Half Year 2020 Pintec Technology Holdings Ltd Earnings Call
[music].
Limited's first half 2020 earnings call at this time, all participants are in a listen only mode. After todays presentation. There will be an opportunity to ask questions now I will turn the call over to your speaker host today, It's Joyce Yang the company's Investor Relations Director. Please go ahead.
Hello, everyone and welcome to Peanuts through comps Twentytwenty and meets conference call, the Companys financial and operation that we bounced <unk> each year earlier today and not booked online you can also view that I mean, that's really my VP IR website at <unk> on the P. tend to comp.
A replay of the call will be available on the IR website in a few hours.
That's just dependent on today's call will be Mr. b to B C. O M P tax and Mr., Steven C.U.S. all content.
Management will begin with prepared remarks, and the call will conclude with a <unk> session.
Before we continue please note that today's discussion will contain forward looking statements made on the safe Harbor provision of the U.S. quite basically to keep the patient was going to ask Nitin Nike fights for lunch.
Well Lucky Freeman evoke you haven't read an ounce doesn't it.
As such the Companys results, maybe materially different from the threat to date.
So the information regarding these and other risks and uncertainties is included in the Companys actors and other property fighting expire we see you at the Securities and Exchange Commission.
The company does not assume any obligation to update any forward looking statements, except as required under applicable.
He's awesome team.
He has any press release and this conference call include the kids Ultratechs financial information as well as on other non-GAAP financial measures.
He has gradually its contact every calculation of the UN audited non-GAAP measures to the most directly comparable GAAP measures.
I'll now turn the call over to Alex C O <unk>. So because he said he said he please go ahead.
Thank you very much choice Oh, well before.
Before body 12 results for the first half of 2020, Oh look to just reiterate how excited a corner lawyer.
I can to help them here out of Fintech.
As many of you know is the way, it's unfortunate to see experiencing some port all else complications.
He is no longer a capable of taking responsibility for the steady operations quite a publicly traded company well.
Well there were all very grateful for me, so I suppose contributions.
Wish him a speedy recovery.
Now turning to our results for the first half of 2000 Twentys.
Pick encountered a series I'm trying to just seem to southern marching on to the first half of 2020.
Including changes in market conditions regulation external partners.
Management.
We also faced all break of Cobiz marching, which significantly impacted our operations during the first half of 2020 <unk>.
In response to these challenges, we decided to she's hoping his focus by providing a increasing number of digital centric services.
I'll also gradually reducing all with risk sharing services.
That's a good result off of long term orientation on the topline performance was adversely impacted in the first half of 2020 with total revenues and the costs of revenues decreasing by 65% and a 51% year over year respectively.
The decision to adopt the new growth strategies was the night after careful consideration of the current market can do this and our unique competitive advantages.
As part of these strategic piece of it we have no the bodies.
Oh services into digital technical services I don't.
Digital operation services, which included a licensed financial services.
Over the long term, we plan to organize the revenue and the profitability of our digital technical services.
Stabilize all the digital compression services by refining our asset quality and the loss reducing the associated.
The associated risks.
To further enhance our daily operations.
We are also focused on optimizing all apart a matrix employee.
Employees structure.
And of course on expenses.
We were we remain confident that such measures will help to improve our profitability on a gradual basis going forward. Despite the near near term headwinds.
For the remainder of my prepared remarks, I would like to provide everyone with some additional detail a sanitized regarding post all the digital technical services and digital and the digital operations services, starting with the former.
For digital technical services, well focus on gradually ramping up our revenue while also refining all over and all the organizational structure marketing ostrich strategies and the PUC matrix.
This opinion segments already include a number of the state of art solutions, such there is as digital retail credit management.
Corporate credit process management.
Intelligent Wilson management fund.
Financial robotic process automation and a digital transformation for banks.
Well it digital technical services in the first half of 2021.
We established a more segmented team structure yellow cells.
Presale support and delivery teams, we have all.
We have also adjusted all team size to accelerate our business development efforts.
Focused on controlling expenses.
And optimized our compensation system to better connect with employers.
Employee performance.
On the marketing front front, we continue to utilize all the strength in big data.
<unk> process automation financial.
Financial services.
And application inhalation can buy all at SAP system services with all the software to develop them as soon as well.
We are also leveraging these core competencies to your submission virtual partnerships in the form of innovation centers volume insurance animal.
Following all the detailed review of all the existing product offerings, we have decided to out okay. All resources to those products with higher profit margins.
<unk> favorable market prospects.
Wall or would you see all the investment into those products was lower profit margins.
As a result of these efforts.
Digital technical services entered into a pure period of rapid development doing.
During the first half of 2020.
We remain quite optimistic about their growth potential going forward.
You affect many.
Many of our partnerships and <unk> and the initiatives continue to make good progress in the first half of 2020.
For example.
Our Australian subsidiary you for risk was successful you knew we're leveraging all the digital retail credit management solutions to drill into the launch and new digital credit facilities was all Australian partners.
Similar to the impacts of occupies final pilot intermodal on the east Formants credit consumer consumption markets we serve.
We expect this product to increase all things access to personal credit solutions going forward.
We also continue to make good progress implementing all corporate lending process management solutions.
During that period, you for risk utilized hold real will recognize automated credit process management to name any Dv X two.
To help to do a bank upgrades is credit process management, we all.
We also continue to work handing hat was totally tough on us to support his financial services business throughout Europe.
Throughout Europe, Osha, India and Africa.
