Q2 2021 Qudian Inc Earnings Call

[music].

Hello, Ladies and gentlemen, thank you for standing by for Q I.

I N C second quarter 2021 earnings conference call. At this time, all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded I will now turn the call over to your host from Q. Dan. Please go ahead.

Hello, everyone and welcome to <unk> second quarter 2021 earnings conference call the company's Mcdonalds.

Well our services earlier today and are posted online you can download the earnings press release and sign up for it.

The company's distribution list.

Our web site at IR docs, she didn't so called Mr. Min Luo, our founder Chairman and Chief Executive Officer, and Mr. Xu Our VP of Investor Relations will start the call with prepared remarks, and then we will open the call to Q&A.

Before we continue please note that today's discussion will contain forward looking statements made under the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1995.

We're looking statements involve inherent risks and uncertainties.

The company's results may be materially different from the views expressed today further information regarding these and other risks and uncertainties is included in the company's Cynthia and felt with the U S Securities and Exchange Commission. The company does not assume any obligation to update any forward looking.

Except as required under applicable law. Please also note that CIT in its earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures.

GDS press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measure.

We also posted a slide presentation on our IR website, providing details on our results in the quarter. We will reference those results in our prepared remarks, but will not refer to specific slides during our discussion I don't know, it's chemical over to our CEO Me law. Please go ahead.

Hello, everyone I would like to thank you all for joining us today.

This call in the second quarter of 'twenty countrywide.

We continue to operate prudently of course, our cash credit business lines.

Penny.

Asset quality.

Healthy level.

Generated a profit.

Misty.

Three point in life.

Yeah.

RMB.

In transaction.

For our loan pool.

And.

On balance sheet loan balance.

Of $3.5 billion.

Our.

Parallel efforts to make him a little bit.

Balance sheet issue of our abilities to safeguard the interest of our shareholders, while providing us sufficient bonding to propel the development of our fixture.

Pretty.

Particular activities.

One of the movies.

We are pleased with what a mood piece.

Okay.

Progress we successfully opened two new centers recently widened towards those PPP in Johnson.

And the other is Sherman.

Furthermore, we have it's fine.

These agreements.

For another 70.

That's 37, while the little Kids Center.

<unk> reached 24 centers.

Under no wasted.

As we further extend our footprint, we believe our first mover.

Advantages in depth entrepreneur.

<unk> expertise and the strong.

Digital.

Fly fishing capabilities well field.

The ongoing growth of Squalamine, Keith now I would like to turn the call over to Susan for more detail on our results.

And good morning, and good evening, everyone I met complex online lending market dynamics, we maintain our cautious and conservative approach in our loan business by rigorously assessing credit risk in new transactions.

Transaction volume for our loan book business was maybe 3.9 billion this quarter.

Our asset quality continues to improve with a day, one delinquency rate below 5% at the end of the quarter and our N. One plus delinquency coverage ratio remained high at two five times.

How can we mean with respect to our extra curricular enrichment business, our vision for one or more kids is to help children joyfully explore GAAP talent and potential in sports art music and other extra curricular activities.

We believe this goal is aligned with our core principle of China's new regulatory framework, which aims to promote students all around development.

With our existing three centers as well as 37, new centers in the pipeline, we're confident to replicate the success of our flagship country and tap into opportunities in China's fast growing extra curricular enrichment market.

Together with the opening of new centers.

We'll incur more operation expenses relating to stock compensation south of marketing rental expenses et cetera wish you would affect our profitability in the third quarter.

Looking ahead, we will continue to closely monitor the evolving regulatory environment and proactively respond to policy changes, we believe that with our thoughtful operating strategy in the loan business along with the money market steady progress we are well positioned to.

Deliver long term value to all stakeholders.

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

In the interest of time I will not go over them line by line for a more detailed discussion of our second quarter 2021 results. Please refer to our earnings press release.

Our total revenues were RMB $412.1 million, representing a decrease of 64, 7% from RMB, One 2 billion for the second quarter up 220 Oh.

Our financing income totaled <unk> $311.8 million, representing a decrease of 46, 3% from gonna be a 500 and.

89 million from the second quarter of 2020 as a result of the decrease in the average on balance sheet loan balance.

Our loan facilitation income and other related income decreased by 95% to even be a $12.6 million from going to be $255 million for the second quarter last year as.

As a result of the reduction in transaction.

Of all filing sheet lungs during this quarter.

Total operating costs and expenses decreased by 19, 9% to $89.8 million.

For the second quarter from the second quarter last year.

Cost of revenue decreased by 82, 3% to <unk> $64.9 million from RMB $366.4 million for the six for the second quarter of 2020, primarily due to the decrease in costs associated with the loan book business and decrease.

In cost of goods sold related to the <unk> E Commerce platform.

Sales and marketing expenses decreased by.

81, 4% to be $29.1 million family maybe 150.

$6.8 million for the second quarter of 2020, primarily due to the decrease in marketing and promotional expenses.

<unk> and administrative expenses increased by 44, 8% to RMB 191, 1 million, if I'm going to be $75.3 million for the second quarter of 2020 as a result of the increase in staff salaries, primarily relating to any more kids business.

