Q1 2021 Qudian Inc Earnings Call
Hello, ladies and gentlemen.
And then by Q D.
<unk> incorporated cycles weighted first quarter 'twenty 'twenty, 1 and earnings conference call at this time.
In a listen only mode.
Mr <unk>.
And there will be a question and answer session.
Today's conference call is being recorded.
Over to our hosts on QD and please go ahead.
Hello, everyone and welcome to a true first quarter 'twenty 'twenty, 1 earnings conference call the company from yourself well he's still the way on newswire services earlier today, and a well posted online you can download the earnings press release and startup companies distribution on.
And by visiting our website at IR from Tdm to come.
Meanwhile, our founder and Chairman and Chief Executive Officer, and MS. Suzy true our VP of Investor Relations will start a call with prepared remarks, and then we will open a call to Q&A Bill.
More convenient and please note that today's discussion will contain forward looking statements made on the safe Harbor provisions on the U S. Private Securities Litigation Reform Act of 1995.
Well, we're looking statements involve inherent risks and uncertainties.
The company from yourselves may be materially different from the views expressed today further information regarding these and other risks and also from Pes is included in the company's 20-F and sells.
About a week 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.
Also on all that GDS earnings press release, and this conference call include discussions of audited GAAP financial information as well as a whole it's in non-GAAP financial measures. She gets press release contains a reconciliation of the non-GAAP major tier.
Audited most directly comparable GAAP measures.
We also posted a slide presentation on our on our website, providing details on a result in a quarter. We will reference those results in our prepared remarks, but will not refer to specific slides during our discussion I will now turn the call over to our CEO and Mizuho. Please go ahead.
Hello, everyone.
I would like to thank you all for joining us for.
Today's call.
We kicked off 2000, and a country 1 reached a sorry first quarter.
And we greatly improved the quality of our assets.
While maintaining a prudent operations, our cash and credit business in light of the ongoing and ship in own life and lending regulations.
Notably.
We record.
And net profit up.
Hunger and a 78 million RMB qualify a supporter.
Compared to a loss in the first quarter loss a year.
On a net assets increased at a true.
To a point a 4 billion on EM.
And we had approximately next 2 mesquite.
7.
Pointlessly billions on the op cash.
And the cash equivalents.
And a short term investment that's a.
And after a good first quarter.
All of a strong balance sheet allows us enough funding to invest in new business and.
A new show Q, which we believe will increase long term shareholder value.
We are very excited about and a meaningful progress we have a meet with our early.
Try to force education business well.
Keith and.
And generally we launch it.
We're very fast and 1 of them.
Keith.
Center and Sherman.
Well all of a company is had a quote.
The center also a pipe.
Cost of a mistake.
4000, and a 600 square meters.
Early feedback has been positive.
And we are going ahead with our pets, 2 expands our national wild footprint and China's large on.
On the debt early childhood is true.
Colby killer.
And which meant a market.
Our mission for what a more kids club.
Is to have a Chinese Keith Gil a happy and healthy.
We hope to have peace and explore the potential and sport a.
And a mill seeker.
Truthfully and a freely.
While also helping children and field house before these.
And the mine.
Pattern right now.
We firmly believe.
And the great potential.
It's Chuck.
Uh huh.
Felipe and no enrichment.
For a young kids and China, we estimate that the currently about.
100, and a 60 million a case between the age of yellow and not in China, and we expect.
Yep.
Penetration rates.
It's true.
Click a lot.
And it's meant services as.
As well as household spending in this area will put us well on them a kit business.
And the well.
2.5.
She expects show Coca Cola education.
A fifth penalty and strive to differentiate ourselves from others and we believe 1 of them a key value proposition for patents and a key.
It's very clear firstly.
Guaranteed.
A hospital a hassle free refund policy.
And also.
To a non refundable lompoc from.
From prepay men required by many other institutions secondly, we put a wise.
Comprehensive Coke and then operating.
And.
And on pace to optimal pricing sales.
And parent debt.
