Q4 2020 Yiren Digital Ltd Earnings Call
[music].
And good day and thank you for standing by.
Welcome to the year and is it the fourth quarter and fiscal year 2020 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the.
You will need to press star one on your telephone.
If you require any further assistance, you stress and stop and fuel.
I'd now like to hand, the contract until what your first speaker today.
The argue if they go from here.
Thank you and welcome to Aaron's and tell us for fourth quarter and fiscal year 2020.
And the session conference call today's call features a presentation by the founder Chairman and CEO of credit E and C. O M. You didn't repurchase all the Sterling Hep C O M and credit and that's my job and CFO off your interest.
And it's not me.
And C R.
And that's where scale and they said that they were.
And well try different sector.
Iridium.
Before beginning we would like to remind you that discussions during this call contain forward looking statements made under the safe Harbor progression from the U S. Private Securities Litigation Reform Act of 1995, such statements are subject to risks uncertainties and factors that can cause actual results to differ materially from those contained in any such statements.
And if.
If it makes them regarding potential risks uncertainties or factors is included and it isn't until filings and so you, let the securities and Exchange Commission.
And it felt like.
Not undertake any obligation to update any forward looking statement, except as required under applicable law.
During the call, we will be referring to several non-GAAP financial measures and supplemental measures to review and assess our operating performance.
These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for financial information prepared and presented in accordance with U S. GAAP.
For information about these non-GAAP measures and reconciliation to GAAP measures. Please refer to our earnings press release.
And now that's a long thing for opening remarks.
Thank.
Yeah.
Thank you all for joining our fourth quarter and full year, 2020 earnings Conference call.
Looking back the.
The year 2020 was then and usual year as we faced a complex macro dynamic.
Input.
From the pandemic and and evolving regulatory environment.
Despite that we're pleased to have accomplished significant milestones and continue our progress and our strategic transition to further solidify our position as.
As China's leading digital personal financial services platform.
Before I go further into detail with the business updates.
I would like to highlight three key milestones that we've achieved in your 2020.
First.
We completed our business restructuring at year end.
You, which we spun off our legacy P to P operations.
The spun off operations will be run independently to focus on is smooth transition and the winding down.
And we expect.
Many investors of our legacy products to transition to our other wealth management products.
The restructuring will allow ear and digital to solely focus on our strategies to grow our wealth management and the loan facilitation based credit tax businesses.
And this is with full force going forward.
Secondly, our wealth management and business has achieved significant growth with strong demand.
With the revenue generated from our current wealth management products.
Clothing, our legacy products.
Accounting for 31 per cent of our total net rather new in the fourth quarter.
From 12% in the third quarter.
Yeah, well has also finished and strategic rebranding and the reposition itself as the one stop asset allocation based.
Professional and wealth management platform.
Dividing our clients with the.
Wider range of well selected product and optimize the services.
To date, you know well has established a partnership with over 60 financial institution and provides over.
With all the and products to meet the comprehensive needs of China's mass affluent customers.
With both strong products and service offerings and the significant growth of your Investor base.
We expect our wealth management business to provide strong revenue per country.
And to our overall business in 2020 one.
Certainly as part of our one stop asset allocation strategy.
To further enrich our product portfolio and services.
We acquired and insurance broker horse yeah.
In 2020.
And to initiate our insurance business and it has been growing at a significantly better than expected rate.
Bring in strong synergies to our other wealth management products and services.
Position as a comprehensive.
First broker with both online and offline channels.
Of course, you all have so far established partnerships with over 150 ensures nationwide.
And offers over 350 insurance product.
M a ring life and profit.
And she and casualty insurance.
Serving both individual and corporate clients.
Clear channel business priority in 'twenty, and 'twenty, one will be to introduce more new products and to increase the proportion of higher take rate products such as life.
Life and health care insurance to further drive the profitability of our wealth management business.
Now I will provide a business update all our wealth management business and.
And then pass it over to MS may job C O of ear and credit to give an update on our.
Our credit business.
On wealth management, we continued to see impressive growth momentum and other demand remains strong going into the year of 2021.
At the end of December 31st 2020 total client assets.
For our credit products.
[noise] exclude other legacy products increased by 71 per cent from prior quarter to RMB eight 6 billion.
In light of the joined notice issued by the P. B C and D. C. P. R C.
And regulated and commercial banks to come back to personal deposits businesses through the internet.
At the end of January we have stopped the facilitating online bank deposits and shifted our focus to other wealth management products.
All lines.
Deposits represent only a small portion of our revenue from investors.
And the financial impact of this adjustment on our business will be minimal.
Meanwhile, our fun products remain the topic among investors.
With.
Total client assets and fund products, increasing by 10% quarter over quarter to RMB, One 5 billion and then the average investment and fund products per Investor reached RMB 61000.
And as of and the fourth quarter.
Particularly ourselves selected fund our portfolio of products.
Enjoy a high demand due to strong performance, which will become a main growth driver going forward.
