Q1 2023 Yiren Digital Ltd Earnings Call
Thank you for standing by and welcome to the year and digital first quarter 'twenty twenty-three earnings conference call.
Participants I would now listen only mode that will be a presentation, followed by a question and answer session.
You wish to ask a question you will need to post the stocky followed by the number one on your telephone keypad I would now like to hand, the conference over to Lydia.
Please go ahead.
Thank you operator, Hello, everyone and welcome to our first quarter 2020 earnings Conference call today's call features.
By the founder Chairman and CEO , Eddie and I see all of them is meaningful and our CFO , Mike not me, but I Havent Walsh head up our PQ <unk> well trying to protect your 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 provision of the U S. Private Securities litigation you can.
I think 95.
These statements involve inherent risks and uncertainties.
The company's results maybe materially different than that.
Okay.
Information recorded she told me I'm, sorry, do you suppose Doctor you can keep it.
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It's not an issue any obligation to update any forward looking statements are quite under development.
Do you call, we won't be there for either an entrepreneur I'm not sure.
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These non-GAAP financial measures are not intended to be considered in isolation or as a substitute.
The financial information prepared and presented in accordance with U S. GAAP.
I'm thinking about these non-GAAP measures.
Reconciliations to GAAP measures. Please refer to Chinese country I will now have an awesome English deal for opening remarks.
Thank you all for joining our earnings conference call today.
First an update on our insurance brokerage business.
Total gross premiums reached more than RMB 323 $923 million.
Up 15% year over year.
Oh, cool, which lives and property insurance policies contributed 57% and 43% respectively.
The increase was mainly driven by life insurance policies, which increased 28% year over year.
Significantly outpacing China's life insurance industry premium growth.
Eight 9%.
Our strategy to drive rapid business World continues to be product innovation customization agents development and Digitization.
<unk> invested in our agent and have established a program to help them improve professional skills.
To enable them to broaden their service scope two.
Cross sell and up sell products and services.
<unk> customers evolving needs throughout their entire lifecycle.
We noted the initial success this quarter.
With a significant uptick in four year life insurance premiums.
Existing property insurance policy holders.
Property insurance as mentioned on our last call.
As part of China's belt and road initiative.
Global infrastructure development and strategy.
China outbound investment and construction projects.
Expanding at a fast pace.
New scenarios for insurance protection.
Protection and coverage.
Well its young laterally.
Vantage is in product development.
That's a no risk management expertise.
Reinsurance qualification as well as <unk>.
Partner.
So it's.
It is now providing reinsurance well overseas cause accident insurance policies.
We estimate the potential market size for these insurance Beckman to.
At least RMB 10 billion.
In the fourth quarter total premiums for this product segment.
Close to 30% quarter over quarter.
We expect to see a continued increase over the rest of the year.
Next on the credit side.
The fourth quarter of 2023 total loan volume was RMB six 4 billion.
Representing a 39% increase year over year.
Total number of borrowers in the quarter.
Increased 71% from prior year to 872000.
The increase was primarily driven by our revolving loan products to Egypt.
Which actually saw volume increased 88% from prior year due to increasing demand.
I mean, you all our email platform is reaching close to point to point 2 million users as of quarter end.
Increasing 8% from prior quarter.
As our active user base on the platform continues to expand we have also seen an uptick in our revenue from electronic Commerce services, which we consider at risk free revenue and includes services like retards.
Online video and streaming accounts and popping up long quality. These.
These E Commerce services also presents an opportunity to establish our own membership ecosystem.
Enhancing customer loyalty and engagement.
On the funding front as a number of our funding partners continue to grow and we continue to diversify our funding sources. We noted a 16% decrease in institutional funding cost this quarter from prior year.
On asset quality, we maintained a conservative risk management policy this quarter.
A slower than expected macro recovery and we noted an improvement in delinquencies with S. P. B 30, plus delinquency rate in proving to us is dollars low or 0.6% compared to the I'll call it 7% last quarter.
This quarter, we started to execute on our international expansion strategy, you, which we hope to leverage our extensive expertise in the consumer finance sector to promote greater financial inclusion.
I'm very excited to report that we have completed.
This isn't a wholly owned subsidiary in the city.