We are now in the process of introducing all the CBX sees them into the domestic market and the <unk> and already providing China daily group with Cvs space.
<unk> Chen financing solutions.
We have also been able to capitalize.
On the growing popularity of our <unk> solutions.
Fintech industry by working with a company producing the well the RPK products and the help himself Reno and clients such as.
Such as the Hong Kong stock exchange to implement new solutions.
Focus on bringing these solutions to more financial institutions that domestic market and have continued to make good progress on this front as well.
Comedy really reaching all expenses and digital financial products Internet customer services.
And then try to an internal development to help accelerate the digitization of financial institutions.
As we have already provided east West Bank, we saw with services and digital product development.
This transformation and the channel and the channel expansion.
We are also activity discussing potential collaboration is with a number of other overseas financial institution partners.
Yes cities such as change in Hong Kong, we have used to British various forms of joint innovation centers.
Aimed at helping to facilitate hooklogic implementation of technical service projects across a variety of industries, including finance entertainment and automobile.
Turning to digital operation services as a result of the car business enrollment in China those.
Most companies participating in credit project Corporation will generally take responsibility for a portion of the risk Oh.
Oh into all early recognition of lease tranche with the Saudi it's too wide, though a significant portion of our risk sharing business.
And our revenue generation capabilities. This.
Despite creating a good amount of loss entergy for revenue you'll see in the short term. This decision will help to refocus and to strengthen our core business in the long term as well.
So you asked improve the health <unk> revenue composition going forward.
<unk> current and go with the spin is is to prioritize asset quality over asset quantity read.
Reduce risk taking collaboration and.
Hey House profit sharing model.
Ponder was more industry leaders.
No you expat market to technical services.
Our digital impressions services segment currency.
Current team, whose credit has had a corporation with financial institutions.
I do added service Corporation was commercial institutions.
Financial services <unk> promotion.
Perfect I version.
No decision support and more.
Your response to the challenges caused by the epidemic, we significantly decreased activity with Lowe's, Sony and partners, who require us to share risks and allow us to reduce our risk sharing and services in the first half of 2020.
During that period, all the total volume of loans facilitated decreased by 83% year over year to RMB 1.2, beating.
In addition, as of June Thirtyth 2020.
All standing alone fan is how to decreased by 61% year over year to RMB, One point Street building.
We also continue to optimize all matrix by focusing on all the development of high quality products was there.
Was used case scenarios for luxury announced spin these platforms as sea trip and the best pay you.
Perfect that's off trade and studios to southern Twentys, Hello, coal, probably two products, we see treatment Truecar and it gets you off.
Accounted for approximate approximately 69% of all outstanding loan balance.
<unk> corporate few products, despite which turn out telecom accounted for 38% of all outstanding loan balance would be.
We believe that the optimization of our price structure has bottomed it helped to boost the overall quality of our partnership base, but.
And also for the you simply volume financial institutions to cooperate with us through profit sharing partnership models.
In the first half of 2020, we continue to forge more partnerships with leading financial institutions and their loss maintained relationships with the 11 corporate to funding partners.
In the period.
Including both cellphone micro finances has to ask factory and partners.
Additionally, during the period the poll five funding partners are all leading licensed financial institutions, which accounted for 94% of total funding amounts.
We remain committed to attracting more top tier founding partners I know you.
Stability issue more agreements through all profit sharing model with partners.
This is in line with all aim to complete all of chat transition into a profit sharing model of corporation as soon as possible.
To significantly reduce our risk usher in cooperation with <unk> with existing funding partners.
The performance of our launch an overdue alongs gradually improved during the first half of 2020.
As a result of these efforts.
Especially the M plus as you can see what's a wheel decreased into southern 20 Q2.
From 2020, you queue up and even better than 2019 Q4. These can.
These kids these sensing improvement was mainly due to number one a bundle.
Bundling products was pull asset quality and the refocusing our efforts onto those those are products, which are used case scenarios now the two abandoning the.
The guidance you model as we know it.
That's we no longer provide any guarantee.
Funny upon or have higher risk management requirements for each loan loss, reducing low quality loss number three.
This is the success the interface of gun Joel I Shouldnt we.
We the PV, obviously use a credit reference centre, which enabled us to utilize the credit you investigation to better manage risk implement multi mission no risk controlled majors.
And over a month kind of <unk> performance.
And another for Liberty all the capabilities you can take an already low.
Oh and other areas to help our funding partners improve their regulation compliance and the post loan management efficiency.
In summary.
Oh activity in the first half of 2020 was marked by a transformation.
In response to the rapidly evolving industry dynamics and I'll break of Cobiz, 19th we have refocused our efforts and actively deployed our digital technical services.
The response to these services both at home and abroad has been quite positive.
We are excited to continue inquiry all partners with our best in class solutions going forward.
That's all the digital technical services continue to build momentum will also maintain our focus on reducing our credit balance fall risk sharing services and.
And the way you expect this combination of efforts to grow.
To gradually improve our profitability over the long term.
Despite the current market challenges we remain fit.
Fit a fast ALD believe that all of us to get any significant competitive advantages in picking logical insulation and the financial services will continue to fuel the resiliency of our business.
Allow us to continue executing our development strategies and if.
Set a stage for a return to growth in the coming year.
With that.
Ill turn the call over to our CFO Steven seem to review our financial results in more detail.
Thank you Victor Hello.
Hello, everyone before talking note that all numbers the indefinitely.
In RMB terms and all comparisons are on a year on year over year basis.
Unless otherwise noted.
Now turning over to our financial results for the first half of clean you think.