Moreover, we also plan to launch a new securities brokerage business and the second quarter.
This year.
Which will further enrich our wealth management offerings.
And to provide investors with high quality services to the financial markets in both the U S and Hong Kong.
Targeting the mass affluent and high net worth population.
With distinguish ourselves from.
From other online brokers with differentiated value a wider range of product and the quality of services.
Including customized one on one.
Investment consulting services, and the bond and the products.
So there are a lot to expect in our wealth management business.
And it's this year.
With that I now turn the call over to Matt who will highlight some key updates for our credit business.
Thank you and me and.
Hello, everyone.
And now provide and.
Our credit business.
And then.
We continue on our App.
Our growth.
The fourth quarter.
And in Q2.
Clutter and stuff the gorilla and the loan volume how can you guys closed from your strong.
Our product mix changes significantly in your 2020.
And long resolving.
Yeah.
And a secured auto loan growth into the army and Robin Hill country.
And good hers.
We continue to drive up to scale.
And the fourth quarter after 2020 two.
Together accounted for 87 per cent of the total loan.
Operating income as compared to 67% and the court and there are a Q.
Q4 Q.
Art.
And the proportion has already existed and.
90% now.
Compare with and cheer to standard of long products.
To show.
Show that and with the performance and enjoy a higher unit economics.
To enable us to further drive up the profitability going forward.
Particularly and.
Worth mentioning that our continued efforts and the product design and innovation and stuff.
The plane and increasing ROE and the driving growth for.
And he said why the product has been upgraded to a robust integration nothing new.
Low and the high credit limits and revolving product.
Leveraging years off the outstanding products and injuries and experiences.
And.
And have also expanded our ecosystem wins.
Our organic compression with the traffic consumption platforms and.
And also build our own E comm and small.
The product better serves our customers needs out of cash flow and construction.
And wrong.
We pilot.
And that new product and the third quarter and lots a year and.
And.
And maybe its success.
Yes.
Alrighty and increasing to 46 per cent of the total volume for it and you've got flat and core four.
Meanwhile.
We are also exploring to offer a new value add services and products and now also relate to the ecosystem.
And also insurance wage and potential new IRA off the growth and the revenue leveraging right down and insurance broker license and.
And can we bring.
Father energy into our business.
Furthermore, our operating efficiency shows and visit visibility improvement and we are continuing to enhance our operating capabilities.
Customer acquisition cost of free you sound quite decline to around 2%.
And called for from close to a.
3% last quarter and on the only one site, we deepen our cooperation with the internet traffic and platform.
On the other side receivable has achieved and improving growth at a lower cost.
And as an increasing portion of the customer is re borrowing using the revolving product feature.
Product approval rate also show visible increase as we further refined and our marketing strategy and credit underwriting capabilities for.
And for auto loans.
And the approval rates reached 75% in Q4, a historical high.
Two our continual efforts to better target customers and with higher credit quality.
Lastly, our asset quality continued to improve as a result.
And of our ongoing efforts and tightening up our risks of control shifted to better credit quality customer base and swipe transitioning into the product with a better risk and performance.
Our vintage risk and performance has consistently and.
True.
Quarter by quarter with the concrete contests, and two and integration not the joint risk and manage a language consumption platform.
Condition per.
And the collection and risk management.
Our 15 to.
89 days delinquencies.
And ratio is one 7% to our container business as compared to 413 per cent for our overall business as of the December.
31st in 2020.
We expect our asset quality to witness.
Our father, Concreting Kirkman and in 2020 first.
With that.
I will now pass it to our Seattle, now who will provide a financial update.
Yeah.
Hello, everyone.
And Nashville.
And I think.
Hello, and focus on key items.
And its operations.
And it sounds like fun.
Okay.
Oh and indeed.
Debt.
Okay.
Oh Wow.
Sure.
And I'll highlight.
Oh Wow.
Wow.
That's all.
Yeah.
We'll have growth closer to them quite well.
Under the total number.
And I'll cover for that.
Absolutely.
People keep put out it goes from 200.
Thanks, a lot.
And I think.
Oh.
Oh, Yeah for M D.
Plastics meeting.
From here.
Other cladding site automation for the culture.
Need for clients to eating.
Or do you want them from.
Oh.
And also alone.
Our small we weren't alone.
Hi.
And two hours of our low volume growth.
Starting from this call debt.
Our quality people.
Hum.
Hello.
As a model whereby funding for loan quality.
Uh huh.
And so our funding partners.
Cloud enabled occasion and fulfill it.
12 common right.
Also all from here.
And so fourth quarter total revenue from.
14 confirmed from cloud culture.
And B.
And one class to eating.
And you need to change.
Moving to transportation.
While seasonally.
Oh, Weldment and gives me a call.
A meaningful contributor to revenue.
And so that's one thing per se.
Other income.
Hum.
Okay.
From.
And I would call her maiden.
And deal with it.
Sure.
Well.
Our public and coupon.
And most of them for free.
And I'm glad with continental and be one.
Sales.