Which owns and online lending license and financing license from the nature of the Securities and Exchange Commission.
We recently beta launched under the brand the EZ pass though.
And how big you are right that substantial surge demand in demand since that.
Already accumulating over 190000 registered users on our E. P P.
As of today, we have completed the facilitation of the law on the clock.
And is conservatively controlling our scale well focusing first on refining and enhancing our risk models.
We see enormous demand for financial services in this underserved emerging markets.
We expect international markets to become a new growth driver for our business.
Going forward, we plan to accelerate our pace of penetration in the Philippines.
While investing in our accretion no flows to inquiries automation and cost efficiency.
At the same time, we will also start evaluating potential opportunities in other regions around the world.
Recently, we've been witnessing the rise the chat G P P and generate fees.
Technology.
And we believe that the application of generation AI can be swapped and bring sweeping changes to the financial industry.
This quarter, we established an AI lab that will be focusing on utilizing tragic P. T large language models and the generation AI technologies to develop applications in each of our business sectors.
For example, using Personalised chat box to provide 24 by seven customer service for our borrower borrowers or utilizing technology to help our agents increased cross selling and upselling.
With the launch of our AI lab, we aim to improve the efficiency and effectiveness of our operations.
Enhance user experience and to drive business growth.
Lastly, I would like to say I feel worse about the management transition, we have announced Georgia is stepping down as CIO and on behalf of the board I would like to express my sincere thanks to George for his outstanding contributions to the company through all these years.
Concurrently the board has selected MS. Ms Young been to serve as the company's chief Human Resources Officer.
Together, we are excited to propel the company to new levels of success.
With that I will now pass it to know who will go through the financials for this quarter.
Oh, Thank you and Hello, everyone on this call Oh and focus all the key financial highlights let me first while arguably I think well find the detail.
In the first two columns are all once you're talking three our total revenue.
900, and HSA sponsoring meaning this is ed.
Hunting assortments of some inkling, yeah over here and that's why because of the Knights of some strong plywood culture called they're called or do you think what's maybe flanked by changing our loan volume.
Our total facilities of culture, which is M. D C. Huntsville eating if I didnt mean, a 79% yeah, Oh, yeah, well under 5% still playing I think likewise with culture.
Oh I'll call. It change can be due to adjustments in product to me that's.
I'll say to me well I have to make adjustments to our small business loan Wow.
I'm going to close in our small well laden load factor.
Before I speak on all key revenue driver from the deal to close to 20% of our National I mean, you'll just culture and is therefore phone dialing funded culture or will it be disclosed exactly total class fun yet on the revenue follows that book of business is the first apologize yeah well also.
What I can find me it shouldn't be 923 o'clock for eating well, but anything official besides it looks like year over year and that's what you want to size. It became from private held back because Oh College I think thing was mainly attributable to a deeply partisan in Europe , which are impacted by timing of alpha.
Yeah climate.
Well, you'll find yourself book of business, which won't be 100 and allows them to save on swap eating for this culture. That's my sense.
In place of 'twenty sounds performed at year over year, and the remaining stable from plywood accountant I suppose I'll watch, let's say your opinion and its life insurance policy well, both high ours, its culture, thereby or it was only 11 to take a write off of Volcker. It gives me a call.
Italy.
I'll bet, you signed deals in the market because that's what keeps us on two N D 100 under six meaning from the same period last year.
Optimization of all cause destruction for all offline.
I'm in close in Polish off all the while he loved it they can cosmos.
On the other hand, Andi know angle so its talking quite so suddenly wants it sounds it year over year to 9200, it meaning maybe drive that includes all organizations and the service costs related to our insurance broker business How's the I'll call them aren't you know so it's tough.
So a percentage of revenue also the insurance sector has remained stable at.
It's two 8%.
John .
First up I was trying to emphasize to you all year, so anything that's a great meeting.
So it comes or is that although the Super Bowl was indeed, what you find meaningful this culture.
He is stable and the proxy so kind of still have to sign a loan facility.
I'm from all walks of life accounting Youll see there were some coffee offer them before I gave on the funding side, meaning its culture in place the 101 for sandy year over year, and frankly, a lot in how much I also can say percent.
