Q3 2022 Yiren Digital Ltd Earnings Call
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Thank you for standing by and welcome to the yearend digital third quarter 2022 earnings conference call.
All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If.
If you wish to ask a question you will need to press the star key followed by the number one on your telephone keypad.
I would now like to hand, the conference over to MS. T O O I R Officer.
Please go ahead.
Thank you operator.
Good morning, and good evening, everyone. In this call the presentation by the founder and then that would be Oh I'm proud of is our T O.
Yeah, well, maybe not me.
He may go the Muslim.
And I will join up we've done that in the Q&A session.
You may begin hey, wed like to remind you that discussions during this call contain forward looking statements made under the safe Harbor provisions, but you'll have credit Securities legislation Reform Act of 90 95.
Such statements I'd like to do it I think Lee and thank God that can cause actual results to differ materially from Duncan Lai.
I need that.
Studying information regarding whether you read them better he is back loaded.
Got it you know we're buying when the U S Securities and Exchange Commission.
We do not undertake any obligation to update any forward looking statements are.
The required and that government law.
During the call will be with Laurie because that are non-GAAP financial measure and imagine that yes, Julian and adapt our operating performance.
There's none that I can imagine a mouse.
You can see that in isolation.
That is huge but a bunch of information the pad and presented in accordance with U S. GAAP.
Well, you've been making non-GAAP measure.
Nathan to getting I guess pleased with agile any classroom.
I will now pass it onto my only remark.
Hi, everyone.
Thank you for joining our conference call today.
We are very pleased to deliver a resilient quarter with solid business the economy and continued improvement in profitability.
Most of our product restructuring and the pandemic resurgence in the first half of this year.
As the macro environment gradually rebound and our revenue structure continues to evolve and operate.
We have full confidence to embrace and accelerated growth in the quarters to come.
First.
Update on our holistic wealth management business.
Our insurance brokerage business continued its strong momentum this quarter.
Amin and essential revenue pillar.
In the third quarter, a 2022 total premiums reached RMB 1 billion.
Presenting a 36% increase year over year.
The parking the industrial average growth rate by over six times.
Revenue generated from <unk>.
Sure and brokerage services reached RMB 189 million.
Counting for more than 22% of total revenue.
And we expect to see an accelerated double digit growth in the fourth quarter.
The rapid expansion of our insurance brokerage business is fueled by outstanding.
Outstanding capabilities in product customization and innovation.
It's two English from other insurance brokers, who excel in analyzing and exploring different clients specific needs in their life and working scenarios.
Therefore, our products enjoy a strong advantage of it.
Close it in the market.
For example.
One of our whole life insurance products tailor made for high net worth clients Hot eat my young children.
Note that nearly RMB 60 million in premiums this quarter alone.
Another example.
Our customized insurance products.
Getting kids and shoes with vision care services will hit the market soon.
Which is expected to contribute sizable premium in the coming quarters.
Moreover.
Our property insurance products also saw continued growth from the past the 22 consecutive months and that the demand remains strong as we expand into more developing areas.
Such as litigation preservation liability insurance business.
Another highlight I would like to point out is that that 10 year renewal rate for our long term insurance products reached 96.6%.
At the end of the quarter this year.
<unk> higher than the industry average up 85%.
Which has further proven the high quality of our services.
Regarding the new regulation of online insurance sales, that's been a hot topic in the industry. This year.
The actual impact on our business has been minimal.
Due to the complexity and the richness of our product matrix and our relatively low relies on online channels.
In the third quarter this year.
Total number of insurance products outbreak exceeded 750.
All right around 650 in the prior quarter.
Looking ahead, the momentum remains strong for both our life and property insurance segments.
Now moving onto a bigger picture of our holistic wealth business.
In the third quarter of 'twenty to 'twenty two.
Total client assets reached the RMB 22 8 billion.
An increase of 31% year over it yet.
Particularly eagle select platform.
Is the upgraded version of you know well and our Super App strategy.
Average client asset held by each client through our institutional partners.
Oh more than RMB 350 filed it.
Representing a year over year Roe of 36%.
With the ongoing penetration of our lives plus finance initiative and the violence of asset allocation investment educational concept.