And the market.
Great.
So from microphone from.
Some kind of a contract with M D.
200 and imagine.
Thanks, a lot and be meeting.
Uh huh.
And as a major component of our sales.
Hum.
This quarter.
Blowing by it.
And so akamai.
Okay.
Oh, we don't know.
Oh Wow.
So I apologize for that.
And seven meeting.
Okay.
And so it's cost plus interest.
Oh, Hey.
China also resolved.
And for.
Last one.
A lot will come from.
And what's wrong.
And the fun meetings and calls that you called him from Florida.
No volume.
And sales.
Okay.
And so far from them.
No.
Loss of disposal.
And all of them.
Hum.
And then meeting its a one time loss either.
And so all seasonal sales contracts.
Total population.
And he was off model.
Hello, and until the ink.
And my hometown.
And in coding.
Hum.
Got it.
Net loss for the call her was at M D.
And <unk>.
Moving.
Excluding gains and one time impact.
Non-GAAP income.
M D.
Pardon me.
That's right.
That's up 21 per se.
Oh and culture.
And the balance sheet side, our cash position.
And we need to.
No problem.
And of cash and the sheltering and Watson.
And some are looking for and steps on page 20.
20.
And with all these things.
Oh no.
I would like to emphasize that I'm gonna translation and upgrade all kinds of fees.
So our loan facilitation model and the price.
Good day.
From a single Standalone quota so focused on debt was caught up with that.
And with good performance and the hot new potential coupled with a strong growth.
Momentum.
And.
I'll continue with evenings.
And the wheel hub.
And our strong financial from Us.
Looking into 2020 one.
New wealth management and sales volume.
Haven't put out a range of M be plenty and medium to long beach.
So do you mean.
Total loan facilities to be the range after and with the Trump and meeting with them and be at 25 meetings.
It's forecast to price, our current and preliminary view other market and operational conditions, which are to try to change fees.
Comfortable with our closing remarks, operator, we're ready for Q&A.
And I'll talk.
Yeah.
As a reminder, if you wish to ask a question. Please press star one on your terms.
The phone.
Enjoy your question press, the pound or how should keep.
And once again and its star one to ask a question.
Yeah.
As a reminder, this charter from like the number one on the telephone and keep up.
Ask your question.
Do you have a question.
Coming from the line of Matt <unk>.
And from National Securities. Please go ahead.
Thanks for taking my call.
Uh huh.
And just kind of a complicated quarter, Fred and from what I understand you've disposed and the legacy P to P business took a charge and you're focusing on higher quality micro lending and asset backed lending with the auto loans.
Plus you're building out.
Wealth management.
M platform.
And Youre doing so because you have a legacy.
Client base that you have had frankly since you went public I was at Morgan Stanley When you went public.
And in December 2015.
And I.
And I think you were really the first P to P.
And to do so and we're very successful and until that business.
You know got regulated that but.
Other companies have transitioned like.
In particular.
M I could suggest that.
It's been evolution, which used to be close something else has successfully transitioned their PDP business.
Two a M.
And <unk>.
And what's the term they use a well what.
What are they forget all their funding from the banks.
And you decided not to go that route.
And I think your best.
These people and you're transitioning into.
M.
Asset management and mutual funds things like that and then letting from money.
The thing that caught my interest was that and the second quarter. You help you you should have a brokerage unit setup fees, that's really where youre seeing some super growth at least and.
And some companies that are listed here Tiger food.
Food too.
And.
And and because of a M.
Real interest and trading securities.
And brokerage that we're seeing globally.
Could you give us any estimates about how that's.
Going to impact your earnings and revenues because the other the growth of the businesses you've just discussed.
And good but it's coming from a very small base, you know your growth and insurance and.
Assets under management are still quite small.
And.
And I'll conclude with one of the assets that is appealing to your company and if you have a huge cash position relative to your market cap, but as far as the growth of earnings could you give us any guidance of what you can expect for 2021, and particularly if you get the brokerage unit up and going.
Thank you for the question and this is mean and I'll take a crack and our other colleagues including.
Including the Denny's can provide them more details and Oh.
A couple of thoughts are one and stopped.
So they are on the borrower side.
On the credit tax side.
We do have this loan facilitation model.
Doing very well.
Growing <unk>.
Cost.
Actually we work with.
Banks, which provide funding to borrowers.
And on that from our very unique strength is in our online offline combination model.
Which is we have online capability.
And we also have.
At a national.
Physical.
And that's what.
How peanuts due bad how credit assessment work.
For certain types of credit business.
And that's for the borrower and side of the legacy.
P.
And on the lender side now is becoming the wealth management business as you correctly described.
Also we have the insurance part that is growing fast.
They're being both.
See the borrower side.
And the Investor side.
And the.
Online brokerage business.
We'll go lives.
And.
The second quarter did.
This is weak spot.
Both a.
Value driver for our business.
We have the investor base.
Which we like to serve better with more service offering.
Like the online brokerage.
Offering.