Well the revenues in the first half of Eattwenty decreased by 65% year over year to 251.6 million.
Revenue from kind of goods services. So these fees you know Chris Hobbled, then you couldn't be increased by 66% to 212.1 million.
674 million in the same period of 2019.
This is mainly due to the decrease in <unk> loans.
The data during the period.
During the period, our business was severely disrupted by the Cobi 19 outbreak, which.
Which impacted our revenue generation typically.
To a significant degree.
In addition, during the backdrop of the Cobi 19 outbreak. We also took the conscious decision to minimize our lease bearing loans.
And such are responding loans.
Contributive to 17% of our brokered loan balance.
June 30 are pretty twinkie and.
And 40, plus I'll talk to the loan balance that's no reimbursement for the Nike.
Consequently revenues from lease bearing loans fall off group loans accounted for couldn't focus enough on revenues from Pepsico service fees in the first topic can you could compare.
Compared to the city it within the same period of two nights.
Revenues from installments of these the units were tougher clinically de increased by 57.5% who could incorporate 8 million from 82 million in the same period Goodnight.
This decrease was mainly due to the reduction on book income and loan volume usage.
Due to the cobot 19 outbreak and which was in line with our ongoing strategy to reduce our <unk> whether the structure.
Revenues from wealth management service fees and <unk> decreased by 66%.
Two brokering seven learn from that important during the same period of 2019. The decrease was mainly the result of our insurance brokerage business.
Lower than previously expected doing.
During the period, we implemented a seasonal optimization you shape, he's doing fine on share brokerage business murder and remove a number of online channels that they will conclude on that.
Compliance criteria.
As such we expect our revenues from inches book of business to start recovering in the foot locker.
Cost of revenues in the first type of thing he thinks he increased by 56% to 208.9 million.
432.8 million in the same PRP United.
This decrease was mainly attributable to the increase in so these coast touched my Jemal group as our Corporation murder Acumen group change from a murder winter, we provide will be provided credit enhancement for the borrowers who are motor lead profile credit.
Enhancements to the borrower.
In addition, we also recorded a decrease in origination and servicing costs I know really due to use use acquisition costs. That's the result of increase in loan volume because of the data.
The reduction of cost of revenues in the first half of the need to you was partially offset by two factors first we were comping, increasing provision for credit losses on balance sheet loans due to the Pao Colgate 19, and the resulting decline in asset quality and increase in.
Treat clock delinquency rates.
By balancing appeal.
Secondly, we have higher costs on guaranteed liabilities for off balance sheet loans the p. it.
Excellent guarantee it only increased due to the fact that most of this is using we've shown modest learning from me 2019.
Well known public he has continuously deteriorated since the second half opinion 90.
Let alone as the result of our commitment to gradually stop providing continued green tea call from guarantee in the second quarter opinion D has decreased by more than 50% compared with compared with the first quarter up in between.
Yes. It continues to decline on a sequential basis for the second half of what you might be.
Delinquency rates have also improved significantly since the second quarter of two things.
Going forward this week.
As we focus on the Soc space the scroll technology services, we will continue to reduce our lease sparing business.
We only provide guarantees for financial services, which we operate with our own licenses.
All other loans that we possibly they were gradually switch to a profit sharing motor we don't any guns. He said he says anything both isn't limiting volatility in earnings and profitability equaling forward.
Gross profit in the puts up with anything decreased to 42.7 million from two.
From 296.9 million in the thing Peter the 19 gross margin into two troubled anything he was 17%.
For the 1.3% in this NPL 90.
Total operating expenses in the course of opinion plenti decreased by 36.1%.
42.7 million.
From 223.3 million units in pickup in 19.
Funding from the beginning of anything we have continued to open my simplifying our organization structure.
Getting strategies put out in the streets.
Let's now review the breakdown operating expenses into put stuff up anything.
Sales and marketing expenses and to put some opinion plenti decreased by 41.1 person, who can hopefully 9 million from 42.2 million just simply opinion Nike. This decree I really driven by the decreases cross promotion expenses and share based compensation.
<unk> decreased due to the adjustments to the company's employees structure.
Promotional expenses decreased due to a reduction of online of determine expenditure.
The Boso Cebit competition decrease due to most of the share based compensation being amortized in the prior year.
General and administrative expenses in the first couple of pennies NT creased by 31.6% elementary yeah.
From 136 million in the same period 90 these days.
This decrease was primarily due to decreases in share based compensation and overhead expenses.
He was also partially due to the decrease in bad debt expenses as a result of decreased gross loan.
An accounts receivable balance for chemicals that we should.
You solution development expenses.
The top opinions and decreased by 44.9%.
To 24.8 million.
I'm pretty pipeline lumber in the same period to 19.
Primary primarily driven by our lower business volumes.
Operating loss in the first half a penny to you was the 100 million.
Compared to an operating income of 73.6 million units in Peter opinion 19 now.
Net loss in the first half of <unk> work 112.2 million compared to a net income of 81.2 million in the same period to 19.
Adjusted net loss in the first half opinion, when he was 96.9 million compared to adjusted net income.
The 11.1 million units NPL opinion.
I loved the gap and diluted non-GAAP adjusted net loss brought innovation for Penny 19 will grow.
Zero point Treaty.
Earthquake country cents, respectively.
Now, let's turn to our balance sheet.
As of June 30, or can you thinking we had combined cash and cash equivalents Chuck.
Short term and long term restricted cash or 588.5 million compared to.
From pad to find an 880.9 or my from December 30 foot can you 90.