The general economy than it is 319 meeting catchment operating sports culture and increase of 40% from probably culture, our total cash and Apache Cleveland, What's 9500 one's eating at end of this culture I'm glad to them before kind of sleep eating that's after year end.
Yeah.
The graduate Tommy about macroeconomics, well to actually seek out opportunities to allocate it yourself as to new initiatives and that's flattish last night, how about technology innovation and the folks that he's nice gross.
In the first two columns are authentic today suites like Dupont alone to find many U S dollars to pay back all shall keep the public market.
The March 31st started talking to you tend to see the company has accumulated coupons around close to $3 billion well all see out in such a program.
It's all a seismologist Smith on the Matson condition, it's part of our total along either second called on safety.
To be wouldn't be zero behind my feelings wouldn't be one beating it by Compartmentalizing patio to living in stable I'll call. This a surprise I'll call. It on the plane you reveal which is subject to change and I saw that hey, we've.
We've got like Huntsville, outsourced remarks, operator, well now open for questions. Thank you.
Thank you if you wish to ask a question. Please press star one on your telephone and wait for your name to be announced.
If you wish to cancel your request please press star two.
If you want to speak a fine please pick up the handset to ask your question.
Your first question comes from Bruce Arent from New Haven Fund. Please go ahead.
Yeah.
Thank you.
First I'd like to congratulate you on another outstanding quarter.
Two quick questions.
Can you provide insight into whether the PRC government regards financial institutions like urine digital's favorably or unfavorably in the current political and economic climate.
And my second question.
Is are you considering offering a dividend to shareholders. Thank you.
Thank you.
Questions.
Hello, Yes. Please go ahead.
Okay. Okay. Okay. Thank you I will answer the second question about our even in any flights Oh, yes, okay.
We have fulfilled all shell construction supply falls a lot since December of last year, and I know, we'll have accumulated about Pennsylvania, mainly in U S dollars to fulfill my Aushev friction.
I know also our imagine my Wow for all catch the policy. So it was mostly focused on so called Mount up Germany teaches us all chats to harvest. So some of our own business and the home office needs to have the stable and the goals are and how cells and also want to replace our flywheel travelers waged racial for.
Now also I know I can say is the company will have no geeks don't fly concentrate on this one.
This question kind of telling you if any abandoned at two of the question.
Okay. Let me cover the first question.
Thank you for your yeah, our accomplishment and we will.
Continuing to try where a basket first of all and regarding macro.
Conditions.
Uh huh.
Like Oh.
You you.
You must know that.
After several years.
So you have seen.
Quite a dynamic yeah, Oh these are sector, a lot of changes and but now things have oh.
<unk> much more stabilize yeah, and Oh, the economy is recovering from the pandemic.
And really Oh Samson.
Our in car reached tomorrow.
Small business is encourage and so after the past few years so sure yeah.
Yeah, that's dynamic and we feel that our recent macro environment is rather a conducive to oh what.
We are doing yeah.
Thank you.
Yeah.
Thank you once again, if you wish to ask a question. Please press star one on your telephone and wait for your name to be announced your next question comes from Matthew Lawson something KBR. Please go ahead.
Yes.
Hi, Thanks for taking my call and again a terrific quarter.
If I could give you some advice to to all to bring greater rep.
Recognition of your company, Yeah, Youre trading at essentially one times earnings if he makes 70 cents a quarter.
We can do the arithmetic, that's $2 80, a year and that's.
That's less that's greater than what the stock is trading at plus you have a cash I see you're balanced group.
North of over $700 million.
And that several times, what your market cap is.
So I've got a couple of questions I mean first.
First of all the the news really Should've said our earnings up a 100%.
You know versus just reporting the earnings I mean that catches People's eyes, and then you mentioned in your report.
Artificial intelligence.
It is.
If you would just say something like you know we havent Brett.
Yes.
We've initiated an AI initiative.
And we expect it to expand our business significantly I mean that alone would.
It's come up on People's screens for U S investors is.
Yes.
No a rationale to invest in your company and then if they did if the computer the numbers and saw how undervalued you are versus your balance sheet versus your book value and your cash balance I think that could get it higher I assume you. Once you start to go higher I mean.
