Q1 2020 Earnings Call

Good morning annually and welcome to the Serums filings first quarter 2020, <unk> financial results conference call and work.

All participants will be in listen only mode.

Sure sure need assistance. Please go we're talking specialists are pressing the star acute followed by zero.

After todays presentation, there will be an opportunity to ask questions.

No this is being recorded.

I would now like turn the conference over to Simon. Please go ahead.

Thank you good morning, and everything and welcome to the C. N finance first called her 2025 National resort.

Lets call it.

Today's call or the old Mr. dry well walk us through operating resolved all by financial results from our CFO Mr. Li.

After that we will happen in Q1 section.

Before we start it I would like to remind you that this conference call contain forward looking statement with the meaning of section 21 eat up the security check 1974.

And have defining U.S. private Securities Litigation Reform Act of 90 95.

Forward looking statements can be identified by terminology, such as well expect anticipate future intends plans believes estimates targets going forward outlook and see minister.

Such statements are based how about manage managements current expectations at current market at opening an opening operating conditions and related to event that involve known and unknown right.

Oh certainties and other factor.

All of which are difficult to predict and many of wage beyond the company's control, which may cause companies actual results performance.

Our achievements to differ materially to differ materially from though in a forward looking statement.

Further information regarding these an order with certainty of factor is included income this filing with the U.S. security checks Commission.

The company does not undertake any obligation to update any forward looking statements such estimates that the result of new information.

She was very bad or otherwise, except as required on the law.

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Thank you. Thank you all dried held for sale.

We don't like to report on a business operation and develop and the financial result in the first quarter of 2020.

I will talk more about the impact.

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The challenges and potential alternative opportunities the part that later I with CF. All were also all your question.

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With a cut it.

[noise] impact why the core why lighting product that dynamic.

Our operating revenue of 490 me on that and then be for the fourth call Girls 2020.

Adapting our proto approach that dynamics might drive up the five off the delinquent loan NPL.

Pardon me if you ask act, we recorded provision for quite a lot of 220 that many of them in be.

As a result, we recorded a net loss of 66 million in be joining the call.

It is worth noticing that the new compression model, what's region has reached a more mutual stage after being 540 year.

During the quarter or law origination volume raised 1.17, the whatever it might be.

Representing an increase of 17% compared to the Sun care, but I'm not talking I think.

The number off the effective cells partnered reached 742.

Representing an increase of 148%.

Compared with seven care about 400 talking lighting.

Same time trying to outbreak I'll, just put that make our asset backed operating long business. That's wrong strong kind of anything to read this to me.

Even though the total loan origination in this quarter was shot of our target set at the beginning of the.

The first quarter performance in law or as a nation, although at a pandemic is testament to the facility and the vantage all our products as well after the new business model.

These rigs out it's also in line with our universe strategy, all being aggressive in business and the conservative accounting.

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Now I'd like to discuss the impact off the pandemic along with a mattress taken by the company to deal with South impact.

Also I will address the opportunity and that the Dabic may present.

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The impact of a dynamic on the company's speeds in our truthful.

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Aren't all good problem back on a year, where they are showing.

Yeah.

First party.

The pandemic Iraqi impact amount a flaw originated.

Phasing decide to an outbreak off them at that make enterprise cross trying to quickly responded to the government's call off extending the that's playing basketball holiday and imposing strict control or returning to work.

Most business, what's hampering shutdown during the quarter.

I'm not the owner we're also our Umang Costamare has sought why I really imitate demands for captisol because their operations without it.

Governments locked on policy has also made it impossible for our employees to conduct all five due diligence.

That's a result, we proactively.

Imposed more stringent risk control Mastercard das.

The next if the impact of impact our business lawn and efficient.

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[noise] secondly epidemic also lead to an increase in delinquency rate.

So their operations, while health it all borrows experienced significant income dropped which lead to liquidity probably sauteing [laughter].

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Collections activity, our oppose long management cannot operate at full capacity.

M.P.L. difficulties cannibalization time, it's also a pull all due to the locked on national wild, including longing for enforcement Hopper with it.

All of those has contributed to a higher delinquency rate at NPL rate in the first quarter.

Yes, all there so quickly respond to drop off mentioned a sudden changes in the marketplace at impact out of business.

The company actively initiate communications with self partner as well as troughs company partners during the Chinese new year to devout exome class.

Consequently, the following modification <unk> employment with improved product trends.

Lawler approval process and post long management.

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Yes, you got what yeah, Josh I'm going to cope with of course home to 500 undergrad consistency.

So yeah, we're now John you hunger.

In terms of affordable design, we have made adjustments based on actual situation. We have for just the qualifications whatever yeah off prospecting for the LTV ratio, that's well after risk assessment procedure accordingly.

We have sat here got lives and encourage employees to maintain communications with our customers So phone calls.