In the third quarter, the number of clients with client assets over RMB 1 billion.
Increased by 57% from prior year.
This collection has the recognition for our improved surveying capabilities.
Before we move onto an update I'm quite it.
I want to mention that we have officially closed our online for which our China glory in the fourth quarter last year to be compliant with new regulation.
Going forward, we will focus our efforts on our core wealth business line and in increase in creating a powerful flywheel effect that will help our loyal and growing number base member base with additional financial management solution.
Match their needs for investment savings and insurance protection.
Well also increasing their lifetime value to us.
Looking into the year, a blended 23 weeks.
We expect to realize increasing synergies between each business line as well as young insurance brokerage continues to customize product and services that match the needs of our customers. We've seen that you didnt digital ecosystem.
Our customer base is also expected to continue to expand with higher acquisition deficiencies.
Our consumption driven businesses start to ramp up in scale and drive up overall customer engagement.
Now I will pass it to me who will go through the highlights of our credit card business.
But the third quarter.
Thanks, Janine and Hello, everyone.
Before I provide an update on our crowded tag business.
I would like to hear that right or should.
Pick a product transition and the way, we'd like to like to see a full recovery off the growth pace post office restructuring.
Lisa aim to improve our overall profitability and reduce the potential operational risk and make that dynamic.
Resurging.
Turning to proactively optimize our loan portfolio structure back to the second half that's got lots a year and a scaled back or I'm flying to care as long as it doesn't it.
Got burned higher operating costs, and the higher but not 10 or T and during the pandemic.
Officially terminate theres, a product and of course the quarter out this year.
Note that our new loan portfolio enjoys a higher operating efficiencies and large lower our borrowing costs.
We believe the transition allows us to better sustain that has scale with a healthy unit economics.
And the higher higher flexibility and does it make sense to respond to any further marketing involvement.
In the third quarter of this year, the total loan volume right.
RMB, one 3 billion accounting for 56% of the total long for Sandvik today is the first of half of this year and are close to pre transition levels.
Given the current strong demand for our loan facilitation services.
Actually four hours more revolving loan with.
We project well there are two digit growth quarter over quarter and total loan volume in the fourth quarter. This year.
Another notable highlight is that our and a new increase it to one 7 million at the end of the third quarter. This year.
Representing a 24% increase compared to the end of the last quarter and 54% of course compared to the end of the third quarter last year due to our improved guest services enhancing accretion now.
Integration with <unk>.
Our bars.
Meanwhile, we see an increasing number of the users coming back for a second loan as we continue to all of our variants of value added services and membership fantasy.
Such as discount tailored insurance product and a more crowded.
In the third quarter out to 'twenty to 'twenty two.
Pizza bar.
Uh huh, 481% of the total borrowers enforced tomorrow revolving loan product.
Compared to 52% in the third quarter last year.
Translating into a decline acquisition cost per user.
More over as our e-commerce platform continue to enjoy increasing popularity among all user and the green right now growing traffic.
The average acquisition cost is.
He was a fogarty crane is a feature.
That's the alcohol what me mentioned all year, our consumer our consumption driven services.
From both our e-commerce platform and E N. There that has the how the build up in <unk>.
Our dynamic and the integrated ecosystem with recruiting.
Synergies between different this one.
On the funding side.
We continued to increase and diversify our funding partners.
We expected to.
To see a continued decline in the funding cost in the coming quarters.
Liked but now that the asset quality also new alone shows establishing and improving the trends.
R F P T 30 plots.
Continued rate in the third quarter reached Oh.
014 at night.
Percent.
Do you have to say historical lows as a result of our continued efforts in customer sentiment, Amit you mentioned and the risks of controlled tightening.
With that I will now pass.
It onto Nah, who will go through the financials for the third quarter this year.
Hi.
Okay. Thank you may and Hello, everyone for this quarters financial update I love to focus on key financial highlights only.
So it's hard to earn your release Oh, that's for further detail.
We delivered solid results this quarter with total revenue reached RMB 841 meeting accounting for 15% of total revenue in the first half of this year with a celebrated with Hollywood, Florida Tampa in pad I'll I'll put out you've talked to her in a pandemic locked up.
