Q3 2020 Qudian Inc Earnings Call

[music].

At this time, all participants a in a listen only mode. After managements prepared remarks, there will be a question and now it's a session.

Today's conference call is being recorded a.

I'll now like to turn the call of a tour a house from cheese Dan. Please go ahead.

Hello, everyone and welcome to a ticket third quarter 2020, <unk>, earning conference call a comment without E filing elsewhere. There was just a little day and we'll see a line you can download the earning press release and I have bought a company to be generally by visiting our website at <unk>.

Yes, the comp Mr.

Mr Anymore are a founder chairman and Chief Executive Officer, and Mr. Pizzi do our VP of Investor Relations, we'll start a cool with they are we prepared remarks before.

Before we continue please note that today's discussion will contain forward looking statements made on the safe Harbor provisions of the U.S. Privy a Securities Litigation Reform Act, a 1990, but well.

Forward looking statements involve inherent risks and uncertainties.

Let's start on the Companys results may be materially different from the views expressed a date.

For information regarding these and other risks and uncertainties is included in the Companys Cynthia it's about a with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward looking statements, except as required under a cable though please.

Please also note that she is earnings press release on this conference call include a discussion of UN audited GAAP financial information as well ought to take a non-GAAP financial measures.

She has a press release contains a reconciliation of the on oddities non-GAAP majors on auditing the most directly comparable GAAP measures.

We also posted a slide presentation on our IR website, providing details on our results in a quarter, we will reference below $3 in our prepared remarks, but will not refer to see a big slot during our discussion.

I will now turn the call over a two hour Theyll New law. Please go ahead.

Hello, everyone.

We're lucky who listen to all for joining the call.

For the quarter.

A minute.

And you moving regulatory involvement we made a home who.

Then a.

A pollution written a GAAP to our cash credit business, well you generating a five.

You live.

So Texas is new.

Our loans who business.

Which was in line with our expectations.

This quarter.

We are delighted.

See meaningful improvement across our delinquency rate.

Rate compared to the first half of the year.

Strange credit accrue a pool will stand up.

Both.

Our a b.

Two net.

Navigate the ever changing operating environment using a <unk>.

Oh, I love being lifted.

So listen a job to see.

Public opinion opinions.

Force them to me a measure us all a them and other administration.

Oh, I smoke credit business may put a controlling.

Hi, Scott on the industry.

New York Huh.

Well, let's look at risk.

However.

We do not expect the proposals like collisions.

For a lot more credit business through that affect our business.

At a brief do not apply a smoke rather than a company.

We've had a little.

We will continue to cope.

Month heard a luckily the lack of a three develop a massive our industry.

Besides the credit alone evening.

Evening, we continue to you, but yeah.

An amazing.

That's probably a new new show to you.

Well from the exporting gross opportunities.

Oh <unk>.

At a kitchen, it's a it's exciting.

New area.

Oh, and we look for a lot to a.

Updating you with our progress you like home in quality.

Now I would like to.

Kind of a call.

Well, we're supposed to see well mortgage health on.

On our dog [noise].

Thank you mean and good morning, and good evening, everyone. In this corner were encouraged to see a significant improvement in our profitability on a sequential basis.

Notably our net income increased by approximately 231% quarter over quarter to 592 million from Andy. This is a great indicator of our ability to overcome challenges and deliver a long term value to our stakeholders.

In light of flux AG market conditions, and ongoing like a regulator a developed from them.

We have been executing a cautious and conservative strategy in our loans business by performing rigorous credit assessments on our platform.

As a result, our efforts to improve credit quality drove an improvement in our credit performance evidenced by a decrease in a day one delinquency rate.

On her over on day, one delinquency rate reduced to approximately 17% by the end of September from around 20% by the end of June which further decreased to 13% by the end of November two it on tiny.

We also continue pursuing potential gross channels outside a cash quite evident.

Backed by our robust on short there may be a liquidity position.

We are optimistic about the long term gross calls back on you initiated related to providing early childhood education services and we'll be happy to share more details when we a half concrete progress.

We are keeping a close watch on other factors that may impact our business, including the lobby regulator a vision for on my cash credit business. Meanwhile, we've been actively adapting to the rapidly changing environment and are confident that on a strong fundamentals.

To help us push you can sustain long term gross.

Now, let me share with you some key financial results.

In the interest on time I would not go over the line my line from.

For a more detailed discussion Arthur what acted on 20 results. Please refer to our earnings press release.

So our total revenues were 849 million in a b, representing a decrease of <unk>.

67% from a and B 2.6 billion, but there was a after a 19.

Our net income totaled 487 million a beep.

Representing a decrease of 39% from 798 million and maybe for the third quarter. After a 19 as a result on a decrease in average on balance sheet loan balance.

Non facilitation income and other related income decreased by.

70% to 177 million game and be from 583 million, even beat for the third quarter of 2019 as a result on the reduction of transaction volume of off balance sheet loans during this quarter.

Partially offset by a reclassification of guarantee income yeah, accordance with a and C D to C.

Transaction services fee and other related income decreased to 6.6 million, even be from 993 million and maybe for the third quarter of 2019, mainly as a result of a substantial decrease in a transaction a month of open platform.