Our ultimate goal was to maximize business turnover I reduced rate drawing to damage.

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Recent ones.

I'll follow that Jim pool, so since you bought back onto that.

Thank you.

Hey, Hey, I'm, absolutely sure that could move <unk> from Jefferies.

In terms of law approval process assessment.

It was almost impossible to conduct Oh, sorry, due diligence joined a country wild locked out.

In order to maintain the efficiency of loan origination.

We decided to take advantage of our risk control system establish over the year and move many of our business procedure online.

Including reviewing the bar as background and the crowd collateral.

At the same <unk> at the same time in order to maintain law qualities. We also adapt a mall fixable LTV policy across different geography to reduce the risk certain stated.

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We also urge all costs Trust company partner to reduce interest rate had a guarantee sufficient faulting.

Turning to pandemic, Maddie and I see on us a facing liquidity problem.

That's important supplement all conclusive financial fifth to support a private to caught me.

We are committed to work together with our Trust company partners.

In serving to financing needs of mass and owners and reduce their financing.

Cost.

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Isn't huge and comp so I'm sure Junkies, Hans you feel pretty I'm sometime this young from <unk>.

We continue to a salary they pull this off nonperforming loans.

Join a called her we received 300 muted I mean be from depots and paid out.

I would recover rates was 106%.

Weeks her on LDL, it's crucial.

So maintained a healthy liquidity of our company and prevent risks from holding npls for a long period of time.

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So that it's almost see what parts of that you then teaching yeah, but do you like.

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Nike.

Yeah, We don't think could you tell me that doesn't move the fine job.

We also believe that challenges are accompanied by opportunities.

And these pandemic no exception.

We believe if the data well bring falling out 10 he.

Sure the company as well has helped the company make future decision.

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Looking quite so comes is going to each of my humble Hi, kids really easily so he can give or take.

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Sure Yeah, we felt that you see don't.

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First the Chinese government the problem at massive scale osprey stuff to contain this but then make.

Or office dented into world.

The government has also real all its policies to stimulate the economy.

We are confident into resist resilience.

Oh for Chinese column economy in all aspects.

Management expect to see the commercial at a product activities will gradually recover in China.

More importantly, we expect real estate price to maintain stable.

Consequently.

As our home packed with him home equity loans.

Oh secured by real estate collateral our business model.

I saw instrument for this.

Even drawing a pandemic, we believe that asset backed nature of our product well also keep the company resistance at least a systematic risk while we continue to scale up into home equity loan business in the future.

Keith what do you feel John Lucey by Chunky some income but.

So anything that you guys for getting up and stuff like that.

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You know Johnson, Michelle this year Uh huh.

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Videos on some accordance with some decent job.

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Hi, John <unk>, She document Eagle Heinz machine, So do you put them all.

For your we showed that junkie could do come back.

Hey shall we kibbutz you can think jockey yet, but you don't.

Secondly, we will focus on reducing funding cost in near future.

During the annual Mtc Kinda CPPCC session.

They console pointed out to help assay games access to capital and to further reduce their funding costs.

Following this got like we will deepen our collaboration with existing Trust company partners, while exploding possibility to set up new forms of collaboration with virus type of financial institution.

Oh, you got effort to reduce our funding costs to provide a more affordable and accessible financial services to match the owner.

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Even though he says hi, most of it means Sheldon good he goes all the new step out drilling.

Your Johnson woman Kinda indefinitely.

Thirdly, absolutely is out of upgrading our business to collaboration model in 2019.

The finance, that's a whole was able to cut that fixed costs, such as employee compensation and office space rental.

New model has also establish a mechanism where the company and itself partner share part of it and better risk together.

Even though were seeing temporary increase delinquency rate, we are able to mitigate a risk and operating smoothly.

Therefore, not a focus of this year, if the increased efficiency ups collaboration model and provide more refined as effective services throughout the sales process.

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Oh, no, let me human but to what I'm teaching.

And then go Sheeple trends will go to be Chung from Jim could you tell me that you'll be sure Pennsylvania.

For John Hi, critical things you could see my opinion.

Falsely these data will also bring consolidation to the home occupancy long industry.

Many smaller competitors in the industry well go out of business in a tough environment.

After leader of the home equity loan industry.

The other part as has the ability to survive the systemic and even emerge stronger.

Our goal is to bite and cherrypick, the codified low facilitators across country to join our platform and then work together with Dan think ways our market share.

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Good morning sponsored by <unk>.

Good evening, John keyboard to put on who said that that complete.

[noise] safely based on a reported by ice financial.

There are approximately 200, starting in May we got a messy onerous in China.

The 2020 report on the work off government has suggest the importance of things access and the future growth of efficacy.

As the business if it does it mean filming with the support of the government.

These large scoop up at all and I see owners will show a surge of demands for working capital.

