Full Year 2020 Pintec Technology Holdings Ltd Earnings Call

Thank you operator. Hello, everyone and welcome to see next 20 20 earnings conference call the company's financial and operational results for issue earlier today and posted online. You can also view the earnings press release by visiting our website at a replay of the call will be available on the website in a few hours off. I just went on to this call will be mr. Victor Li Co of pink tank and Mister Stevenson CFO of pintec management will begin with. And the co will conclude with Q&A session.

Before we continue. Please know that today's discussion will contain forward-looking statements made under the Safe Harbor provision of the month the one looking staying on Samoan human risk and uncertainties and such the community results may be materially different from the views expressed today for the information regarding this and other risks and uncertainties is included in the company's Prospectors and other public filings as fire with the US Securities and Exchange Commission off. The company does not assume any obligation to update any forward-looking statements except as required under applicable law.

Please also.

No dad painted and this press release and discomforts call include discussions of an autographed financial information as well as the non-gaap financial measures package contains free cancellation of the unknown number matches to the move directly comparable gaap measures.

I don't know to the call over to our CEO, please. Go ahead.

Okay. Thank you Joyce. Hello, everyone, and thanks for joining today's call before I start. I wish you and your family is staying safe and healthy.

In today's call our first review our 2010 Jeep performance. Now this customer pays our strategic initiatives in delivering long-term value life expectancy 2020 was probably the most challenging operating environment in the history of pintec as we were affected by an unprecedented Global pandemic month. However, 2020 was also a pivotal year in which we initiated our business transformation eliminating Legacy Services optimal product mix and the corporate structure.

Controlling operates expenses and the reducing risky assets as human record in 2020 or Benny has been restructured into digital Technical Services and digital operations services.

And our long-term strategy is to augment the revenue and profitability of digital Technical Services by increasing recurring Revenue while stabilize features of operation Services by refining asset quality.

Giving you spectral for full-year twenty-twenty while Revenue has been significantly impacted by a decline of 71% compared to 2019. Where are you supposed to be execution our defense strategy and I would like to mention a few of our achievements and wins in demonstrating our technical advancement and opinions both teams.

First ski for digital Technical Services business which includes digital retail Credit Management corporate credit Process Management intelligent wealth management wage Financial robotic process Automation and the digital banking transformation. We do have over 400 Corporate clients in further diversifying our Revenue Source. In addition. We are focused on revamping our Revenue model from the traditional long facilitation transaction driven nature to recurring revenue of software Services should talk to sales for 2020. We are pleased to report that is recurring Revenue contribution has increased from R&B 5.6 million to RMB 20,000 Milling 2020 increase close to three times compared to 2019. Although it is still in early-stage, but it's the good month.

So and we believe it will.

Continue to drive the cross.

New Motorola volts Our intention is to continue different contract or services with the existing and large corporate Partners while expanding our services to small and medium-sized Regional financial institutions. We are seeing some early success as we leverage our capabilities and Retail long expertise empowering clients is their own transformation efforts and the channel expansion.

For example for domestic clients such as ten our Telecom bass player who has been on long-term partner. We initially began our relationship installment low-wage. We have significantly expanded our collaboration into risk analysis and management as well as various software model and the system designs and implementation. We also gained a few new Men Days from domestic companies in 2020 such that Industrial and Commercial Bank of China has accepted our estimated risk and managing solutions for micro and SV lending business. We partner with Aspire a subsidiary of China mobile enabling is intelligent fintech solutions and Dish Nation, especially for 5G applications.

We also completed the phase one digitization of the supply chain financing operation for China Daily group who is one of the largest agricultural products wholesalers in China for overseas expansion. We've successfully partnered with Genco and pay respectively in launching Next Generation online lending platform and twin motorized digital lending capabilities to offer unsecured loans quickly and efficiently in Australia earlier in 2026. We also found a strategic partnership with Judo Bank of Australia in order to provide cloud-based intelligence credit installment Solutions with upgraded credit Choice management.

All other collaboration would be Swiss bank. You'll be back and Toyota finance continue to be on track as weeks as we expand throughout Europe Ocean New York and Africa. This is overseas Market penetration are strong Testaments of our capabilities in competing and winning against Global players off next for digital operation Services business, which mainly includes our traditional license along organization and a facilitation as we mentioned in the last call in 2012's we continue to actively qualifies as a quality over asset-quality reduce risk taking collaboration and has profit sharing model partner high-caliber industry leaders and expand the market into

And expand the market to incorporate more of our digital Technical Services.