Our sales income increased to 139 million from India from 135.5 million, even beat for the third quarter of 2019, mainly due to the launch of the wanting new ecommerce platform, partially offset by the reduced sales income from.

Now the auto business.

Total operating costs and expenses decreased by 93% to 100 million in India from 1.4 billion and before the quarter a 2019.

Provisions for receivables and on assets decreased by 87% to 19 million even be from 691 million maybe for the thought what her a 2019.

The decrease was primarily due to a decrease in past due on balance sheet outstanding principal receivables compared to the third quarter of 2019.

Net income attributable to she didn't share holders was 592.

They're getting a beat.

Or 2.2 to even be per diluted share ideas are.

Our non-GAAP net income attributable to a she gets shareholders was 576 million in maybe or Super Onesix GAAP.

On me be per diluted adss.

With that I will conclude my prepared remarks, we're going now opened a core to question operator. Please continue.

Thank you ladies and gentlemen, we will now begin the question and answer session.

If you wish you asked a question now please press star one on your telephone on lights for your name to be announced if you wish to cancel your request. Please press the pound or hash key.

The benefit of all participants on today's call. If you wish you all should question to the management in Chinese. Please immediately repeat your in your question in English once again, ladies and gentlemen, if you wish you asked a question now please press star one.

[noise] Oh first question comes from the line of Jackie sourced from China Renaissance. Please ask your question.

Hi, Nick.

Hey, good glu blank on much on how good she a good well, it's you know again a huge.

Galinsky sounds you got a you.

Good to Chicago, New Jim what GPS a.

From a woman she came to shoot a the only good people it's been change a cheap on balance you agree more of a push on.

Not to shoot a gun type nobody Tony its Oh Gee, that's usually a.

No problem.

Woman she gave a good they see total.

Just a people did you end up on that even a more sure Jones from wish with algae go to Jim what you see.

A a whole New York Olin tissue blame it on Monday. She gets you do a tissue a phone on hours that we show a nice on Lisa a peak a shouldnt due to a car into class a woman take a male leases book School.

A lot secrets, it will take a g. goods and on that you guys are actually going from a multi job job.

Oh, you when he to Chicago page on our New York She's here with a book.

Thank you Glenn you talked quite a known <unk> Goldman Sachs.

Hi day, you should see a a good you get a year war bump cool she goes a little so I will try a AAA my questions a so.

Oh, Thanks for taking my question I have a a couple of questions to a.

So a number one is a policy regulation.

I understand a a a majority of our a currency a lending a is using a capital and a mentioned on just mentioned the.

Yes on line micro lending a.

A document so a just want to ask on whether this document will affect our current lending model.

Second question, it's been a cover a new loans and a new borrowers I'm I'm a serve bad so we actually saw a recovery on a loan origination a sort of quarter. So a can management share some color regarding a new acquisition, a new bar acquisition and the a new.

Borrowers number in a sort of color and lastly is all about our new business a in.

NB or a early age from a child education. So any color will be helpful. Thank you.

Thank you Jackie if all the questions I'll address them one by one so as you know we were not using and Michael credit license for our loans disbursement a instead, we are using a trust structures on a day and all other funding it from our on equity so up to now we don't have any.

Well, we don't have a note noted aiming regulations regarding a this there's a kind of trust structure a loan disbursements yet.

A as you know directly rate rate environment, He's never changes fashion day in China will pay a close look a ah Ah onez regulation changes, if anything changes, which will go a GAAP very fast.

Your second question regarding a new borrowers actually Witt <unk> well our approval rate what a new borrowers is a close a deal in this quarter. It seemed like last quarter. So then the number of new <unk> and he's got a minimal.

Your third question regarding a our new bins initiate it is actually a during a debt early stage a the business is about the consolidated offline on early childhood education centers.

Moving to give you keeping investors society more colors, where we have a a more concrete business.

Thank you think a jacket on question.

Thanks.

It was a very helpful.

As a reminder, ladies and gentlemen, if you wish you asked a question. Please press star one on new television.

[noise].

Our next question comes from the line of a Sungy Gen from a lead your cat Dole. Please ask your question.

Hi.

Thank you for the presentation on just a couple of questions a.

The first one a can you give us some idea on.

About your gross line on the lending side in the fourth quarter.

Our next year.

I know the regulatory landscape is evolving.

Bart.

Oh, Yeah Youre.

Moving seems to have done, but I believe you can give us some idea on how the loan book on what all the origination on the balance could go.

And the second question is on a on the move.

Hi, good so we're about $90 million.

Third quarter seems to be very small we bought a business that in theory should be doing bad you know ecommerce booming Oh and a new gold they are.

People are probably ought to be more so on line. So are you happy with a program or want to be more so far.

And a big deal came on board I know a.

Yeah, no condition, the new you'll be able to share the economic Oh, Doug. Thank you.

Thank you a sanjay a a just a question on I want so first a four as you know that a that industry landscape is ever changing so before things get crystallized, we will we'd like to still keep on Wednesday. It was cool so the.