If we captured this opportunity.

We expect to see a greater growth yeah, one loan origination in near future.

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Thank you Donna Karan's on up and Jim do you guys.

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Well you end up on John.

Lastly, due to our continuous investment and I see subsistence during the past here.

Our self developed all libraries control system enable us to complete most often process online, including credit check race assessment law facilitation out et cetera.

Conducting business online helps offset negative impact brought by depends on mix.

We will continue to leverage science and technology clean power of figures for equity loan business.

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Okay. Thank you ladies.

I will talk.

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Hey, I'm bought itself this year given kinome <unk>.

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Although I didn't know tend to last conference call, but as I mentioned last quarter 20, Twond he will be a year of both challenges and opportunities for field finance.

Through this the dynamic we are now even more confident that a business model upgrade in 29 thing has enabled us to better cope with potential risk as achieved long term sustainable growth.

The next few caught her.

We will hold all general strategy ultra processing business and.

Okay and accounting.

Our task is to capture every option alternative to scale up the business.

Provided that are financial surfaces to that messy honest across country. Thank you.

Now I will let me ask Paul.

Yeah, well against the Jan.

Problem that sample do you think that [noise].

Do you have had to keep it I guess, how youre already aren't linear feet are there I was on top.

Yeah.

Now I would like to hand, the call over to our CFO Ms. truly knitting, who will walk you through the financial result of us off the first quarter of 2020.

[noise] Hello, everyone.

Now I walked you through our first quarter office on 20 financials.

These here or your comparisons she is the best way to review our Afirma is unless otherwise stated old percentage changes I'm going to give furby on that basis.

That's all from March 31st Tucson certainty.

Total outstanding loan principal decreased to 10.8, feeling I M D compared to 11.3 Binney IB as of December 31st 2019.

Total loan origination water them.

Was 1.2 billion R&D compared to one BT R&D you know same theory doctors on 19.

Interest on the financing service fee on loans was 408.

89 million I'd be a decrease of 45%.

Emulate due to a decrease in the total outstanding low amount.

Such that the decrease was the result of a smaller no origination one of them as compared to the amount of loans repaid.

Our collective.

During the same puree downtime.

Due to the fact that most of the economic activities, where how to it because all the Kobe 19 pandemic actually there is a company is for cars to reinsure loan quality over long girls things adoption of the collaboration model.

Interest on the fees expenses decreased by 51%.

To 201, mainly IB.

Compared to 400 or 9 million R&D in the same period of 2019.

Primarily due to a combined combine effect.

Oh, the decrease aegis theory borrowings and so you're sending repayment to trust companies. After probably are made payments for the underlying loans, which resulted in a decrease of idle cash.

Collaboration cost for sales partners increased by 914% to 94 million I'd be compared to 9 million IP in the same period out 2019.

Primarily due to that the better than than all the collaboration model, which was starting to since December.

2018.

Provision for credit losses increased by 27% to 220 million IB from 173 mini IB same period all 2019.

The increase was mainly attributable to a combined effect of.

The impact of.

Neil currently, especially as quietly losses model not taking into account.

Deterioration in the economic awful lot costs by the call the 19th Panic and an increase in the amount of npls, namely the long been delinquent for over 90 days as a result house the efficient legal proceedings and on the call with 19.

Nick.

Total operating expenses decreased by.

27% to my hundred or 1 million in RMB compared to 137, I mean, the R&D in the same period out 2019.

Income tax expenses decreased by.

<unk> hundred 36% to an active.

17 million <unk> from 46 mini I'd be you know same period of 2019, the first quarter of 2020 had losses before income tax off.

82 million, a R&D as compared to income before income tax of 580, why many IB you know same period, all 2019, leading to an effective tax effects.

Not lose this was 66 million IB decreased by 149%.

Net income of 136 million RMB same period out 2019.

As of March 31st 2020.

Comedy had cash cash equivalents off 1.7 billion R&D compared to 1.7 Beanie R&D I saw at December 31st 2019.

So aggregate delinquency rate for loans originated by the company, which he is calculated by the Whiting total balance outstanding loan principal obese and installment payment in years past steel ass off a particular they buy the aggregate total amount of loans, we are treated as things 2014.

Increased from 5.4% as of December 31st 2019% to 7.1% as of March 31st 2020.

The increase in the aggregate delinquency rate was the result of the changing market environment slower girls of outstanding loan principal on the longer collection process.

Ways, I mean, I'll like to open the call for Q1 night.

Thank you.

[noise]. Thank you we will now begin the question answer session.

To ask a question you May proceed star then one already touched on them. So.

If you are usually the speakerphone, please pick up your handset before pressing the key.

So we're trying to your question. Please press Star then too.

We will pause momentarily to assemble our roster.

And our first question today comes from William Gregozeski was Greenridge Greenridge global.