And a Solutions this strategic decision has resulted in our total revenue decline for 2020 primarily because of total facilitated long volume decrease by 83% over to 1.8 billing. However, the risk-free loan facilitation has significantly increased to about 50% of the total loan volume in 2020 compared to 30% in 2019, which means we on track in enhancing our risk profile in the long-term. We are confident that that would allow us to redeploy resources strings and our call digital Technical Services business and enhance the quality of Revenue composition for some updates. Our micro company cancellation is now firmly interfaced into Bank of diners credit type Center, which will full-scale access to real-time Credit Data reports. Yep.

Enquiries can do is the very first internet micro loan company injunction programs to be linked directly into Bank of China.

The end of 2020 we have also started to focus on the expansion of our insurance brokerage business Liberty our insurance brokerage license and exploring, New Jersey.

Now let me provide some updates a broader array of strategic initiatives and up looking to 2021. But please be reminded that there are still some uncertainties from a global pandemic forsee macro-level the global pandemic and the increasingly stringent regulatory oversight from Chinese comments. Well actually a couple of writing digitalization from financial institutions in order to fulfill the demands from being customers. It is estimated that in 2020 fintech investment in China off u.s. Dollar Thirty billing representing annual growth of 14% compared to 2019 according to my research

Therefore we see Ms. Potentials of digital transformation from these disruptions which are which are opportunities as we are all well positioned in the sector off with long proven track records of all around Innovation and execution secondly will continue to invest into our technical talents and advancements especially for a i Big Data machine learning the order to enhance our capabilities in digital transformation and stay at the Forefront of the VIN tech industry. Our Target is to page Partners in a more integrated automated and fast of operation was reduced costs and risks this drives our focus on product and service advancetrac an old to my vision as will ask for the overseas expansion in order to capture Global growth opportunities.

Mau specifically for digital Technical Services business will continue to Leverage

Autonomous expertise and a technical Innovation the optimizing standardized modules and collaborating with partners for customized module developments in order to provide and Thursday and fully digitized versions of retail SMS SME loan or Nation servicing finding collection risk analysis and customer management for both existing and potential corporate clients in terms of further business expansion. We are open to collaboration with local government entities is to be leasing Big Data platform empowering for funding and risk management. We are all so excited about duplicating a retail loan successes overseas as we deepen our partnership.

You order to up-sell and cross-sell to allow other services such as management.

Thanks for digital operation Services business will continue to leverage our internet micro license to originate and facilitate retail loans in compliance to regulations and to our integrity more stringent risk profile.

We expect we expect the Spanish Revenue to continue to stabilize our panelists and Engineering these data with cutting-edge techniques wage earning to continuously refine and optimize risks and underwriting terms. So we will continue to leverage the spinach in building profile free software and the system to deliver seamless highly automated and broaden access to retail credits with younique customers experiences. In addition. We are extending this month you talking to take an order to get the advantages into our insurance business for 2021.

Aside from organic growth exclusion for both of our business units. We are also actively engaged in mergers and Acquisitions in order to accelerate our growth plans may be under the car Mr. Homage strategy to broaden our office Pioneer advanced technology built deeper relationships in fulfilling client in Palm to her and the software needs as well as graphical expansion with complimentary Market penetration. So recently as you can refer to our press release Thursday, we are very excited to have added a new partner of the talent in the teams was proven operating capabilities for the product diversification. And in terms of Technology know how long this will further accelerates. I'll type abilities in servicing our corporate Partners the order to drive growth and a shareholder value.

Finally having these calls all these strategic initiatives. I want to emphasize that we have and will continue to be very disciplined our Cost Containment home equity protection the order to minimize overall impact on our business fundamentals, which still will discuss further later.

So

In summary 2020 was a challenging year. You may need aspect. We worked very hard as a company in preventing business models in relating a strong opinions foundation and am getting those challenges to continue deliver differentiated values to our clients. We now see great opportunities as people change the way they leave were and consume that's been completed and the filters are executing our clear strategy of innovation and scalability in order to deliver long-term shareholder value. We greatly appreciate the dedication fowl employees as well as the Continuum continue to trust and support from our partners and shareholders.

With that, I'll turn the floor over at 12:17 to review our financial results in more details.

Thank you, Victor. Hello everyone. I'd like to begin by echoing Victor sentiment get all of you and your family stay safe and healthy wage before I start the school year twenty-twenty Financial discussion. I would like to make some comments firstly already mentioned by Victor the unprecedented pandemic and our internet business transformation 20/20 significantly impacted our top and bottom lines. However, as we intensely review and lay our business foundations you believe these uncertainties are short-term.

Second even the macro-economic win and the domestic regulatory tightening of the financial markets. We had to undertake server one-time write-off including imperatives intangibles and Investments totaling R&B 85.3 million, which represents about 30% of our net losses for 2020. We do not expect a future Financial impact from these items totally start of our business transformation. We made the difficult decision to aggressively cut our expenses when necessary so unfortunately would have to reduce account like 39% and all other Associated costs associated calls and twenty20s. However, we will focus on continued investment into a call, and capabilities discipline cost management as well as enhance our balance sheet and liquidity position, which can be demonstrated by our successfully successful 400 off.