The net financing receivables, including short term and long term receivables was 75.9 million as of June thirtyth than you think.
Good morning, 49.5 million.
Remember that the method.
Looking ahead, we will continue to focus ramping up revenues in our Vista Technical services business segment wish.
Wish we expect to become a key revenue per student loan.
We understand that these adjustments will impact our top line for the <unk>.
However, we are confident that these changes will bring.
Solid foundation for favorable development.
At the same time, we will also work towards refining on asset quality for dish to operation services, and so as our license Magnachips what leases.
In order to reduce the associated.
We will accomplish this by increasing our activity a quality financial institutions, if a broker coming weeks from decreasing activity. Those prime this will require us to show.
That's such but we then being the impact.
Not withstanding the impact from.
We anticipate the cobi it nicely outbreak.
We expect all access to contribute to a recovery you through our financial performance and position in the near term.
This concludes our prepared remarks for today.
Beta we are now ready to take questions.
Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question. Please press star one on your telephone.
Wait for any TV announce.
If you wish to cancel your request please press the pound or hash key.
Once again, you May press star and the number one on your telephone keypad.
Your first question comes from the line EPS Daphne from Citi. Please ask your question.
Hi anyway.
The management.
Christian.
So I have two questions. The first one is.
Can you talk more about how to use the Spanish data in terms of your telcos assets, how do you differentiate perpetual.
Those traditional.
Satisfy that and also kind of actual Ah Ah.
The Internet Giants also a joint that.
I guess I kind of course, that's a positive.
Second question is can you talk more about your progress in terms of international expansion. Thank you.
Okay I'll take the question.
Firstly on the second floor type paying attention 12 annuity fund strategy.
Fintech as a leading technology company digitization for banking and financial institutions.
Our hands on experience supporting business growth through product innovation and digital operation has given us a very unique value proposition comparing comparing to traditional energy service providers in the same domain.
This is going to our direct involvement either through our partnership with financial and commercial partners or through our own licensed financial services over the last few years.
As we all know Digitization is not just about technology.
It requires true expertise in a business domain and operational excellence in order to drive revenue growth and improve operational efficiency.
Therefore pin takes a bit of between the light Oh you.
Oh, you can see we are experiencing in product development and the co operation with financial institutions.
And a plus all the technical solution and the services Big data.
And the process automation.
Loss to add value to our partners from Daiwa of collaboration so.
So we are very confident for the future of our digital the technical services.
And to answer your second question in a global landscape Chinas Fintech industry has been quite a lot of you, especially in the last 10 years.
We are very optimistic that all expenses.
In this fast growing market will make us stay competitive unit global market.
Apart from assisting some of <unk> global clients expanding their being as you in China. We have also fit up.
Okay Innovation center with East West Bank in the U.S.
I'm also set up a joint venture with you will be to jointly promote the consumer digital data solutions based on the alternative beta in South East Asia.
We have acquired if for reason to Australia, and we have made notable progress in the last until models. This holiday.
Our digital ending the software CVX has to be adopted by the first digital good news back judo back Australia and the Cvs has also being used by a total finance you know several countries, including Australia, our advanced and Australia, we don't.
We don't have the opportunity to further expand our business to another in 19 countries in Europe and Africa. Following our success in Australia. So we are satisfied with the international expansion, so far, albeit the cobot 19 impact this year.
That's all for my answer thank you.
Thank you.
Your next question comes from the line of Linkedin from I.C.B.C. I. Please ask your question.
Thank you. Thank you.
Thank you management for taking my question.
Have a question.
Steven.
And that is to be profitable in the past.
The company recorded net losses of about.
100.
Aston management share this Jeff.
For the future development Ken.
Okay.
There are no further revenue growth and profit.
In the second half.
Thank you.
Hi, This is Stephen Ah. Thank you willing for asking the question.
I think as as we mentioned in the remarks that it is indeed unfortunate that we met with the Covidien IDN outbreak.
Which has Ah Ah.
<unk> costs, a pretty significant impact to our business activity in in that backdrop, even with that that could be effectively due to the decision.
To plan for the long term and lay foundations for long time in terms of focusing more I'll technical services business on the SaaS business, rather than just going back to focus on the lending business. That's one aspect the other.
The other important aspect to mention is that or indeed, the case with the Colgate 19 it back.
It benefits or certain industry and it also unfortunately, a cause more harm to update the street.
All case because of our affiliation with the travel industry.
With the Covidien IDN outbreaks the impact or both.
Both mainline and international travel and especially in the first half of the year that has entirely cost our business volume to to go down even though as I mentioned.
As I mentioned, we still make the.
Asset to to invest in the business in the long run because we believe that the eve.
Even though with a short term impact it was it's still important to insist on the right.
You see on the right approach and investing the right right business model going forward, but that's what we are doing incomes LTL question the revenue and profit.
Outlook, you shouldn't have traditionally we have not given specific guidance about.
But having said that our business model today has been optimized or sorry, our business organization today has been optimized to the extent that we think that we are well placed to tap into the next wave.
Of recovery and we believe that that's already taking place as we speak.
And in in terms of that we have rationalized our business, we have cut costs, where we feel that we we can see.
And also we have also invested in areas, which we feel will contribute revenues have coffee going forward. So I think.
So I think in that sense, where well twice and b will be in a good position.
Going forward.
Most importantly, our business.
This this financial position is still healthy.
We have sufficient financial position to a planned investments.
Pine and invest for the future and today, we are generating also.