Oh, Yeah. This is going to be a key value driver in my view, but other businesses. What we just discussed like the long supposed to mutation credit to attack business.
Our wealth management.
So portfolio.
Business.
As was the insurance business in my view.
So high quality businesses that clients really like and that the company will benefit from.
Yeah, Thanks, Ming and and me at a very cute.
At this point.
I think a new.
You mentioned the P to P transition and it's actually a very successful underway.
And.
Eric.
Continuing to work on the credit.
Besides as we mentioned on the wealth manager.
Listeners are if you look at the Q4 revenue contribution from the.
And the pure was men and business with us.
Excluding the legacy PDP business completely.
And the revenue contribution and so.
And reaching 31% that's quite significant compared with only 10% in Q3.
Clearly demonstrate the momentum and the business demand from our large investor base.
In terms of the book online broker business.
It's one part of our overall asset allocation strategy for our mass App and.
Extra days in China, because they have their demand for our mutual fund bank products insurance, but they're also interested in capital markets.
Already and we see stronger.
Demand from customers, especially in 2020 and.
The overall capital markets, and it's becoming very active in China, and and we believe providing these online brokerage services.
Help us to better serve our.
Our client base and.
And provide synergistic.
The opportunity to get more up their assets and they're all.
And our platform and then in terms of how much contribution from wealth management business and.
If you look at the sales volume guidance and you probably see.
And.
The loan business, we're looking at growth double for the sales.
And the wealth management fees were also looking at significant.
Gross potential year over year.
So which means that they over a wealth management business on our platform will become very meaningful part of the.
And for a whole platform and of course right now for the online brokerage business will start serving our existing customer first but as you have mentioned, it's a very hi.
The high growth market in China, and we expect to expand that into larger.
Per se.
The opportunities as the business matures.
Okay. So.
It looks like you're transitioning from your legacy P to P business.
And two just a full service wealth manager.
And where are you you're offering a collection of loans.
<unk> asset backed loans, and so unsecured loans still but not P to P are these would be.
Hum.
What do they call them.
Well.
<unk> share directly through banks, and and then you're offering insurance and then a M.
And the future brokerage so that you have a legacy.
Client base Okay.
Very large one debt.
Emanates from years back when you were a Peter P lender, but you can leverage.
Funded our relationships from these people.
And move them into a more traditional investment products and loans that are.
I guess.
Looked upon more favorably by regulators because the P to P business of course has to be.
And the downsized or converted and the other companies like $3 60.
Finance.
Lexing Fintech and like you know I don't know what else is there over there and that and the PRC day.
And have successfully gone too.
You know the the.
You know that light.
Hum business model and with a different successes.
So.
So and then I correct in and.
And defining your company has kind of a full service.
Wealth manager offering.
A number of products and.
And benefiting the investor.
From the new there's a massive growth of this type of business.
For people and the PRC is as People's interest and.
And.
And products.
Uh huh.
<unk> growth because there's a lot of wealth and generated over there and maybe less will be directed towards real estate and more towards investing.
Investment products and loans as that and accurate way to describe your company.
Yes.
Okay.
And then last question because I.
And I didn't have much time to really look at the the earnings release.
One of the attractions to me and then I'm and I've.
And and investors there from not only putting new went public way back when and at Morgan Stanley and I M.
But recent.
Maybe because.
And your company's been repositioning itself and derisking and reducing the risk.
And particularly with the with getting away from the <unk> business, but you have you've had your balance sheet has been extremely strong.
And it looked like your cash balance.
Recently has declined quite a bit even though it's still quite substantial can you give me a sense of where your cash balances right now.
And he debt versus say last quarter.
Yeah.
Thank you.
Uh huh.
Okay.
Our cash balance.
And the category.
There can be true.
Of cash and the caffeine.
Uh huh.
And.
About the.
About the cash deposits.
Yeah.
First off the car and Joe.
So 2.6, and I'm trying to do the conversion of.
That's over 400 million is that and accurate.
Way too.
And net cash is that reasonably accurate.
Yeah about and.
New and U S right and then if I just I'm a value investor keep a certain degree.
And so if I look at the market cap of your of your company I mean, you're trading essentially at what the cash value is worth.
Give or take a bit so so if if if.
Within that framework, you have and extremely strong balance sheet to grow out your business.
And four and Investor.
Kind of getting the sense that you are.
And where it can grow the business dramatically over time, but in the meantime, one can own Ah, you're a year and digital.
Essentially what the liquid assets are worth of cash and would that be an accurate assessment.
Thank you for thinking that.
<unk>.
Okay. Good that's the way I think alright listen thank you very much I appreciate your time and Oh, let somebody else ask a question, if there's anybody else and the Q.
Have a nice day.
Thank you.
And once again as a reminder, it is star followed by the number one and your telephone to ask a question.
Once again and they just don't want to ask a question.
If you have no further questions at this moment ladies.
Ladies and gentlemen.
Today's conference call. Thank you all for your participation you may disconnect from now.
Thank you.