R&B 400 million financing in 2020

finally mergers and acquisition will be another pillar of golf driver for future development establish created by our recent analysis acquisition of which bright wage is a licensed security brokerage firm and decent I which is a security technology firm, which is the core technological background of which place we believe in the value that these two Acquisitions will create going forward. They will lay the foundation of wealth management business in the back.

Yeah focus on long-term.

Injustic synergetic values in terms of business model management philosophy technical empowerment team talents while we are also very prudent in reviewing Financial ages and group potentials.

No turning over to our financial results for 2020 and as usual, please note that all number stated in the following remarks in RMB terms and all comparisons are for year-over-year basis unless otherwise specified for the revenues for a full year twenty-twenty decreased by 70.6% year-over-year to R&B 378.3 million in terms of wreckage breakdowns Technical Services service fees for 2020 decrease by 69.3% to 330.7 million RMB mainly due to the decrease in off-balance-sheet low wage state that during the. It's part of our business changes in actively minimize minimizing our Whispering loans. The total loan volume four station was one point eight billion in 2028 compared with that of 1.1. Sorry compared with that of eleven billion in 2019.

However, the risk-free loans for the facilitator was increased from 30% in 2019 to 50% in 2020.

Revenues from installment services in 2020 declined by 77.2% to 42.7 million RMB. This decrease was mainly due to reduction of installment loan volume up to 19 outbreak and was in line with the ongoing strategy to optimize our portfolio structure lastly revenues from Wealth Management Service in 2020 decreased by 75.7% off. So I'm be 4.9 million primarily as a result Insurance Brokerage business going slower than we previously expected during this. We implement the series of optimization initiative to reform you should brokerage business model and terminate the cross-selling with retail Consumer Finance Finance products. However, towards the end of 2020 we completed the revamping of an insurance brokerage business office and we expect let go of of this business under the new market oriented model in 2021 cost of revenue for the year of 2020 decreased by 62.9%

So I'm be 285 point eight billion from 769.7 billion in the same period of 2019. This decrease was mainly attributable to several factors, including the decrease in organization and service fee from reduce user acquisition costs as a result loan volume facilitation decline.

Also the decreased cost on Guarantee liability for off-balance-sheet loans as we purposely and gradually stopped providing any gambling twenty-twenty in order to significantly enhance the quality of life and lastly the decrease in service calls charged by the related-party because the company sees original of Corporation model under which the related-party used to provide credit enhancement for the bulb see if the beginning of 2019 resulting to a further decrease of the loan balance and related costs under such model in 2020 all these efforts led to the significant movement of the delinquency rate since the second quarter of 2020. We will continue to reduce our Whispering loan business in twenty20s cost on Guarantee liabilities off the service cost mainly related to the Legacy business. That was almost no new loans facilitated facilitated under the guarantee of risk-sharing model.

if we only provide

Peaceful Financial Services, which we operate without licenses while all other loans that we facilitate will gradually switch to a profit sharing model without any guarantee Services minimizing the home volatility in profitability in the future Place probably in 2020 increased to ninety two point five million this represent gross margin for two years twenty twenty of the month 25% compared to 40.1% in the same period of 2019. This is a reflection of the lower-margin higher-quality off last Whispering business going forward as we focus on the Subspace digital technology Services, we expect those magic improving twenty-twenty. Sorry in 2021.

Kono operating business in the year of 2020 decreased by 75.9% to R&B 209.3 million from R&B 1.2 off in the same period of 2019. We have continued to optimize and refine our organization structure marketing strategies and product portfolio since the beginning of 2025. That's not reviewed a specific operating expenses, and I'm pleased to report that we have aggressively reduced every cost category sales and marketing expenses in 2020 decreased by 35.8% Mm 24.7 million from 69.6 million in the same. 2019 primarily driven by the decrease of promotion promotional expenses from the reduction online advertisement in a decrease in stock calls from corporate structure.

General and administrative expenses in the flu of 2020 declined by 86.5% 247.8 million from 1.1 billion in the same period of Twenty Ninth this decrease was primarily primarily driven by decreases in the reduction of bad debt provision expenses related to loans under the related party agreement from 890.7 million to in 2019 to 7.8 million in 2020 due to the decrease in loans and also stock cost and professional expenses increased by approximately thirty thousand nine million, you have the Personnel structure optimization and reduction in Consulting expenses.