Property cash flows so we are not worried that.
Any short term impact will cause us to lose focus on executing our long term strategy and thank you for the question.
There are no further questions at this moment Hello, now hand, the call back.
Mr that Kelly for any closing remarks.
Thank you operator.
Thank you everyone for joining us today, we look forward to see you next time.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[music].
[music].
Good morning, and good evening, everyone. Thank you for standing by and welcome to Fintech Technology Holdings Limited's first half 2020 earnings call. At this time, all participants are in a listen only mode.
After todays presentation, there will be an opportunity to ask questions now I will turn the call over to your speaker host today is Joyce Yang the company's Investor Relations Director. Please go ahead.
Hello, everyone and welcome to the intense Firstcomp Twentytwenty any conference call the Companys financial and operational results was issued earlier today and that booked online you can also view the ending.
My VP IR website at <unk> on the pizza comp.
A replay of the call will be available on the IR website, you Miss you Alex.
It just depends on today's call will be mr., because being the out of state tax and Mr. Stephen. Thank you that's all a pin pad.
Management will begin with prepared remarks, and the call will conclude with up to an eight session.
Before we continue please note that today's discussion will contain forward looking statements made on the safe Harbor provision of the U.S. climate security implication become act of 1995.
Looking statements evoke given week.
And this is good.
Such the Companys results may be materially different from the threatened to date.
The information regarding these and other risks and uncertainties include that when the company accurate and other properties filings filed with the Securities and Exchange Commission.
The company does not assume any obligation to update any forward looking statements, except as required under applicable.
Awesome. Thanks.
Correct any gradually and this conference call include the shape of other financial information as well as other non-GAAP financial measures.
Thanks, that's gradually contact with completion of the unaudited non-GAAP measures to the most directly comparable GAAP measures.
I'll now turn the call over to our CEO. He told me to lead this will be clearly please go ahead.
Thank you very much choice Hello, everyone before.
Before diving into our results for the first half of 2020 I would like to just reiterate how excited and honored I am to be.
Have you taken the helm here out of Fintech.
As many of you know he is the right way is unfortunately experiencing some prolonged palace complications.
No longer capable of taking responsibility for the daily operations of publicly traded company.
Although we are all very grateful for me, so why as Pos contributions and wish him a speedy recovery.
Now turning to our results for the first half of 2020.
Fintech encountered a series of challenges in 2019, and the first half of 2028.
Including changes in market conditions regulation external partners.
<unk> management.
We also faced the outbreak of cobalt 19, which significantly impacted our operations in the first half of 2020.
Your response to these challenges we decided to shift how good his focus by providing a increasing number of digital centric services.
I'll also gradually reducing all with risk sharing services.
That's a good result off of long term orientation on the topline performance was adversely impacted in the first half of 2020 with total revenues and the cost of revenues decreasing by 65% and a 51% year over year respectively.
The decision to adopt the new growth strategies was a night after careful consideration of the current market can do this and our unique competitive advantages.
As part of these strategic pivot we have now the bodies.
Our services into digital technical services and digital operations services.
Which included our lives and financial services.
Over the long term, we plan to organize the revenue and the profitability of our digital technical services has stabilized our digital compression services by refining our asset quality.
The loss, reducing the associate.
The associated risks.
To further enhance our daily operations.
We are also focused on optimizing our product matrix employee.
Employees structure.
And cost and expenses.
We were we remain confident that such measures will help to improve our profitability on a gradual basis going forward.
Despite the near near term headwinds.
For the remainder of my prepared remarks, I would like to provide everyone with some additional details and updates regarding in post all the digital technical services and digital and the digital operations services, starting with the former.
For digital technical services, well focus on gradually ramping up our revenue while also refining our organometallic organizational structure marketing a stretch strategies and a product matrix.
This opinion segments already include a number of part of the state of our solutions such nearest ask digital retail credit management.
Corporate credit process management.
Intelligent Wilson management fund.
Our national robotic process automation and a digital transformation for banks.
For digital technical services in the first half of 2021.
We established a more segmented team structure yellow cells.
Presale support and delivery teams, we have all.
We have also adjusted our overall team size to accelerate our business development efforts.
Focused on controlling expenses.
And optimize our compensation system to better connect with employee.
Employee performance.
On the marketing front front, we continue to utilize our strength in big data.
Hi process automation financial.
Financial services.
And application inhalation to combine our SaaS system services with all the software development services.
We're also leveraging these core competencies to your submission virtual partnerships in the form of innovation centers joint ventures anymore.
Following all the detailed review of our existing product offerings, we have decided to allocate our resources to those products with higher profit margins on a favor favorable market prospects while.
While reducing our investment into those products was lower profit margins.
As a result of these efforts our digital technical services entered into a pure period of rapid development there.
During the first half of 2020, I know, we remain quite optimistic about their growth potential going forward.
In fact many.
Many of our partnerships and it is any initiatives continue to make good progress.
First half of 2020.
For example, our.
Our Australian subsidiary you for risk.
It was successful you knew were leveraging our digital retail credit management solutions.
I would want to launch a new digital credit service was all Australian partners.
Similar to the impacts of occupies final pilot intermodal.
On the installments credit consumer consumption markets.
We expect this product to be in Greece alternatives access to personal credit solutions going forward.
We also continue to make good progress implementing all corporate lending process management solutions.
During that period, you for risk utilize all real will recognize automated credit process management to laminate Dv X to help judo bank upgrades is credit process management.
We also continue to work handing hat was totally tough on us to support his financial services business.