Time and money spent.
Talking and taking kids 2 different places.
Suddenly we have a well trained a shocker each of our centers.
And that's it.
And a rising.
Teaching process here.
And we also have a.
Centralized teaching.
And a development.
Last but not least.
We provide this offer a up high tech facilities to create a safe and a comfortable environment each center.
With our first mover advantages, we've built strong and she batteries into assets.
Location and pellet.
Yeah, and limited good and Covid, yet locations near a call up and.
Rest and residential areas.
And while we secure a right of use and.
These locations and others cannot easily find a similar location on the other hand.
As a pet is a.
After the call on business.
We have attracted over 50 sheet excellent and shipped premier.
Who have run education business with.
Annual revenue of over a house, you had a million RMB to join us and equally.
D a.
And actually Pan out.
Special.
So that's a big fixed cost.
And that's for sure.
Our equity partner.
Actively participate in our frontline business operations.
A senior management team and employees, a highly motivated and a shell a thin wages.
Adding critical.
Relative to a success of this new business Inc.
Got a cruising as we went through further into.
2000, and in 'twenty, 1 and we remain cautious in our crowded.
Loan business operations and striving to develop our early childhood education business.
I'm also happy to share with you debt we have.
Our internal kickoff meeting attended by over 800 employees and a call.
Management and teams.
Marking 1 a more keys at the show and move to a nation niche and no stage from shaman and back.
And by our share on wages.
We look for what 2 joining hands with our core management team and employees to build a nationwide.
Sure Chris.
Cook curricula platform in China to have a tens of millions of Keith go up happy and healthy now I would like to turn the call over to <unk> for more detail.
All of our results.
Thank you mean and good morning, and good evening, everyone. Anthony mentioned in order to navigate evolving market dynamic we maintained our conservative approach to operate our loan business by rigorously assessing credit risk off a new transaction count.
And quickly we experienced an $8.4 per cent decrease and transaction volume from our loan book business for the first quarter up too long and 21 contact with a previous quarter. Our strict credit approval standards continue to pay off during the first quarter with a photo of a sequential decrease in our delinquency.
And in particular, our day, 1 delinquency rate for a loan book and a soldier and left on 5% at the end of the first quarter. After a down in 'twenty, 1 on a normal level in our operating history.
Moreover, our balance sheet remains strong and healthy enabling us to safeguard the interest of about a share holders.
Additionally, more than 98 per cent of our Allegheny lungs were founded by our own balance sheet loan transactions and hour and 1 plus delinquency coverage ratio remained at 2 points out on time.
Echoing mean, when a already tied to a quality education business. We are actively progressing towards our goal of becoming a comprehensive 1 stop service provider for Rd childhood extracurricular enrichment progress on.
And we're running a little keys project offers numerous top quality sports art music and Richmond programs for children from Ages Zero Tonight.
Such a swimming basketball and football and dancing at spectrum.
Following the if I could opening and operations of the shaman and types of weight activities centered on a first in double indeed early childhood education market. We are designing more than 80 additional activity centers to replicate his success.
Both being solid financial strength and a superior team on education industry veterans and we plan to broaden our already tied to it and education and services across the country with a mission to help Chinese children drill out a happy and healthy.
The incremental spending in outlining our kids business may put pressure on on a profitability in the near term, but we believe we are well equipped to tap into the opportunities and a fast growing Ashford trabecular enrichment market in China.
Following the completion of a loss, making them a theory, we anticipate that the unit economics or E for the wedding and Kids club business will be very attractive do you eat will be superior to back off and many other offline businesses because number 1 being a large long term traffic generating tenants, we can and.
Joy lower rents compared with smaller institutions and number 2 we can enjoy lower user acquisition cost due to the variety of skus being offered and because of strong word of mouth referrals as evidenced by the fact that over 50% of a topic for the first center, where from referrals and a natural.
And walking.
Having said that we have a concrete plan to expand across China, and this year and home alright, and doctors could stay with us and enjoyed a great journey ahead.