Frankly, I worked at Morgan Stanley . When you guys went public back in December 2015, when you were a peer to peer lender and exited that area because the government.
Did not.
The PRC government.
Frowned upon that and you've done a great job doing so and youre, making plenty of money.
So I think you've got to get to.
The word out there and.
Being more.
Detailed.
And frankly.
Little more hyperbolic.
More oh.
No animated and and your news releases I think would gain attention.
Let me ask this though after that.
Detailed because I've been an investor for a long time and I'm frustrated.
This stock should be you know six or $7 minimum if not a lot higher but.
Hum.
On June 30th the PRC is going to be looking at companies that are capital light and are doing the lending as you do.
And maybe make some changes and what have you.
Since you have so much capital and you have a small loan book.
Do you keep your loans on your balance sheet.
Yeah, I I see your point, so yeah, I'm actually a full our London business and we have to to a milder one model is used our guarantee in town news like the highly motto for the high Maltose alone bomber is enough and you see I've seen no yeah, the second amount.
So it's I'm not highly Asa license, although destiny Sidedly justice to the performers and the promotion and our lessons and I said south channels on funding partner. Although we just are about our consulting revenue from a parting comment I know, we don't have any challenging our responsibility and up.
So this motto the longwall until it smells eat our Venice Beach and allow warehouse closer to I'll say, Aldo and itself was enforced. The mazo are easily takes all gone to their responsibility the little well Oh punishing yeah.
Alright, because I think that's really the issue.
That.
Uh huh.
You know to get.
To be license to make loans, one has to take the some of the risk and I'm seeing some of your former competitors or maybe competitors, whether its XY, yeah QF lyanne.
F I N V. I in particular is keeping more of the launch on their balance sheet. Besides just being capital light now.
Now as far as having all that huge cash balance you have I see that you had a lot of our income.
Our investment income.
Just interest on your cat.
Which you shouldn't be getting mutual interest rates have risen and that should be a large part of some of your income.
Hello.
Now are you taking this question.
Yeah. So your math I mean, you have a lot of you and you have a lot of cash $700 million Oh, what sort of interest are you earning on that.
Yeah lots of things.
Has that.
I'm sorry go ahead.
Okay, Yeah, you'll kind of see what has Oh, we have also fly onto my billing.
Deposits in our balance sheet for fantasy Ah well catch you will see certainly hassle actually what has what one does the pardon me that as of lately counter deposits and a coffee with all finding time now to Mexico. Our financials were not the financial income and trust income is that it's actually live.
Found this year, but also for our passion our youths aging for example, I have calculated way I'll try to companies that have tried to fly is well I'll answer that one.
There are some figure for you for laughing English the Kazaks are our own money and set up the truss alone has a lot of in light of obviously, the hunton meeting followed them wanting and their their trucks at Transexual mildly patio to about 600, meaning by the end of offices that can the culture. So we can use our own.
Morning Foods with silver production underground parking funds out Oh for amplify, let's say one off costs and that's still playing either you want my English name Sunshine as Tony mentioned in all screen well have almost this strategy will also use our own money tourists, it's wanted to overseas opportunities and.
Does he have some pre on a Sunday.
Oh, well, let's see I'll go watch doesn't give me his strategy and also we will use our cash to two attaching posture ontology innovation patchy.
Now is that it will have sat on our lives and hopefully we are knowledge on Patriot you. The future is the type of vehicle Oh. So generally we would have as a management what happened try I'll buy so to speak of mall opportunities are 222 to increase our foundry.
Translational and keep our let's take all pocket.
Okay, Let me let.
Let me.
Let me add that they're used to really great too.
Me to an old friend and are you now.
The past few years has been.
NAFTA are easy for our US and are all of the stakeholders are wrong.
But I feel.
Bad about yes has about being able to.
You know produce great returns for some of the people who have fussy dos.
So.
We will continue to double our effort to work.
Good job, Yeah, I take your advice, Oh, making things more eye catching so long and.
Well, we didn't so highlighted the AI initiative, but because we have seen a 90 people just they use it to us that was like a marquee logos.
We hope to really yeah utilize it.
In our daily work had a achieve.
Our good better numbers first.
Well the point is that.
Well it takes it will be more a proactive.