True ups Europe.
India and Africa.
We are now in the process of introducing all let's see actually some into the domestic market and also an already providing China daily group with Cvs space.
Hi, Jen financing solutions.
We have also been able to capitalize.
On the growing popularity of API solution in a fintech industry by working with the company producing into what the RPK products and the helping such Renault and clients.
Such as the Hong Kong stock exchange to implement new solutions.
Our focus on bringing these solutions to more financial institutions.
Mr market and have continued to make good progress on these.
His front as well.
Finally, we are leveraging our expertise in digital financial products Internet customer services and then.
And then try to an internal developments to help accelerate the digitization of financial institutions.
As we have already provided east West Bank with all the services and digital product development process transformation and the channel and the channel expansion.
We are also actively discussing potential collaboration is with a number of other overseas financial institution partners.
Cities, such as change in Hong Kong, we have used the British various forms of joint innovation centers.
Aimed at helping to facilitate our Clos implementation of technical service projects across a variety of industries, including the finest entertainment and automobile.
Turning to digital operation services.
As a result of the car business enrollment in China most.
Most companies participating in credit project Corporation will generally take responsibility for a portion of the risk.
Moving to our early recognition of lease tranche with the Saudi it's too wide down a significant portion of our risk sharing business and app and our revenue generation capabilities. This.
Despite creating a certain amount of swaps entergy for revenue, we'll see in the short term. This decision will help to refocus and to strengthen our core business in the long term as well.
As you asked improve the health of our revenue composition going forward.
Our current goal with the spin is is to Paul prioritized asset quality over asset quanta to read.
Reduce risk taking collaboration and.
Hey House profit sharing model.
Ponder was more industry leaders.
No you expat market to technical services.
Our digital operations services segment currently.
Currently Incruse credit asset Corporation with financial institutions.
Value added service Corporation was commercial institutions.
Financial services product promotion.
Traffic diversion.
Our decision support and more.
In response to the challenges caused by the epidemic, we significantly decreased our activity with Lowe's funding partners, who require us to share risks and a loss reduced our risk sharing services in the first half of 2020.
During that period, all the total volume of lost facilitated decreased by 83% year over year to RMB 1.2 billing.
In addition, as of June Thirtyth 2020.
Ill all standing alone business had a decreased by 61% year over year to RMB, One point Street building.
We also continue to optimize our matrix by focusing on all the development of high quality products was there.
It was used case scenarios for luxury announced business platforms as sea trip and the best buy.
In fact as health care in the city is 2020, our coal probably two products with sea trip Truecar kind of gets you off.
Contents for approximate approximately 39% of all outstanding loan balance.
On all fronts, you products, despite with China Telecom accounted for 38% of all outstanding loan balance would be.
We believe that the optimization of our price structure has not only helped to boost the overall quality of our partnership base at all.
But also for their you simply volume financial institutions to cooperate with us through profit sharing partnership models.
In the first half of 2020, we continue to forge more partnerships with leading financial institutions and the loss maintain relationships with the 11 call prior to funding partners.
In the period.
Including both cellphone micro finances, as well as factory and partners.
Additionally, during the period the poll five funding partners or leading license financial institutions, which accounted for 94% of total funding amounts we remain committed to attracting more top tier funding partners I know, you're still producing more agreements through our profit sharing.
Total with partners this.
This is in line with our aim to complete our chat transition into a profit sharing model of corporation as soon as possible.
And to significantly reduce our risk usher in cooperation with it because it was existing funding partners.
The performance of our launch an overdue alongs gradually improved during the first half of 2020 as a result of these efforts.
Especially the one plus delinquency was will decrease into southern 20, Q2 from 2020, cool and even better than to southern lights in Q4. This can.
This 'cause this sensing improvements was mainly due to number one a bundle.
Abandoning products will pull asset quality and refocusing our efforts on who is also a lot of products, which they use case scenarios now that you have.
Abandoning the.
The guarantee model as we no longer provide any guarantee.
On your partners have higher risk management requirements for each loan loss, reducing low quality last number three.
Let's say the success the interface of casual I Shouldnt we.
We the PB overseas credit reference centre, which enabled us to utilize credit you investigation to better manage risk implement multi dimensional risk control measures.
And arguments casual issues performance.
Another four leveraging our capabilities in technology.
Oh and other areas to help our founding partners improve their regulation compliance and the post loan management efficiency.
In summary.
Oh activity in the first half of 2020 was marked by transformation.
In response to the rapidly evolving industry dynamics and outbreak of Cobiz marching we have refocused our efforts and actively deployed our digital technical services.
The response to these services both at home and abroad has been quite positive.
We are excited to continue in Pari all partners with our best in class solutions going forward.
All the digital technical services continue to build momentum.
We'll also maintain our focus on reducing our credit balance fall risk sharing services.
And then what do you expect this combination of efforts to go.
To gradually improve our profitability over the long term.
Despite the current market challenges we remain fit.
Fit a fast ALD belief that all is to get any significant competitive advantages in technological innovation and the financial services will continue to fuel the resiliency of our business.
Allow us to continue executing our development strategies.
Set a stage for return to growth in the coming year.
With that.
Ill turn the call over to our CFO Steven seem to review our financial results in more detail.
Thank you Victor Hello.
Hello, everyone before starting I just note that all numbers data indefinitely.
In RMB terms and all comparisons are on a year on year over year basis.
Unless otherwise noted.
Now turning over to our financial results for the first half of two anything.
But the revenues in the first half of 2020 decreased by 65% year over year to 251.6 million.