Going forward well keep a close eye on a regulation in the online lending industry and proactively take a topic measures in a rapidly changing environment.
Supported by our adequate cash was worth it and a strong financial position. We believe we can continue to grow our loan or a business and deliver sustainable value to our shareholders over the long term.
Now, let me share with you some key financial results.
And the interest of time I will not go over them line by line.
For a more detailed discussion of our first quarter 2021 results. Please refer to our earnings press release.
Our total revenues were 515.27 billion and be or.
$78.7 million U S dollar representing a decrease on.
And from 958 million and maybe for the first quarter ups on 20.
Our financing income totaled and then the 362 million representing a decrease from the gonna be a 623 million and for the first quarter last year as a result of a decrease in the average.
And I should a loan balance.
Loan facilitation income and other related income decreased by 97 per cent to M. B, a tough million from we're gonna be a 422 million for the first quarter of 2 on 'twenty as a result of the reduction in transaction volume of off balance sheet loan during this quarter.
All of a transaction so there's a fee and other related income increased to it and maybe $50.6 million from a loss of a if we're going to be $150 million for the first quarter last year, mainly as a result on the reassessment of where a lot of variable consideration.
Sales income and others increased to it and maybe 62, 4 and $5 million from them and be a 7.1 and then for the first quarter of she's on 'twenty, mainly due to the sales related to the 1 and where you kind of a step 1.
Our sales commission and fee decreased by 68 per cent to and maybe $10.7 million from them and be 30 day points on a money for the first quarter of John tiny due to the decrease in the amount of a merchandise traffic and transactions.
Our total operating costs and expenses also decreased by 97 per cent to them and be 63.3 million from we're gonna be 2 billion for the first quarter of last year.
On a cost of revenues decreased by $4.8 per cent to be $91 million from we're gonna be $95.6 million for the first quarter last year, primarily due to a decrease in funding costs associated with the on balance sheet loan book business, partially offset by the increase in cost of goods sales related you want and need.
E Commerce platform.
Sales and marketing expenses decreased by 36 per cent to M. B, a $37.6 million if I'm gonna be $58.8 million for the first quarter last year, primarily due to the decrease in third party service fees and a marketing and promotional expenses.
On the ROE and administrative expenses decreased by $12.9 per cent shouldn't be a 66 points of a million from gonna be $76.6 million for the first quarter of 2 on 'twenty as a result of a decrease in staff salaries and research and development expenses decreased by $28.4 per cent to even be 39.
Point 2 million and so I'm gonna be a 54 point and 7 million for the first quarter of 2 on 'twenty as a result of a decrease in staff salaries, a provision for receivables and on assets with a reversal of really beat 106.8 million compared to a lowest copper and then be 1 per 1 billion for the first quarter last year.
Mainly due to the decrease in past due on balance sheet on ours.
And in principle receivables compared to.
To the first quarter of last year.
Our income from operations, which wouldn't be a $464.8 million as compared to a loss off of them and be 961 point and 1 million for the first quarter after that and 20.
Our net income attributable to Chi and share holidays wasn't even before $178.4 million Oh, we're gonna be 1 point, a 1 per diluted EPS.
On a non-GAAP net income attributable to a treaty and shareholders watching them and be $488.3 million Oh, we're gonna be 1 a 5 per diluted ads.
With that I will conclude my prepared remarks, we will now open the call to questions. Operator. Please continue.
And he.
Thank you yes.
To ask a question.
A star 1 on your telephone and too.
So on your question. Please press the pound a husky and.
Please standby.
Compiled a kinase lobster and for the benefit of all participants on today's call. If you wish to ask a question to management and Chinese people immediately repeat your question.
Fish.
Once again to ask a question. Please press star 1 thing and telephone.
Yes. Thank you first question is supposed to light a Jackie who owe a China Renaissance and I have your line is open. Please go ahead.
She is a question from.
I agree with you and that's your way you sit on.
And she thinks food and you should do it.