As you may have.
No one here, we recognize all the revenue segmentation. The so called her lots a year to a high ecommerce revenue, that's Australia J D Prime and in consumption driving service starts to set off and life to a multi month Baker ecosystem.
All customer engagement activity and the lungs are lining.
Contribution from let's say wild business reached RMB 294, meaning that's the culture and autonomy for such a fun to sign the other total lab you.
It's the same clients comply with the same period last year.
Lie with Australia proceeding on a personal.
National management framework that is quite difficult to Oswald ladies here on.
On the credit side, our total from Citi just called her it what's the dengue assays pumps today meeting with lots of double digits homegrown culture, Oh look how old her although we're bundling Tonys talk July one of last year.
And that's a blend of all small where very low revenue. So I'm glad you talk so it each cylinder 493 meeting this culture of California, only 50% of all sudden off the first I'll hop off this year all I liked your phone calls has seeming to 'twenty four hangzhou straight percent well.
All new loan facility October this Friday, all ongoing commitment to financial inclusion and airlines is that look.
U S T.
On the e-commerce side.
Okay, well shouldn't be 500 undefined medians its culture, because my son to comply with the so called that last year well in the market.
Consistency that Lindsay 100 under certain six meaning for the same period last year, mainly driven by cost saving us a lot of my I'll I'll fly again.
Well as you may have potsherd office quite early.
<unk> increased 20% year on year, 2200, 24 meeting really due to the accomplish all insurance workers excuse me as long as the English somehow with a plasma silicone, putting our rights to cut my German policy on it this year a lot of as well it sounds like I said, we're still in August .
558 year over year, so wouldn't be certified.
Due to a higher palladium books for our long term sexual alone Latvia.
Do they want a strong project also in the 217 meaningful called her that's right I'm not eco modern looking to kind of 2%.
Shifting to plus 2% points year over year as we enjoy a unique economic post up a tiny part of.
Or that it was chacha unconscionable household Costa your efficiency.
Turning to our balance sheet, which I think eliminating a substantial bond issue was <unk> 5.5 meetings in total shock hold us ecology on September 13th plenty plenty tools.
So by 14% compared to iPhone.
Tucson, but looking for Nokia.
Why it wasn't a new and a strong cash position with notable catch which Lindsay for all kinds of Sally beauty become something offer well our execution, our Charlotte cluster of clients, which we'll announce the audio video as well, but not so well and it gives me it's only one small kunal just going for a while now.
All our seismic business and the marketing Foundation possible Avenue. The first called me, Yeah, it's too easy to.
Zero.
Oh nice needing to be at one one to one.
And it wasn't my closet imagine trying to remain stable.
Is that what sounds cool I'll close Omar operator, well now open up for questions. Thank you.
Thank you if you wish to ask a question.
Please press Star then one on your telephone and wait for your name to be announced.
If you wish to cancel your request.
Please press Star then two.
If you are on a speaker phone please.
Please pick up the handset to ask your question.
The first question.
Comes from Boyd Hines.
Equinox capital.
Please go ahead.
Hi can you tell us how many what's the size of the loan facilitation in Q2 of fiscal year 'twenty two are in your <unk>.
Previous Ah press release, you just gave a first half number.
Kind of curious to see what was the sequential rate of growth in your online lending channel.
Yeah.
Tell me and Nah answered this question please.
Second quarter loan volume.
Okay.
Yeah.
Okay is this is not I will answer a question Oh I'll just share a culture of our loan volume total about Oh.
Oh, the infrastructure punches takes the meeting.
And I can try to the so called her all the longwall until you also called you is increased to about a 20% to 30%.
Yeah.
I'm sorry was that that was Q2, it's increased.
20% to 30%.
Yeah.
Okay.
And can you talk a little bit about the strength of the demand of those.
Those online loans.
How how much oh, how much more growth can you expect.
To see.
In fiscal year 'twenty three.
We have positive outlook, but the Mod now do you have.
Detailed numbers or do we disclose that.
Oh yeah.
Thanks Al.