Revenue from technical services service fees in the time of any plenti decreased by 66% to 212.1 million.
674 million in the same period of 2019.
This is mainly due to the decrease in our book loans plus.
Listen the data during the period.
During the period, our business was severely disrupted by the Cobi 19 outbreak which is.
Which impacted our revenue generation typically leads to a significant degree.
In addition, during the backdrop of the Cobi 19 outbreak. The also the conscious decision to minimize our lease bearing loans.
As such we sparing loans.
Contributive to 17% of our total loan balance as of June 30, or 2020 and four.
And 40% of our total loan balance that's all we've done both in the United.
Consequently revenues from Rhys bearing loans for our book loans accounted for 12% of our revenues from technical service fees in the first topic can you can see compared to 38%, it's NPV up to 90.
Revenues from installments of these fee in the first half of the liquidity increased by 57.5%, who 34.8 million from 82 million in the same period Goodnight.
This decrease was mainly due to the reduction on book installment loan volume.
Through the Cobot nice you know brick and which was in line with our ongoing strategy to reduce our portfolio structure.
Revenues from wealth management service fees, and that's helping you can indeed decreased by 66%.
4.7 million from 15.7 million in the same period of two new 90. The decrease was mainly the result of our users brokerage business going slower than we previously expected.
During the period, we implemented a seasonal optimization initiative that we find online brokerage business model and remove a number of online channel that there was a we don't actually come.
Compliance criteria.
As such we expect our revenues from insurance brokerage business to start recovering in the foot print.
Cost of revenues in the first half a penny safety increased by 56% to 208.9 million from 432.8 million in the same PRP United is.
This decrease was mainly attributable to the decrease in service calls touched by Geo group as our Corporation motor with Cuba Group change from a motor where we provide will be provided credit enhancement for the borrowers who are motor that we provide credit.
Enhancements to the borrower.
In addition, we also recorded a decrease in our origination and servicing costs, primarily due to reduced use acquisition costs as a result or increase in loan volume because the data.
The reduction of cost of revenues and if it's not something you think you was partially offset by two factors first we were an increase in provision for credit losses on balance sheet loans due to the Pao Colgate 19, and the resulting decline in asset quality and increase in.
Entry plus delinquency rates.
By balancing the tier.
Secondly, we had higher costs on guarantee liabilities for off balance sheet loans the period.
From guarantees going increase due to the fact that most of this is using lease showing modest starting from May 2019.
While low quality has continuously deteriorated since the second half opinion 90.
Nevertheless, as the result of our commitment to gradually start providing any guarantee continued green tea.
From guarantee in the second quarter opinion, 20 had decreased by more than 50% compared with competitors that those caught up in between.
As it continues to decline on a sequential basis for the second half of the 19th.
Delinquency rates have also improved significantly since the second quarter of two things.
Going forward as we focus on the soft space. The scroll technology services, we will continue to reduce our lease bearing business.
We only provide guarantees for our financial services, which we operate with our own licenses.
Well other low that we possibly they were gradually switch to a profit sharing moto without any guarantee services.
Anything both isn't limiting volatility in earnings and profitability going forward.
Gross profit in the several opinions you decreased to 42.7 million from 296.9 million in the same period. The 19 gross margin in the pickup of Cincinnati was 17% compared to 41.3% in the same period 90.
Total operating expenses in the puts up a penny plenti decreased by 36.1% 242.7 million.
From 223.3 million within pickup in 19.
Funding from the beginning of anything we have continued to optimize and refine our organization structure marketing strategies and put on the street.
That's where we view the breakdown of operating expenses in the tougher than anything.
Sales and marketing expenses and to put some of the Plenti decreased by 41.1 person, who can hopefully 9 million from $42.2 million simply opinion Nike. This decree I really driven by the decreases cross promotion expenses and share based compensation.
Costs decreased due to the adjustments to the company's employee structure.
Promotional expenses decreased due to a reduction of online have determined expenditure.
The Boso Cebit competition decrease due to most of the share based compensation being amortized in the prior year.
General and administrative expenses in the tougher than you think <unk> creased by 31.6% domain treatment.
No 136 million in the same period 90.
This decrease was primarily due to decreases in share based compensation and overhead expenses.
He was also partially due to the decrease in bad debt expenses as a result of decreased growth load balance and then.
An accounts receivable balance for technical service.
Research and development expenses, it's a tough affinity decreased by 44.9%.
To 24.8 million.
From 45.1 during the same period to 19.
Primary primarily driven by our lower business volumes.
Operating loss in the first half a penny to you was a 100 million.
Compared to an operating income of 73.6 million units MPRP 90.
Net loss in the first half have been T 112.2 million compared to a net income of 81.2 million in the same period to 19, but.
Adjusted net loss in the top ups anything he was 96.9 million compared to adjusted net income.
Under 11.1 million units Npls that you mentioned.
I loved the GAAP and non-GAAP adjusted net loss Bobby innovation.
We're pretty United will go there.
Zero point Treaty.
So then she cents respectively.
No less than through our balance sheet.
As of June 30, or can you thinking we had combined cash and cash equivalents.
Sharpton and long terms, the stricter cancer 588.5 million compare.
Compared to find an 880.9.
December 30 for the new 90.
Well, the net financing receivables, including short term and long term receivables was 75.9 million, let's look June thirtyth anything tea.
Hi, Good morning 29.5 million.
Remember that the method.
Looking ahead, we will continue to focus ramping up revenues in our Vista Technical services This segment, which.