So don't get a huge well would you be on the Olympia Changchun Zhongshan ego.
Sure.
She got a credit business no me a candella cheek a.
Each day 1.
So we see on the J code should change and she was actually a Joe and that sounds.
Does that go on and so on and Joel does a good a decline.
So you could and she issues on the.
On the Honeywell with a new change a shoe.
Women's inside a chip.
On balance sheet, you assumed debt.
She took a wait for that.
And the cheaper more share.
Not a cheap quite a Joel she Chico June got a cheap.
Cheek, a chico's yodlee a hole.
A coffee so 2 and all you could ship high, though John and the more fruit shoot and Chico a credit business.
Thiago and tissue by a woman.
And you want it.
And cheap no true.
And so you've got a type a and it's when you're a dollar true it seems like on the other chico's.
Some of these jobs that you want and we'll keep you should think that a cheeky you either mushy and she she goes you know and she saw that.
You tell them to go and she does have 1 and so much and I'm in a moment and Asia.
And xiaomi.
Thank you marching shoot you on them.
On the whole comes on your T.
Dollar flow.
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A woman she quote on it you go and she polluter.
Sure.
So let me translate my questions. So thanks for taking my questions and congrats on congrats on the solid results a 2.
2 questions number 1 is about our credit business a.
We observed that our a risk level continued to decrease year to date.
So just a want to check on what he is.
And our loan balance ox and book for this year and in terms of the a quite a business model. My understanding is we continued to use fee and trusted.
Lending model for a while.
On balance sheet loans, a do we see any regulatory pressure, but it's a type of model a we plan.
And to switch to a let's.
And let's say license lending for example, using the micro loan a license and so.
Second question and small type of a new business.
On the new kids.
So just trying to understand the a unique and called it makes a so there's a new business.
Can you give us some details on a breakdown and also we mentioned a we will increase the spending for this new business in terms of a nationwide expansion. So what will be the investment.
And pace going forwards. Thank you.
Thank you Jackie.
And I'm happy to see on a car.
So let me answer your questions 1 by 1 regarding our credit business and we also observed at a hour would be 1 delinquency rates and as well as our vintage cars have been improving over the past quarters.
But.
And a long term future and we believe although the demand force more crowded will always exist, however, in China and such.
Demand in a long time, we believe will be highly likely shocked by and large financial institutions as opposed to a non government backed technology companies like us.
And so the regulation and the sector should not be ignored a as.
And as were observed at the tone from regulators have been on the tightened and fight so in our point of view and.
Clothing on things like interest rate cap library, a restriction information disclosure apartments credit guarantee restriction and successful there and not many positive updates and a regulation in a first quarter all of a second quarter and such we chose to maintain our prudent strategy and which means we will maintain our a similar.
Crowding on assessment, a rigorously crowded Satsuma and rules and similar volumes. However, our loan balance for our loan book business will still be decreasing a in.
And a second quarter.
With regard to the on balance sheet loan channels from the interested loan model to other regulated models.
License models, yes, we have already changed at Schuh and licensed chart. So.
The risks and pending the entrust a loan model is not with us.
Regarding your second question on our U S. A which we expect the you used to be superior to that of many of other offline businesses.
Although it is our company's policy and not a piece on guidance 2019, you know.
We we surely will interest on paybacks for a renovation of activity centers and operating and operational expenses for staff costs and events.
Unit economics, although I couldn't give and I couldnt get out concrete guidance I could help guide the market to think and a make reference to other offline businesses are you you will be superior to many traditional education on things.
And this is as we do not need to incur abnormally high user acquisition costs are high rents and also are you you could be a bit similar to that of offline catering business as well just need to take out the large amount of food and consumable expenses after a offline catering business.
And Bob is very attractive.
Yeah.
And with regard to our keep accident a ramp up speed as we mentioned in a call and in our presentation. We currently have over a T M. A C.
Centers in the design and process and the renovation process.
So we expect them to do a a a big ramp up and expansion nationwide. This year.
