted. As Mr.

Speaker 2

Yan mentioned, we delivered exceptional results in the Q1. Our loan origination volume surged 142.9 percent to RMB19.8 billion, exceeding our forecast made last quarter. Our net revenue was RMB1.12 billion, up 119.5 percent, driven by a 94.1% increase in our revenue from loan facilitation services. Other revenue grew significantly to RMB 255,700,000 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.

Speaker 2

Origination and the servicing expenses were CNY274.2 million, up 193.6 percent, driven by the increased loan origination volume and post loan services related expenses. Allowance for receivables and the country assets grew by 67.5% to RMB 6,700,000, primarily due to the increased loan volume from overseas markets. Sales and marketing expenses increased by 155.9 percent to RMB380.8 million mainly reflecting an increase in borrower acquisition expenses and commission fees for partnership referrals. As a percentage of net revenue, S and M 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. G and A expenses were RMB 46,400,000 up 14%, primarily driven by higher staff costs in the quarter.

Speaker 2

As a percentage of net revenue, G and A expenses reduced to 4.1% from 8% in the same period last year. R and D expenses were RMB 64,800,000, up 55% from RMB41.8 million, mainly due to increased employee compensation benefits expenses and professional service fees. As a percentage of net revenue, R and D 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 Q1 increased by 93.4 percent to RMB279.7 million from RMB144.6 million in the same period last year.

Speaker 2

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 ADS were both RMB5.23 compared to RMB2.68 in the same period last year. We ended this quarter with RMB 340,600,000 in cash and cash equivalents, up from RMB 291,000,000 as of December 31, 2022. As of March 31, 2023, we have bought back approximately $1,500,000 of our ADSs for $3,500,000 on our $10,000,000 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.

Speaker 2

The extension will be commenced on June 13, 2023 and ending 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. Operator, please proceed.

Operator

Thank questions from the line of Banting Chen from 10 Asset. Please proceed.

Speaker 3

Let me do the translate first. Hi, management team. Congratulations on the 3rd strong results. This is Martin from Ten Asset. I have two questions.

Speaker 3

The first one is regarding the guidance. The loan volume guidance in the 2nd quarter is about RMB 23,000,000,000 combined with RMB 20,000,000,000 in the 1st quarter, account around 60% of RMB 70,000,000,000 for the full year guidance. Does this imply that the volume in the second half of the year will slow down compared to the first half?

Speaker 1

Okay. This is Sean from the IR team of Jiaying Group and I will do the corresponding translation for Ms. Xu. So thank you for your question. And so generally, we believe that the loan volume we facilitate in the second half of twenty twenty three will not be simply limited by the whole year guidance we just expressed before.

Speaker 1

As you have mentioned that we maintain our whole year guidance as the same without any change, but we are very confident to complete the guidance in this year. We know that there are probably going to be some risk fluctuations during the year, but we still see generally the economic environment is

Speaker 2

stable. So I think

Speaker 1

the volume would mainly depends on 2 things. So firstly, it will depend on the total funding supply from our partners. And secondly, it will depend on the requirement we have on the asset and our goal to strike a balance between risk metrics and our sustainable growth in the second half year.

Speaker 3

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 return these borrowers in the future?

Speaker 1

Okay. So to reach the better quality borrowers are one of the strategic goal of Giant Group from when we finished our business transformation that our funding sources just changed from a former individual funding sources to the financial institutions. So, high quality borrowers is also a requirement from our funding partners. So in brief, high quality we call represents the borrowers with better credit standing. We may find many similarity among those borrowers such as they are younger in their age, they may care more about their credit standing and they have rational use of the loan, etcetera.

Speaker 1

Those characteristics made them without over borrowing from too many sources and at a better personal balance sheet position. So, to reach those more high quality borrowers we just mentioned, we are now selectively choosing borrower acquisition channels just like other platforms And we are providing more competitive products to those high quality borrowers when they need and focusing on the borrowers with good credit who may grew up with us in the long run. Jiayin is a platform who has the business for over 10 years. And so we are also trying to attract those borrowers through our service during the launch, such as providing them with better products and lower rates. Thank you.

Operator

Thank you for the questions. One moment for the next question. Next question, we have the line from Lin Yao from Huafu Securities. Please proceed.

Speaker 4

And then we'll do the translation for myself. I'm Lin Yao from Huazhu Securities. My first question is about the sales and marketing expense. Can you share some details on your sales and marketing expense increase in this quarter?

Speaker 2

Thanks.

Speaker 1

So the sales and marketing expenses in the Q1 of 2023 reached RMB380 1,000,000 with a year over year increase of more than 150%. And it's also a slight increase from the previous quarter. The S and M expenses mainly include borrower acquisition expenses, employees, compensations and other related expenses. So the main reason for the substantial year over year increase was the increase in our the volume of loan we just facilitated.

Speaker 2

Okay.

Speaker 1

So after we just transform our business model from I mean the funding sources from the individuals to the our funding partners from institutions, so in line with the company's strategy on the rapid growth, we have adopted a very active our acquisition strategy and spending more on the acquisition process to ensure that we can achieve those high quality assets efficiently. So the proportion of new borrowers of our platform has remained higher and we plan to increase our spending on the high quality borrowers acquisition channels to ensure the LTV of our borrowers and to continuously optimize our borrower base where our business is developing rapidly. Okay. So from the perspective of our operation and finance, we will also carry out a top level planning on the ratio of SM and M expenses to our revenue and also some budget control to ensure the accuracy and effectiveness of our sales and marketing. In the Q1 of 2023, you can see our the S and M expenses accounted for above 33.9% of our revenue.

Speaker 1

It's basically at the same level as 33.1% in the whole fiscal year of 2022. And if you compare it with the 35.5% in the Q4 of 20 22. You can also see a slightly down. Okay. So just because we have a strong control and process on our sales and marketing, we are keeping our development at a very high quality and we are confident that we will develop at a very sustainable way in the future as well.

Speaker 4

Again, we'll do the translation for myself and for your answer. My second question is about account receivable. Notice the accounts receivable is on for large proportion of the total assets in the company right now and there is also an increase of about CNY 2,000,000 compared to the end of 2022. Can you please land the main reason?

Speaker 1

Okay. So you're right, Mr. Lin. At the end of the Q1 of 2023, the company's balance of account receivable was RMB 1,930,000,000, which accounted for about 45 of our total assets. And you can see it has been steadily increasing at the end of each quarter.

Speaker 1

Okay. So the vast majority of accounts receivable we have are acquisition and risk control service fees for our loan facilitation services. So under the currently accounting principles, at the same time as the loan is issued, the rights and obligations under our facilitation services have been fully met. So the corresponding accounts receivable and income are recognized immediately when the loan is issued to the borrower. And you can see that as our loan facilitation volume continues to increase and projects we recently signed will be usually collected within 12 months during the whole long term.

Speaker 1

So you may observe that our balance of receivables also continue to increase. So under our currently business model, as our volume the volume we facilitate continues to increase, the absolute value of our AR balance would surely increase accordingly. I want to mention that the collection of our account receivable is very good. And after our we just completed the transformation from personal funds to institutional funds in 2022, there have been almost no bad debts in the domestic loan facilitation business and no bad debt loss has been accrued so far either. And our management team and our auditors will pay very close attention to the recovery of account receivable.

Speaker 1

So generally speaking, the company's profitability is satisfying and our balance sheet also continues to improve. It has laid a very solid foundation for the healthy development of our business in the future.

Operator

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

Speaker 1

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.

Operator

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

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Earnings Conference Call
Jiayin Group Q1 2023
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