Parents are all local for all attend to 10 days before constantly things that a lot of our loan we'll keep it almost stable and good bad parts about Gan and debates all our towers are a full pass away. Thank god, well, all know well inquiries about a 20% to 30% yeah underneath what.
I hope that is there.
Bachelor of performance Yeah.
Mhm.
The your balance sheet is very strong you have a lot of cash yeah.
What kind of interest income are you generating from that cash.
At this time, because it seems like Theres not I don't see much that's been reported on the income statement.
Yeah.
Oh, Yeah, I think our most golf will catch a catch is mostly one oh, our revenue from our customers is long ago crowded.
Second one on does a holistic segment and actually there's a little interest in cause so much on the eagle attached apologize yeah.
Most of all customer revenue.
Right and I think you've done a great job of managing your expenses out.
In a in a declining the declining.
<unk> revenue environment.
I'm just curious about your capital allocation given.
Given that you're not generating much interest income from the cash.
Is it possible that you could.
You do have a 20 million U S buyback program in place and it doesn't appear to me that you have utilized any of that yet it would it would appear to me that you should be much more aggressive.
Repurchasing your own shares are okay going forward can you just comment a little bit about the status of your buyback program is it ready to be put into effect immediately.
We have right now.
Yeah, I totally agree with you yeah, I feel as I mentioned that we have announced a new share also they approach us supplying September .
And now I think I'm trying to weigh on your release, so let's so called her.
Financial stay might not sound will restart all of their purchase flying and I think of our strong cash position you will get with all the big.
I've worked for actual hours. She also purchasing children you have caused away well also keep out that's fine either why small business opportunity is new to.
Use our capital use all cash position and also Johan Zelle Capstone, Yeah as you mentioned.
Will I feel out of the person's fly and identify either you'll watch them opportunities for yourself checked position. Thank you. Thank you.
Just I'm, sorry, I didn't mean to interrupt just to be clear.
Looking at your 20-F, you did have a previous 20 million U S buyback program authorized and in place and yet you didn't utilize that.
During the year and you cancel that and then.
Put a new 20 million U S to replace it.
Why was why did you do it that way why didn't you just.
Utilize the existing.
The repurchase program that was had already been authorized.
Yeah, Yeah, I so much in a way when you on you risk such as fly and sometimes that's because scientists the old flywheel amongst the many years ago and the deal runs on its own.
The salary Ursula have excuse though of course is flat and then there is a little lifestyle. So as the cost of what all shareholder well hope that what we need to renew our new approaches for like amount to attend a meeting and so that's a way Kevin you want because just the last one it's a little bit yes.
Yes, it's a menu years ago announced date.
Right I think what people are looking for is to see the actually follow through with the repurchase yeah. So I would urge you to do that.
Okay and.
That's I it's.
Horton to show.
Investors around the World that you also feel that the shares are undervalued and that you know youre going to be in there supporting the the a T S.
Hmm, which seem to be extremely undervalued.
Even in a sector that is generally undervalued.
I guess this question is also for the larger shareholders who are on the call.
Do you consider taking this company private given the dramatic.
Difference in what.
The company should be valued at and what it is trading at right now.
We have no such intention at this moment.
Okay, because you because oh bolt is our strategy.
Yeah.
This offshore this being a position.
The a lot with our global strategy.
I see.
Would you consider.
Going in and purchasing more shares at this level yourself individually.
You're talking about me.
Yes.
The program is there and it's not finished.
You pointed out that we will yeah.
Uh huh.
Push forward with that right I understand I understand but the the you know a lot of what what can also be done. In addition to that is if if large insiders at the company are going in and purchasing stock themselves for their own accounts.
And again well just another.
Bob.
Yeah. The the floating part is not that big.
So while we.
Totally agree that the yeah.
Sorry buyback is a very helpful. We're also mindful that the float is not that big.
If we buy back all the shares than it is.
Okay, I'll I'll allow others to ask questions. Thank you.
Once again, if you wish to ask a question. Please press Star then one on your telephone and wait for your name to be announced.
There are no further questions at this time.
You have any further questions you can feel free to contact the company's IR team.
That does also conclude our conference for today.
You for participating you may now disconnect.
Thank you all.
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