They will be starting on the capex expand and.
And it expenditures and we expect in a steady state or you will be very attractive.
Thank you Jackie.
And you can see it's clear.
Thank you.
And once again for those who wish to ask a question.
Part, 1 and his telephones and clean and to be announced.
Okay.
Yeah.
3 questions. Please press star 1 on the telephone.
Telephone keypads.
Yeah.
Our next question is from the line of Steve Chan a hypo international.
He's pulled ahead from 90 something.
So they're going to go and do it when a day.
We are thrilled and but 1 day.
And he got a disease and there is a you always into a house and.
So a pipeline.
The balance can and does he do I see a way once all too soon.
Thank you Bill.
A can see that that would do and that kind of a hub.
Germany, and my mother tongue.
Take a 2 day.
What do you think on.
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Buckeye a O meal, you got me a balance sheet also a let me translate yet into.
English.
I have 2 questions first of all I think you just mentioned about the the loan balance of the credit business will likely to be reduced in Q2.
And we will maintain a conservative approach in quite a bit so does that and probably the in the medium term.
Dan and I liked the T a gradually.
Transform from a loan facilitation Alt a.
Credit lending business to your awards and a more like an application.
Early education company. That's the first question and secondly could you give us some second tier 2 sub questions..1 from the accounting point, a play of where did you put a.
Our revenue and expense itself, 1 and new kits a.
And the P&L, a cons and do you have and the target revenue.
A target.
Returns for this business.
And in 3 Years' time.
Thank you Stephen Thank you need over the lagging so let me address your question 1 by 1 and first of all our balance sheet warping and right. So.
And as a matter of fact, the Unix armies of a credit business is still very profitable and all that.
At 36%, a and your interest rate and our delinquency on our annualized delinquency and default rates is that a 10%.
And so this business still a very lucrative a so as long as we're making profit on this business, we will keep a similar level of loan volume at a similar level of a risk assessment procedures.
In the mid to long term if from a in the investment point of view, a yeah and that's what we've assumed a 2 day, the investor who invest in both credit business and 1 of them a kit business if the pay off from a white and kicked the kids business is better than our cash quite a business we will.
And more resources in Q1 of them a kit business for sure so and from a regulatory a.
Standpoint, a we believe 1 of them a kiss quality education, but it is a more safer and a inc.
From a regulatory point of view on.
Though it is still very small at this stage, we only have a full quarter of 1 school 1 center only in a first center.
So a relating back to your second question and accounting times.
On our revenues and costs for the first 1 with center is quite minimal and it is inside the self income as well as the cost of goods sold.
Ah in 2 to 3 years, a return on money mortgage business, we expect that to you and economics of this business. After the ramp up there there will be very attractive.
And if we look at the offline catering business and <unk>.
Economic net profits will be a ground, 10% a net profit margin and.
And for some other offline.
Education business day U E for a net profit will be around 10% to 20%. So as we as we have them.
Experienced expense.
And I meant it on our strategy in a first and second a school, we expect we anticipated a U E of our kids business will be superior to that of the offline catering and offline and traditional offline.
Education business.
And I hope that answers your question.
Steven.
And finally to your system.
Thank you.
For those who wish to ask a question once again, please press star 1 on your telephone keypad.
A question Please press star 1.
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And once again, please press, Taiwan and a telephone.
Our next question is from the.
Once again these first tier wanting a telephones.
Telephones.
Thank you there are no further questions now I'd like to turn a call back or was it a counselor to the company for closing remarks.
Please continue.
So thank you all once again for joining today's conference call, we warmly invited and doctors to visit us and Shannon and there is doing and other major cities and in China, as well and if a country and person and you'll see that our sensors and person.
And I'm sure you'll be impressed.
And by the new species of children's quality education that we're developing and if it had any further questions. Please don't hesitate to contact our IR team and a visit our IR a site. So thank you once again very much.
Thank you.
As a conference call you may now disconnect your line.
Thank you.
Yeah.
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