Research and development expenses in 2020 decreased by 52.6% to 37.5 million from 79.1 billion in the same. I was twenty nineteen. I'm not really driven by the decrease in stock calls from postale structure optimization. And as part of our business transformation impairment of view and intangible Assets in 2020 increase by 6 months increased to sixty nine point five million from new in the same period of 2019 primarily due to 37.6 million payment for Google and thirty one point eight million environmental intangible assets associated with like with the license to operate the small own business on by cancel. I see network micro finance companies considering the fact regulation and changing Market environment. However, the company expects no future in that.

as a result

Creating laws in a fee of 2020 was 206.8 Million extra expense expense increased to Forty Nine Million compared to only two million in the same period of 2019. I really do to the different tax expense of 46.9 million caused by the increase in the valuation allowance for a different tax expense of 87.3 million in the in the year twenty-twenty long as management determined that the Deferred tax asset will will less likely be utilized in the future while it was deferred tax benefit of 70.3 million in the year 2019 net loss and adjusting that loss between 2296.1 million and 284.2 million respectively. However, excluding Thursday mentioned one one time write-offs and the impact of the decrease in this context as a balance our net loss and adjust the net loss for the fee of twenty twenty should be hundred forty seven point two million dead.

And 135.3 million respectively. The net loss was mainly due to the Legacy business and it was well decreased. It has while decreasing the second half of 2020 Escalade with the first half of 2020 tell you to get net loss for ordinary shares in 2020 or 0.9 and 6.96 respectively. Less than overdue balance sheet 31st, December 2020. We have combined cash and cash equivalents short-term and long-term restricted cash of 552.3 million is compared to firing 80.9 million as of December 31st, 2019. Other than that financing receivable, including short-term and long-term receivable decreased by 83.6% to 73.6.

73.6 billion SL December 31st 2020 from 449.5 billion as of December 31st, 2019 mainly due to the lower volume of our own book on a long business in conclusion to a very proud of what the team has collectively achieved during the transition period and the COVID-19 hour break and we are very excited about what we could achieve in the years to come. We were focused on ramping up volume ramping up revenues, you know digital and Technical service business which we expect to to be a key Revenue took a long time. So continue to refine RSA quality four digit operating Services as well as our license Financial Services not as optimize our risk profile despite this shot impacts real confident that these changes will bring solid foundation and sustainable development for future this conclude our prepared remarks for today operator. We are not ready to take questions wage.

Thank you will now begin.

The question and answer session to ask a question. You may press * then 1 on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press * then two at this time. We will pause momentarily to assemble our roster.

Our first question is from LinkedIn from ICDC International, please go ahead.

Hello Lang. Is your line needed?

Thank you management for taking my questions. I have two questions regarding the acquisition. My first question is what changes do you foresee from this acquisition? And what's the margin profile changes from this acquisition? And the second question is how will you in life grade this acquisition into your Roth Management Services and could management give us some color under wealth management Revenue growth Target wage the next three to five years. Thank you.

Thanks for letting this is Steven. I think the second part of the question first. I think in terms of the integration into the current wealth management is mentioned in today's remarks and also in our press release the wealth management has not met in stock in the past. Where as we expect for 20 20 21 in line with the insurance brokerage business will have significant growth organically and potentially also looking at opportunities in the market for potential and mayonnaise and in in terms with which bright we we expect that it will be collectively integrated into our technological innovation in terms of not just operating license ugh brokerage business which which it is license in Hong Kong and we we think that wage

With that it has a significant technological advantage and difference in terms of how it's able to penetrate the B2B markets. That differentiates is Jake from what's the current offering out there? And we feel that this ugh digital brokerage business is already well understood and what we should investors in the market. We feel that it will add to a very good part of our portfolio and we've known the team for some time before completing the acquisition. So we think in terms of the business and other aspects of integration issued. You should go smoothly now in terms of the first part of your questions and I think we expect which by to be contributing uh, and in the normal course of their business normal ma'am.

And in fact, we believe that since it is not operating.

On a purely b2c type business model where it's more of a BDC business model. It should have higher traditional a great as compared to suck on a other businesses in the market as an example. We we understand that potentially you have certain players in the market that we have to fax in uh, cause of traffic acquisition wise in our case. Our business will be mainly driven by large corporate customers in which case interesting, you know, the users and the the the the the players are that are customers of this corporate. We think the cost of traffic a decision will be much lower them giving us a better to wait at the same time. We feel that it's also able to offer other non-traditional brokerage business. Yep.

Other business other companies as well in that way you will increase our opportunities to have more income from these sources. Thank you.

again, if you have a question, please press * then 1

There are no more questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to Victor Lee for any closing remarks.

Okay. Thanks for pleasure. And again, thanks everyone for 20 in today's Court. We wish you a good day, and we'll see you next time. Thank you.

The conference included. Thank you for attending today's presentation. You may now disconnect.

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