[music].
[music].
[music].
[music].
Good day, and thank you for standing by.
Welcome to the <unk>.
And if it doesn't and fourth quarter and fiscal year, 2020 earnings Conference call. At this time, all participants are in a listen only mode. After the speakers.
And the presentation and question and answer session to ask a question. During the session you will need to press star one on your telephone.
And he for the assistance these strength staff and field.
I would now like to hand, the contract until what your first speaker today Lithia argue these take all of them.
Thank you and welcome to Aaron's and held for fourth quarter and fiscal year, 2020 earnings Conference call. Today's call features a presentation by the founder Chairman and CEO of credit East and C O up and didn't default and the Sterling Hep C O M and credit and that's my job and CFO up here and just does not make.
And see our offense and help.
Mr Dorf, CEO and Mr desktop the restaurant and.
Well try to put that Jerry Q&A session.
Before beginning we would like to remind you that discussions during this call contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995, such statements are subject to risks uncertainties and factors that can cause.
Actual results could differ materially from those contained in any such statements for guidance.
It makes them regarding potential risks uncertainties or factors is included and it isn't until filing the U S Securities and Exchange Commission.
And there's other does not undertake any obligation to update any forward looking statement that is required under applicable law.
During the call we will be.
You're referring to several non-GAAP financial measures and supplemental measures to review and assess.
Our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or a substitute for financial information prepared and presented in accordance with U S. GAAP for free.
Oh from making about these non-GAAP measures and reconciliation to GAAP measures. Please refer to our earnings press release.
I would not have and opening for opening remarks.
Thank you yeah. Thanks.
You all for joining our fourth quarter and the full year 2020 earnings Conference call.
Looking back.
The year, 'twenty, and 'twenty, what's and and usual year.
As we faced a complex macro dynamic with impacts from the pandemic and and evolving regulatory environment.
Despite that we're pleased to have accomplished significant milestones and continue our progress and our strategic transition.
Transition to further solidify our position.
As China's leading digital personal and financial services platform.
Before I go further into detail the business updates.
We would like to highlight three key milestones that we've achieved.
And in year 2020.
First.
We completed our business restructuring at year end.
Yeah, which we spun off our legacy P to P operations.
The spun off operations will be run independently to focus on is small.
Transition and the winding down.
And we expect that many investors of our legacy product to transition to our other wealth management products.
The restructuring will allow ear and digital to solely focus on our strategies to grow our.
Our wealth management and the loan facilitation based credit attack businesses with full force going forward.
Secondly.
Our wealth management business has achieved significant growth with strong demand.
With the revenue generated from our current well.
Wealth management products, excluding our legacy products accounting for 31 per cent of our total net revenue in the fourth quarter.
From 12% and the third quarter.
Yeah, well has also finished and strategic rebranding and the repurchase.
<unk> position itself as the one stop asset allocation based professional and wealth management platform per.
<unk>, our clients with a wider range of well selected product and optimize the services.
To date, you know and well has established a partnership.
And our ships with over 60 and financial institutions and provides over 4000 and products to meet the comprehensive needs of China's mass affluent customers.
With both strong products and service offerings and the significant growth of your Investor base.
We expect our wealth management business to provide strong revenue and contribution to our overall business in 2020 one.
Certainly as part of our one stop asset allocation strategy.
To further enrich our product portfolio and services.
Yeah.
We acquired and insurance broker Hello, Yeah in 2022.
To initiate our insurance business and it has been growing at a significantly better than expected rate book.
And strong synergies to our other whilst.
Service and product and services.
Position as a comprehensive insurance broker with both online and offline channels.
Hershey has so far established partnerships with over 150 insurers nationwide and offers.
And that's where 350 insurance products covering life and property and casualty insurance.
Serving both individual and corporate clients.
Clear channel business priority in 'twenty, and 'twenty, one will be to introduce more new products and two <unk>.
Always the proportion of higher take rate products, such as life and health care insurance to further drive the profitability of our wealth management business.
Now I will provide a business update on our wealth management business and then pass it over to.
Increase may job C O of ear and credit to give an update on our credit business.
On wealth management, we continue to see impressive growth momentum and other demand remains strong going into the year of 2021.
As the and.
To me, it's under 31st 2020 total client asset for our credit products, which exclude other legacy products.
Increased by 71 per cent from prior quarter to RMB eight 6 billion.
Yeah.
And the joined notice issued by the P. B C and D C b or C.
Regulated and commercial banks to conduct the personal deposits businesses through the internet.
The end of January we have stopped and facilitating online bank deposits and the.
And like our focus to other wealth management products.
All lines and deposits represent only and small portion of our revenue from investors that the financial impact of this adjustment on our business will be minimal.
Meanwhile, our.
Our fun products remain the topic among investors.
Total client assets and fund products, increasing by 10% quarter over quarter to RMB, one 5 billion and and the average investment and fund product per year.
And that starts reached the RMB.
Shifting to 1000.
As of and the fourth quarter.