On loan volume in a fourth quarter would be very similar to the level in a third quarter. We don't have a visibility for next year it yet a.

I'm, so sorry, but I can't answer your question about looking into next year.

So same question about are a luxury ecommerce platform, we didn't spend much money on a promotional spending on a subsidized oh on this luxury pack. One. So that's why you may notice that the sales income from the white a move back on isn't as much as the premier.

Quarter.

Before we see a there a strong demand on a and b repeat purchase on the stock one well maintain a little keep a low a small scale from operation for the luxury business.

Hope that answers your question.

Okay. Thanks, one follow up.

On a lending side a.

You know for the fourth quarter, a second quarter, Youre, saying youre not showed a back a quality things youre not showed up the.

Jim on a and now of course that is there a regulations are going to be a good bye.

At least from the US a quality side looks like a things are purely book.

So why are you not getting more confident about gross.

At least on balance sheet side, and do you intend to restart open platform a on or some other margin. Once you become a feeling more confident so and that you are still going to be bad things on the lending business a foreign.

For next year.

Sure actually would you see a quite a number on a day and then from the regulators recently, a most of them. It doesn't have any impact on our current business, but as we can see from the steaming on the tone from a regulator is kind of more towards the tightening side.

Oh for a one just on like cash credit business.

I'm, a we're not sure either so for now we're just stay where we are on the stuff that loan volume on for the fourth quarter was a very similar to the previous one although we see a good improvement in our asset quality.

Would do not rule out a possibility that we make a restarted gross again.

Right now when when when regulators adult English changes day, there's a would you hope to keep on I think a school.

Okay. Thank you.

Interest engine.

Your next question comes from New line, a Stephen Chen from high total International Please ask your question.

One income on so to me only on one day. These are just see a understand change orders are just wondering do you see any day and I'm seeing enjoyed a five point and a.

I Oh, she was a high <unk> each you're talking about a new songs are you, saying Oh Gee you did a good example on <unk> sold on a there's a no sooner than say a whole day I always share usually I was a ci a whole day do you actually to a we line and local agenda tight on <unk> or a c. It seems on the died went on.

A what do you like Oneq I, Oh boy a.

A quick jet at once orders <unk>, Yeah type C income and.

Thanks on the need to seek a C.D. the Wendy good one do you just see.

Sure.

A woman did you do still enjoy a scene, Georgia and they said they play a hold any contractual on okay on guns onto the top adult day, we'll try and do those young people seem to hold a a follow up on I told a hot water on what do you use a whole you book where are you type deal what C.D. dual.

I'm, sorry, I'm talking Monday, a dumbbell bump on what does a world class a guaranteed income new client how you'll just see a woman or did you do a sunday to come down to a degree or a.

A ball beat a we book doorway top model a.

A <unk> not there's a whole seems on I did a deal you got a financing income.

A what it does it hard to publish on a full receivable.

It doesn't change I use a two yeltsin day in and I wouldn't be I will translate into English first of all a I'd like to on a what is the latest lending rate on you on new loans a it.

A have you looked weighted to below 30% on a as most of your peers has already a cut stay a lending rate often a new originations even keel free hmm on what.

It'll be the outlook on your lending rate a in the coming quarters. That's the first one and second question just.

In case, you'll a no growth in Q4 on on volume in Q4, a mainly.

Mainly related to you the on balance sheet a own on equity expenses, so would that imply that for the line off a loan per se tasting income in a other when they take a income you, especially when they took a rent to income and a line related to changes in a guarantee liabilities M risk. So.

On slide 18, which was weighted to some write bad infill fishing is a will need to also see rule and find a quota share gains.

Thank you Steven So regarding your first question, we didn't change our a pricing policy a.

Yet there's still left on 36% and for a second question regarding to a off balance sheet Garik income and changing a gain of a guarantee liabilities on Diaz is a.

No, it's not going to be a totally got be zero, because as you know the off balance sheet before regarding the off balance sheet loans. We book a portion of initial revenue and the other a will be released Inc. All or a revenue line later on I think on to income.

Because as we see a and better than expected delinquency rate trend on the changes in gain in a losses I've got to grab a huge might be a gain on gain a game internet a in <unk> in the fourth quarter, a if the trend continues.

The same thing on Susie a but my question is that but he's on my rough estimate on the off balance sheet a guy.

One day business from the.

The remaining amount a trusts maybe around <unk> point for a.

Maybe a run full a.

400.

A millennial a 400 billion, so I and ER and your average 10, a talking about you know just a run full months so [noise] even.

Even if the two line may not be seen real but it will be a will there be continued to decline a very minimal and do you expect food a right back in provisions its.

Is there a possible as we can see that they want a liquidity continues to a continued to reduce up to now.

Thanks.

Once again, ladies and gentlemen, if you wish to ask a question. Please press star one on your telephone.

Thank you if there are no further questions.

I'd like to turn the call back to the company for closing remarks.

Thank you everyone. Once again for joining us today, if a have further questions. Please feel free to contact treaty on Investor Relations team. Thank you.

Thank you. This concludes the conference call you May now disconnect. Your line. Thank you.

[music].

[music].

[music].

[music].