Which we expect will become a key revenue contributed along.
We understand that these adjustments will impact our top line for the short term.
However, we are confident that these changes will bring.
Solid foundation for favorable development.
At the same time, we will also work towards refining I'll answer quality for dish to operations services, So as our licensed financial services.
In order to reduce the associated with.
We will accomplish this by increasing our activity quality financial institutions. It will go up every week and decreasing I'd give you those partners will require us to show.
That's such notwithstanding the impact.
Not withstanding the impact from.
We anticipate the Cobi at night the outbreak.
We expect assets to contribute to a recovery you through our financial performance and position in the near term.
This concludes our prepared remarks for today.
We are now ready to take questions.
Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question. Please press star one on your telephone and wait for your name to be announced.
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Once again, you May press star and the number one on your telephone keypad.
Your first question comes from the line EPS Daphne Koller from Citi. Please ask your question.
Hi, Good evening management.
My question.
I have two questions. The first one is.
Can you talk more about how to use the Spanish data in terms of your question.
Question, how do you differentiate perpetual.
Those traditional IP satisfy that and also kind of actual.
The Internet Giants also.
Joining back I guess at that kind of course I've put us back on the second question is can you talk more about your progress in terms of international expansion. Thank you.
Okay I'll take the question.
Chris Yeah. Thanks.
Thanks for type paying attention 12 newly defined a strategy.
Fintech as a leading technology company digitization for banking and financial institutions.
Ill highlight trends supporting business gross.
Innovation and digital operation has given us a very unique value proposition.
Comparing comparing to traditional audio service providers in the same domain.
This is going to I would direct you moments either through our partnership with financial and commercial partners or through our own licensed financial services over the last few years.
As we all know Digitization is not just about technology.
It requires to expertise in the business domain and operational excellence in order to drive revenue growth and improve operational efficiency.
Therefore pin takes a bridge between the light Oh you.
Oh, you can see we are experiencing in product development and the co operation with financial institutions.
And a plus all the technical solution and the services Big data.
And the process automation.
Cost to add value to our partners from Daiwa of collaboration so we.
So we are very confident to the future of our digital technical services.
And to answer your second question in a global landscape Chinas Fintech industry has been quite a lost you.
Especially in the last 10 years.
We are very optimistic that all expenses.
In this fast growing market will make us stay competitive in the global markets.
Apart from assisting some of <unk> global clients expanding their business in China, we have also fit up.
Why innovation center with East West Bank in the U.S.
I've also said on the joint venture with you will be to jointly promote consumer digital lending a solutions based on the alternative data in South East Asia.
We have acquired you for raising the Australia and we have made notable progress in the last until Mouses holiday.
All the digital lending software CBX has we adopted by the first week. So good news back judo back Australia, and a Cvs has also being used by a total finance you know several countries, including Australia, our dance and Australia, we don't.
We don't have the opportunity to further expand our business to another 19 countries in Europe and Africa. Following our success in Australia. So we are satisfied with international expansion, so far, albeit the covert marking impact this year.
That's all for my answer thank you.
Thank you.
Your next question comes from the line of Blaine 10 from IC BC I. Please ask your question.
Thank you. Thank you.
Thank you management for taking my question I have a question.
Steven.
And that is to be profitable in the past.
The company recorded net losses of about 100 million.
After management Shadows, Jeff.
So it doesn't change the balance.
Oh I see.
Okay, why some color on that.
Other revenues gross profit.
In the second half.
Thank you.
Hi, This is Steven Thank you willing for asking the question.
I think as as we mentioned in the remarks that it is indeed unfortunate that we met with the cobot 19 outbreak.
Which has Ah Ah.
<unk> costs, a pretty significant impact to our business activity in.
In in that backdrop, even with that that could be if that was due to the decision.
To plan for the long term and lay foundations for the long term in terms of focusing more I'll.
Technical services business on the SaaS business rather than just.
Going back to focus on the lending business, that's one aspect.
Another important aspect to mention is that.
Indeed, the case with the Colgate 19, it better.
It benefits.
On the industry and it also unfortunately, a cause more harm to other industries.
Al Qaeda because of our affiliation with the travel industry.
With that Covidien outbreaks, the impact or both.
Both.
Mainline and international travel, especially in the first half of the year.
Has entirely cost our business volume to to go down.
Even though.
As I mentioned, we still make the.
Asset to to invest in the business in the long run because we believe that the Eva.
Even though with a short term impact it was it's still important tool.
It seems on the right approach to invest in the right right business model going forward. So thats why we are doing.
In terms of your question.
The revenue and profit.
Outlook you shouldn't.
You shouldn't have traditionally we have not given specific guidance about.
But having said that our business model today has been optimized or sorry, our business organization today has been optimized to the extend that.
We think that we are well placed to tap into the next wave of that.
Of recovery.
And we believe that that's already taking place as we speak.
And it is in terms of that we have rationalized our business, we have cut costs, where we feel that we can see.
And also we have also invested in areas, which we feel will contribute revenues and profit going forward.
So I think in that sense, we're well price and b will be in a good position.
Going forward.
Most importantly.
Business financial position is still healthy.
We have sufficient financial position to play.
Plan and invest for the future and today, we are generating also.
Property cash flows so we are not worried that.
Any short term impact will cause us to lose focus on executing our long term strategy and thank you for the question.
There are no further questions at this moment.
I hand, the call back.
Mr. Kelly for any closing remarks.
Thank you operator.
Thanks to everyone for joining us today, we look forward to see you next time.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.