Particularly our self selected fund our portfolio of products enjoy a high demand due to strong performance, which will become a main growth driver going forward.
Moreover.
We also plan to launch a new securities brokerage business and the second quarter this year.
Which will further enrich our wealth management offerings.
And to provide investors with high quality services to the financial markets in both the U S and Hong Kong.
And the mass affluent and high net worth population.
We distinguish ourselves from other online brokers with differentiated value a wider range of product and the quality of services.
Including customized one on one.
Investment consulting services.
And following the products so.
So there are a lot to expect in our wealth management businesses. This year.
With that I now turn the call over to Matt who will highlight some key updates for our credit business.
Thank you and me and.
And the other one.
And now provide and.
Our credit business.
And then.
We continue on our.
Upward growth.
And the fourth quarter following two consecutive quarters off the gorilla and the loan volume.
Peanuts closer years strong.
Scott.
And how long they.
And your 2020.
And long resolving product.
And and secure auto loan growth.
True.
Robin Hill country and theaters.
We continue to drive up the scale.
And the fourth quarter after 2020 eight.
And next gather accounted for 87 per cent of the total loan.
And as compared to 67 per cent and the court and there are cute.
Q4 acute or start.
And the proportion has already existed and.
90% now.
And can take on per with.
And she had a long products.
And to show.
So that and risk.
Funds and they enjoy a higher non.
And next which enable us to further drive up the profitability going forward.
Particularly.
Worth mentioning that.
And our continued efforts and the product design and innovation is a plane and and.
Increasing Roe and the driving growth.
For each and why the product has been upgraded to a robust integration nothing new.
Low and the high credit limits and revolving products.
Robert.
And yes, it's off the outstanding products and and the risk and experiences.
We have also expanded our ecosystem wins.
Our organic compression winter traffic consumption platforms and.
And also build our own e-commerce and small.
The product better serves our customers and needs of the cash loan consumption zone.
And we pilot launch this new product and the third quarter and lots a year and he has seen and immediate success with volume and alrighty and increasing to 46 per cent.
Of the total volume for it and kind of flat and core for me.
Meanwhile, we are also exploring to offer a new value add services and products and not all towards the lithium and ecosystem such as auto insurance wage and potential new IRA off the growth and the Robin.
And the new leveraging cross selling insurance and brokerage license and.
And we bring further synergies to our business.
Furthermore, our operating efficiency shows and visit visible improvements as we are continuing to enhance our operating capabilities.
Or acquisition cost of free and you sound quite decline to around 2% and core.
And four four from close to a three.
And 3% last quarter as our only one site, we deepen our cooperation with the internet traffic and platform.
The other side receivable has achieved and improving growth at a lower cost as an increasing portion of the customer is re borrowing using the revolving product feature.
The product approval rate also show visible increase as we further refined and our marketing.
Operating strategy and credit underwriting capabilities.
For auto loans and the approval rates reach 75% in Q4 our.
Historical high due to our continued efforts to better target customers and with higher credit quality.
Laughter.
Lastly, our asset quality continued to improve as a result of our ongoing efforts and tightening up our.
M risks of control shifted to better credit quality customer base, and while transitioning into the products with the better risk and performance.
Our vintage and risk of performance has consistently improved from quarter by quarter with the concrete handsets and two and integration not the joint risks are manageable and Elizabeth.
Stuffs and platforms.
Acquisition portfolio and up collection and risk management.
And our 15 to 18.
And my days delinquency ratio is one seven per cent to our container business as compared to 413 per cent for our overall business as after December.
31st in 2020.
And we expect our asset quality to witness a fuller concrete improvement and in 2020 first.
With that.
I will now pass it to RCI for now who will provide a financial update.
Thank you.
Hello, everyone.
And that's what I think I will.
And our focus on key items, all fall season, and its operation and the financial Fulfillness owning it kind of like flow to the detailed financial results and all that.
These are debt.
Hockey post Oh, well that's.
Sure.
Okay.
And I'll highlight four oh, well for our wealth management fees.
Business.
These temporary purposes.
And as homepage will have close to a true quantum from Eaton and Watson under the total number of active and went to and I'll call reported us, it's clearly need to see people keep put up growth.
And from 200, Msas and pain.
And I'll come and put us, including two or seven times year over year for RMB eight six meeting and from September from.
And he's one of the quality side.
Automation for the culture, which is M D for quanta to eating representing.
And I believe.
31 per cent culture a culture.
And also alone and the East zone from all of a small world and loan courthouse continues to be the main driver of our loan volume from.
Starting from this quarter, our quality business model has transitioned to a pure loan facilitation model.
From a funding for loan is planned at 100% from our founding partner and.
We plan to have enabled bottle occasions, and facilitation ruling 12 hammer.
And for all financial deal and so fourth quarter total revenue increased from 14%.
Concerned about and plow, a culture for them and B, one constitute beating with a loving and needs continue to change as a result of business and translation although seasonally.
Oh, Weldment and business is becoming a meaningful contributor to revenue representing six 6%.