Research and development expenses decreased by 33% to even beat $39.2 million some of them would be $56.3 million for the second quarter of 2020 as a result of the decrease in staff salaries.

Provision for receivables and other assets was a reversal of 97 four.

Maybe compared to a loss of 519 million for the second quarter last year, mainly due to the decrease in past due on balance sheet.

Outstanding principal receivables compared to the second quarter of last year.

Our net income attributable to <unk> shareholders, what it was maybe $269.9 million.

Or it can be 1.03 prior.

Per diluted ads.

Non-GAAP net income attributable to <unk> shareholders, what's you're going to be $282.5 million RMB 1.07.

Per diluted ABS.

With that I will conclude my prepared remarks, we will now open the call to questions.

Please continue.

Secondly.

Ladies and gentlemen, if you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced.

Wish to cancel your request please press the pound or husky.

For the benefit of all participants on today's call. If you wish to ask your question to the management in Chinese. Please immediately repeat your question in English.

Once.

Again, if you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced.

Hugh.

Once again, if you wish to ask a question. Please press star one on your telephone keypad and wait for NIM to be announced you wish to cancel your request. Please press the pound key.

Keith.

As there are no questions at this point of time I would like to turn the call back to the <unk>.

For closing remarks, thank you.

Okay.

Hey, a J I actually heard from our investors that there might be some technical glitches on over the phone that they can hear us clearly.

Is there a spell lineup.

You can connect to.

We do a sound check again.

Yes.

Well good luck.

Hey interruption.

Am I not ordered them.

Thank you ma'am.

Hello.

Okay.

Hello. This is the operator.

Yes.

Audible to you.

Yes, loud and clear.

Okay.

Once again participants who wish to ask question. Please press star one on your telephone keypad.

Ask your question.

Yeah.

Sure.

Yes.

Once again, if you wish to ask a question. Please press star one on your telephone keypad and wait for you.

NIM to be announced.

Once again, if you wish to ask a question. Please press star followed by one.

On your telephone keypad ask your question.

We have our first question from the line of Henry hub from Broadcom.

Internationally. Please go ahead.

Thank you for taking my question.

Two questions.

The first one is.

Or do you think about the.

<unk> 2004 cap.

The Chinese word president Chad.

Window guidance by some that is customer financial companies the second Omar.

Could you gave us a more color about your new in Asia too.

For your education program.

How is going to be valid.

Forward. Thank you.

No what that Johan.

Hey, Julien gradually zibo.

These are deals that are.

<unk>.

Yeah.

Sure.

Yes.

Uh huh.

Sure.

In Asia, Germany, Doug one tidbit.

Ill hop Jago in Colombia.

Amanda.

Great.

If I'm here in the year.

Program.

So we let it go.

Projecting the acute market yet.

Thank you Hannah Thank you Hannah for this two further questions let me address it.

One by one so regarding the 2000 and for interest or cap per outstanding.

We know guidance.

Uh huh.

Is meaning relevant to licensed financial institutions.

And local regulators have very different implementation details and timeline as AUM with this issue.

Given the fact that our profitability will be actively negatively affected in our interest rate gets cap and 24%.

So before any concrete interest rate restrictions get enforced on our proprietary lending activities, we will choose to maintain our status quo that is we charge at less than 36%.

We don't have.

Plans to boost the growth our growth.

Growth of our of our credit business before the regulation has changed to the promising side. Nevertheless, Nevertheless, well embraced a regulatory changes and promoting vulgarly audley and healthy new market together.

With regard to your second question.

For our kids business.

Where we.

We're happy to say that we have successfully opened three centers, so far and 37 other centers with signed long term lease contracts in the pipeline.

<unk> are quite satisfied with our superior service offering.

Good thing is we've been quite some effort and money in designing and renovating the sentence was in time become one of our competitive advantages and Tibet and entry barriers.

As a matter of fact building swimming pools, and a sports venues indoor require lots of detail designing calculation and advanced construction techniques.

To give the investor community more confidence our first center, which opened in January of this year already passed our internal test of monthly breakeven points outperforming our expectation.

If we take out trial programs and associated floor areas from the <unk> from the calculation.

As.

For the business as a whole the financial numbers are still there is more an immaterial as opposed to our core lending business, although customer satisfaction satisfaction is that good.

<unk> will certainly be more than happy to disclose the numbers when they become material.

Thank you Hannah Hope I answered your question.

Yeah, that's very clear thank you.

Okay.

Thank you.

Once again, if you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced.

Once again, if you wish to ask a question. Please press star one on your telephone keypad grateful NIM to be announced.

Thank you.

And there are no further questions I would like to hand, the call back to the company for any closing remarks. Thank you.

Thank you operator.

So if they're happy to meet everyone online today and if you have any further questions. Please don't hesitate to contact our IR team.

You can also find our press release any relevant Powerpoint on our IR website. Thank you very much again.

Thank you.

Ladies and gentlemen that does conclude our conference for today. Thank you for participating you may all disconnect. Your line. Thank you.

Okay.

[music].

Yes.

Okay.

[music].

Okay.

[music].

[music].

[music].

[music].