Hi can you disclose the bulls number of transactions in the first quarter and then what the interest you're charging on those new loans was.

Oh pose your services the operator, it looks like southern it looks like one of course, because there's so much of any delbarco. Please standby sir.

Thank you.

[music].

[noise] and services. The operator, we have reached American Speaker Ryan. Please proceed with your question he got Mr., Greg adjusting.

I can you disclose the number of transactions in the first quarter and then what the interest rate here on average are charging on those new loans is.

Sinovel Mel checks all your job bunch it easy there wasn't boiler door LP class I'll now a whole tortured she's on that one finjan are definitely should model.

And when I when I when I had to go in here.

Oh well.

Well then.

To equal Palm pilots I've ever heard outstanding we Ah facilitated around approximately.

2500 loans during the first quarter, Oh, sorry got no only got any got Nick I think Oh gosh, It I'll tell baby.

Yeah, Scott just to make an exact is around 2500 feel that I've got a sharp.

And the loan origination volume is around 1.2 billion RMB.

No not guy that may be that seems like Oh, gosh, that's dramatically, but the average ticket size of point 4 million RMB.

A woman that easy Yauch Union, usually you like C bench, I mean, if I'm kind of Alabama, our average interest rate didn't change a lot comparing to that of last year, even a woman's uniontown to you hit on T. type.

Because we are rolled out some a shorter some some products with shorter tenure.

Sure well than the opinion that I think someone that easy talk guy because I'm just should deal. So on the average annual interest rate how far products. We facilitated this quarter, it's around 19%. He sheen, Yeah, No New York, John D is slightly lower than that of last year.

Nothing much.

Okay.

When do you think all the loans from the old model will be fully off the books.

Nearly two and wash out of type one thought that what youre quite trimble vacancy.

Well, yeah woman the tight quiet.

Sure.

[noise] Banja and the central has.

Furthermore, since you've been around due to two teams.

We have a stopped facilitating alone it's under the old model starting from the third quarter of 2018, I'm not talking you end up volumes.

Neither simple Steven and your thoughts here.

And.

We are expecting that are the loans under the old model to be fully serviced.

Sure I mean by the August 20 funding, especially attack plan.

And then you get back one thing meal. It doesn't mean wasn't all she just like you nearby.

Just to state again.

We'll be until this August that we are hoping all of the longest under the old motto is serviced series UQM Motors, how that you shouldn't either yes, I do nearby so you've got your MACI.

So.

He scenario and is under the old model should be fully serviced.

And this August certainly got a sneak a you put the Chinese militia, you see how mutual and as such a high level or to transition to do that sort of variable I like they're like last year and or the rest.

It would be alongside our delinquent as well as the subordinate illness that was subscribed by the company.

The top I saw that take a triggering she does he got quite a challenge.

Sure no longer term topic, when LG bars tickets important way too much.

So that's probably not the way it's set up with our Trust company partners will only.

And we'll never be delinquent loans are fully.

Recovered or fully collected individual major dominion.

Union, Julio and that would be in the middle of next year, Yes interim.

And Oh, it would be the in the end of 10 2021 I'm sorry.

Okay, Alright, and last question is you know assuming there's no other shutdowns or delays in operation from you know kroner virus or anything else do you have an estimate of what you're expecting for loan originations for the whole 2020.

Say more general spacing why isn't it you know John you know one daughter, it's always yeah. Those her team goes on high I'm going in to our New Orleans Funny I know that went the other way, but they all the China.

They are a woman to even think he certainly do you want me easily the you touched on huh.

Our first quarter of operation was mostly was ER being impacted most severely by the pandemic <unk>.

No.

Tom would you like a fairly easy do you foresee critic of trying to pull the trigger to.

Hi, John notions I'm one channel.

Keep in mind, you know you could tell me to China.

As D.

As the operations and activities by the M.S.C. owners resuming.

For right now our power business has returned to is ideally you also schedule as well they will need to your R&D.

Thank you change he didn't use open or something.

Comedy show them, what you're not going into <unk>.

And ER. So if those restrictions, we mentioned earlier, including though on the outside due diligence.

Yes, Oh.

Being implemented the right now by Oh, you teach venue I can you.

I'm going them too.

Our estimated go a long facilitation for tons, you're trying to is still 10 billion RMB.

Okay, great. Thank you guys.

Thank you.

And once again, ladies and gentlemen.

Asking question. Please press Star then one since.

Once again, we will pause momentarily to assemble a roster.

Ladies and gentlemen schools are question answer session I want to turn the conference back Irwin Simon for any final remarks.

That would be off today, thank you for John alcohol.

Any further questions. Please feel free to come to us contact our services and I are cash trying to dotcom. Thank you so much.

And thank you Sir This concludes todays conference call. Thank you all for attending today's presentation. You may now disconnect your lines another wonderful.

Sure.