And that revenue this quarter other income growth significantly increased 19, five per cent from private culture, making deal to the red and our insurance business.
It also expands our total is has increased from 19% from plywood culture to M. B, one 7 billion.
Sales and marketing expense he quipped go from 9% from private culture to a and B 295 to one.
<unk> meeting for occupation.
Currently the major component of our sales and marketing.
And the decrease this quarter was mainly driving by organization.
And we loved true for us.
From an operational efficiency.
I'll I'll read and though and so it's expense increased 149% from Pilar culture, and 519, seven meaning mainly due to an increase and low service cost plus increased commission expense.
Moving to self China as a result of expanded insurance volume.
A lot of them will come from ISS, and the receivable with Lindsay and searching for quantify and meetings and culture.
And to silicon and 8% of loan volume as compared to say look on a per from last quarter due to improved risk profile.
And for farm, driving battleship and loan product mix.
Loss of disposal and Hong Kong offer them, if they've hundreds and $55 eight meeting its a one time loss recognized in relation to our business and structure.
Total consideration was determined using a DCF model.
That would fly and for future its pillows, it will be incurred and my hometown agitate and included and the fairness without issue and independent millennial.
Net loss for the culture, which is M. D 515, nine six meetings, including the one time impact as much about.
Non-GAAP net income from the quadrant, which is M. D 19 phase two meeting representing the interest of 21% and culture over culture.
And the balance sheets, and our cash position remained strong with it and be true Pas de fleeting of cash and the sheltering Westland and.
From December 31st.
Okay.
Before and with our business outlook.
And to emphasize that average translation and other.
Great, Okay, and your business model to loan facilitation model and.
The price from Friday, and a single Standalone, Florida for focus on Star Wars product with better risk and performance.
And the high earning potential.
And with a strong growth momentum and you know well excuse me.
I'll continue business has and will continue to deliver strong financial from us.
Looking into 'twenty, and 'twenty, one lease and wealth management and sales volume of copper and put us to be the range of M.
And be bumpy and meetings food and be certain meetings and.
Total loan facilities to be the range offering E train team meetings to renminbi and 25 meetings.
These forecasts.
Colin and the preliminary real other market and operational conditions, which has to try to change it.
Income from our closing remarks.
So pretty true lighting for one day.
Okay.
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Yeah.
And do you have a question.
Coming from the line of Matt Larson from National's Mccarthy. Please go ahead.
Thanks for taking my call.
Just kind of a complicated quarter it from what I understand.
<unk> disposed and the legacy PDP business took a charge.
And you're focusing on higher quality micro lending and asset backed lending with the auto loans.
And things like debt plus you're building out.
Wealth management.
M platform.
And Youre doing so because you have.
Our legacy.
Client base that you have had frankly tissue and public I was at Morgan Stanley When you went public.
And in December 2015.
And I.
And I think you were really the first P to P.
And you do so and we're very successful until that business.
And I got regulated that but.
Other companies have transitioned or like.
And.
Hum.
In particular.
I could suggest that.
It's been evolution, which used to be called something else has successfully transitioned their PDP business.
Two.
A.
Whats the term they use a well well what.
What are they forget all the funding from the banks.
And you decided not to go that route.
And I think your best.
And as it is your significant customer base, you're a legacy.
People and you're transitioning into.
M.
You know asset management and mutual funds things like that and then letting them money.
The thing that caught my interest was that and the second quarter. You help you you should have a brokerage unit setup fees, that's really where youre seeing some super growth at least and.
And some companies that are listed here Tiger food too.
And and because of that.
Real interest in and.
Trading securities and net.
And brokerage that we're seeing globally.
Can you give us any estimates about how that's.
Going to impact your earnings and revenues because the the growth of the businesses, you've just discussed and it looks good but it's coming from a very small base you know your growth and insurance and.
Assets under management and Theres still quite small.
And.
And I'll conclude with one of the assets that is appealing to your companies you have a huge cash position relative to your market cap, but as far as the growth of earnings could you give us any guidance of what you can expect for 2021, and particularly if you get the brokerage unit up and going.
Thank you for the question and this is mean and I'll take a crack and our other colleagues are including Danny.
Can provide them more details and Oh.
A couple of thoughts are one and stopped.
Absolutely on the borrower side.
On the credit side, we do hobbies loan facilitation model.
And doing very well.
Growing fast actually we work with banks.
Banks, which provide funding to borrowers.
And on that from our very unique strength is in our online and offline combination motto.
Which is we have online capability.
And we also had.
Have a national.
Physical.
And that's what.
How peanuts due bad how crowded assessment work for certain types of credit business.
And that's for the borrower and side of the legacy.
C P to P.
And on the lender side now, it's becoming the wealth management business as you correctly described.
Also we have the insurance part that is growing fast.
Sorry.
Being both the borrower side.
And the Investor side.
And the.
Online brokerage business.
We'll go lives.
And.
The second quarter did.
This is weak.
We expect a.