In terms of communicating plus the let me say I feel worse, I mean about yeah, our strategy and how to win.
We you know are in the coming years as students you mentioned like yeah.
The stock price, that's a long I mean, the domestic lending business is a high growth and a prostate January pea, although it's not the top top the scale yet, but we are catching up I believe in a few years.
This time, though we will.
Be able to largely catch up but at the same time would been trying to do a better job in insurance, Yeah. We show, we like and yeah. We've built a very good foundation for insurance I think that will be.
Be a key differentiator.
Ah another tepe wells the driver a strategy for US is our son my folks are have done some work outside of China are with yeah, some progress, but our we believe our.
You know after the pandemic the field is good for us too.
To do a good job outside of.
Mainland China and we've got started in the Philippines that are more telecom.
And so these are the building blocks are but we will try and do more although we have no clear ideas other than utilizing a attitude to do be about things are better, but we should have a yeah.
More ideas about.
How to really yeah, it feels good business.
Good.
Okay, and thanks for that oversight.
Literally your stock should be a lot higher I, just think of like a lot of companies from the P. R. C. They they felt they fall below the radar because people in the U S.
[noise] become disenchanted with a lot of companies.
But yours are.
You know it just trades well below your liquid assets I know you had in the past mentioned the share buyback which would be.
Very accretive and.
It certainly would be helpful. I, just noticed that none of them were shares it looks like were purchased in the first quarter.
You, obviously you have the money to do so I mean, you could easily buy back 10, 20 or $30 million worth of stock.
Reduce your float, but you know.
What do you have to lose because the stock is track trapped in the $2 range.
So do you expect to buy back any shares are if you're not going to do a dividend this quarter.
Nah you will take this question as he D. We keep doing share buyback.
Yeah, I find my shouldn't be far away pro forma of our shelf tie back of Guangdong December lots a year after its up about a third and so on and if I know what have you found a $3 million okay.
3 million I'm sorry.
Uh huh.
Right.
Oh five phase of flights a day, what have you about a strain meaning to us dollars to fully fund it yeah.
I know, we will keep on our shelf payback program. Yeah household would have been up for the $20 million a pound Assam I'll be able to afford it so I'll, let him Oh, there's a fair amount of stuff like that yeah.
Yeah, that's L. A in general anyway, Okay, Paul Al Shams tea bags and jewelry yields so the rest of them. Yeah, I think we'll kick off with I think the rest of this year.
Okay, because the stock price is so low you don't even have to be that.
If the stock price I mean, you could pay up.
Now to three or $4 a share if you just put a bid in the market.
Four 5 million shares it would.
Not only alert the investment community that there is a serious buyer, but it would be very accretive to us since your book value is many times.
Where its trading at so it's it's a it's a plus plus I mean with all the money you have I can't imagine.
I know many better investments than your own stock.
Yeah, I I know, you'll tell sorry, and I think you'll you'll come in and I I, Scott and some oh.
We will find the information to you about why a hallway cause on the outside high boyfriends, because I'm a day at the time, they pencil from Martha Shelton of Mount Isa They sounds a bit like Brazil like nursing, so absolutely, Oklahoma that we sell blue cards are actually they have now that as you mentioned the silver.
It's like a payback or we have oh can I take a powerhouse shall purchase so our athletes communication will all okay I've called it off with a couple summers that shall payback based on a rattler Tom Yeah, we have paved the way.
The largest amount Oh car T to go if you don't.
[laughter] no another seriously to pay back.
The council in March to comply.
These days, we have a limited amount of everyday we can okay.
Yeah.
Okay, Yeah, I know youre constricted by volume, but alright lets you gave up the good work I think you just got to get the message out to more investors because again AI as a marketing tool by many companies, but you guys have been using some form of AI for years, that's how you make your.
Credit decisions.
You know by using our algorithms and things like that.
So I think the ship brokers you should promote it because it's valid.
And make it very clear that you've doubled your earnings year over year.
And are you have you know complete upside and I think that a news release, such as that would would generate some interest here. So thank you for your time and keep up the good work.
Thank you Sheena advice.
Thank you there are no further questions at this time that does conclude our conference for today.
You for participating you may now disconnect.
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