Value driver for our business we.
We have the investor base.
Which we like to serve better with more service offering.
Like the online brokerage.
Offering.
So yeah. This is going to be a.
Key value driver in my view, but other business is what we just discussed like the loans that's a mutation.
Our day to attack business.
The wealth management.
The bond portfolio.
Our business.
That's why it's the insurance business in my view and also high quality business.
Nancy that clients really like and.
And that the company will benefit from.
So yeah, I think for me and and at a very cute.
At this point.
And I think and Sydney.
You mentioned the P to P transition and it's actually a very successful and their weight.
And.
<unk>.
Continuing to work on the credit.
Sites I actually mentioned on the world's manage a business. If you look at the Q4 revenue contribution from.
The pure was men and a business, which is excluding the legacy PDP business completely.
And your revenue contribution is.
Already reaching 31 per cent, that's quite significant compared with only 10% in Q3.
Clearly demonstrate the momentum and the business demand from our large investor base.
In terms of the book online broker business.
One part of our overall asset allocation strategy for our mass App and our investor base in China, because they have their demand that's where.
And our mutual fund bank products insurance, but they're also interested in capital markets.
And we see stronger are you now a demand from customers, especially in 2020 and the overall capital markets and it's becoming very active in China, and we believe providing these online brokerage services.
Help us to better serve our client base and.
And and provide synergistic.
The opportunity to get more up their asset and all.
Our platform and then in terms of how much contribution from wealth management business and.
If you look at the and sales volume guidance and you would probably see.
And for the loan business, we're looking at growth double for the sales.
And after wealth management fees.
And we're also looking at significant growth.
Gross potential year over year, and so which means that the over our wealth management business and our platform will become very meaningful part of debt.
Oh platform and of course right now.
Online brokerage business will start serving our existing customer first and but as you have mentioned, it's at a very high.
A high growth market in China, and we expect to expand that into larger market per se.
The opportunities are.
The business mature.
Okay. So.
It looks like you're transitioning from your legacy P to P business.
And two just a full service wealth manager.
<unk>, where you're offering a collection of loans.
<unk> asset backed loans and some unsecured loans still but not P to P are these would be.
You know what are they called the book.
And with.
Fun to directly through banks, and and then you're offering insurance and then a M and the future brokerage. So that you have a legacy.
Client base Okay.
Very large one debt it.
Emanates from years back when you were a P to P lender that you can leverage.
And the relationships from these people.
And move them into a more traditional investment products and loans that are.
I guess.
Looked upon more favorably by regulators because the P to P business of course had to be.
You know downsized or converted I mean, the other companies like $3 60.
Finance.
Lexing Fintech and and you know I don't know what else is there over there and the PRC they have successfully gone too.
You know the the.
And the credit light.
The business model and with a different successes.
So.
So am I correct in and defining your company as a kind of a full service.
Wealth manager offering.
A number of products and.
And benefiting the investor.
From the bid and a massive growth of this type of business of free.
For people and the PRC is as People's interest and.
And.
And products.
Growth because.
There's a lot of wealth and generated over there and maybe less will be directed towards real estate and more towards investing.
Investment products and loans does that and accurate way to describe your company.
Yeah.
Okay.
And then last question because.
I didn't have much time to really look at the the earnings release, one of the attractions to me and and I'm and I've been and investors from a not only putting new went public way back when and Morgan Stanley and I M.
But recently.
And because.
And your company's been repositioning itself and the deep derisking and reducing the risk, particularly.
Particularly with the wood with getting away from and appear to be business, but you have you've had your balance sheet has been extremely strong.
And it looked like your cash balance.
Recently has declined quite a bit even though it's still quite substantial can you give me a sense of where your cash balances right now are net of any debt versus say last quarter.
Thank you.
Yeah.
Okay.
And the hour.
Sure.
Yes.
Cash flow.
Sure.
And.
Of cash.
Uh huh.
And about.
True.
And the cash deposits.
Yeah.
Joe.
So 2.6, and I'm trying to do the conversion of.
That's over 400 million is that and accurate.
Way too.
And net cash is that reasonably accurate.
Yeah about.
And you and U S right and then if I, just I'm a value investor to certain degree.
And so if I look at the market cap of your of your company.
Mean, youre trading essentially at what the cash values.
Uh huh.
Give or take a bit so so if if if.
Within that framework, you have and extremely strong balance sheet to grow out your business.
And four and Investor.
Kind of getting the sense that you all.
Or could grow the business dramatically over time, but in the meantime, one can own you're right a year and digital are essentially at what the liquid assets are worth of cash and would that be an accurate assessment.
Thank you for thinking that.
That way.
Okay. Good that's the way I think alright listen thank you very much I appreciate your time and I'll, let somebody else ask a question, if there's anybody else and acute.
Have a nice day.
Thank you.
Once again as a reminder, it is star followed by the number one and your telephone to ask a question.
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Ladies and gentlemen.
Today's conference call. Thank you all for your participation you may disconnect now.
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