Q2 2023 Yiren Digital Ltd Earnings Call
Speaker 1: Thank you for standing by and welcome to the Year in Digital Second Quarter 2023 Earnings Conference Call.
Speaker 1: All participants are in a listen-only mode. There will be a presentation followed by a question and answer session.
Speaker 1: If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. And today's conference call is being recorded. I would now like to turn the conference over to Lydia Yu, with Minister Relations. Please go ahead, ma'am.
Speaker 2: Thanks, Keith. Hello everyone and welcome to our second quarter 20.3 earnings conference call. Today's call features prepared remarks by the founder, chairman, and CEO of CreditEase and our CEO Ms. Ernie Tong and our CFO Ms. Namie.
Speaker 2: Before beginning, we would like to remind you that discussions during this call contain four looking statements made under the Safe Harbor provision of U.S. Private Securities Litigation Reform Act of 1995. Four looking statements involving inherent events and uncertainties. The company results may be materially different from the abuse expressed today.
Speaker 2: Further information regarding future risks and certain factors is included in the filings of the US FCC. We do not undertake any obligations to update any foreign-looking statements as required under development laws.
Speaker 2: During this call, we will be referring to certain non-GAAP financial measures and supplemental measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with the U.S. GAAP. For information about these non-GAAP measures and regulations for GAAP measures, please
Speaker 3: Thank you all for joining our earnings conference call today.
Speaker 3: Before I jump into business updates for the quarter.
Speaker 3: I would like to first review our new corporate positioning.
Speaker 3: and AI and technology driven financial and lifestyle services platform.
Speaker 3: Our new positioning better aligns with our business model that is anchored by three key pillars.
Speaker 3: Financial services, insurance, and consumption and lifestyle services.
Speaker 3: with underlying business strategies and operational flows driven by AI technologies. The company's AI Lab, which was officially established last quarter, will focus on utilizing large language models and the generative AI technologies to build and develop new products and applications.
Speaker 3: that will work across our business lives. A few examples of what we are working on include a customized virtual AI customer service agent.
Speaker 3: that will be available to respond to customer inquiries 24 by 7, as well as AI assisted marketing tools and AI productivity tools to enhance our productivity. I will continue to share more details and progress about AI during future earnings conference calls. Next, an update first on our insurance work which business.
Speaker 3: Total growth premiums reached more than R&B 1.3 billion in the second quarter of 2023, up 67% year over year, of which life insurance policies increased 162%.
Speaker 3: year over year. Despite in life insurance policy sales, this quarter was mainly driven by the timing of the new regulation that requires life insurance companies to lower their pricing interest rate of newly developed products, from 3.5% to 3%.
Speaker 3: and to discontinue selling or products above 3% interest rates. As we continue to invest in product innovation and customization and agent development and the digitization.
Speaker 3: We noted three key successes this quarter.
Speaker 3: Average first year premiums increased 15% quarter-over-quarter.
Speaker 3: The number of life insurance policy premiums exceeding R&B 3 million.
Speaker 3: Inquist 206% quarter-over-quarter, an average productivity of our agents grew by 328%.
Speaker 3: On property insurance, as mentioned on our last call, re-insurance for overseas construction policies is a new key market we're focusing on.
Speaker 3: and a total premium for this product statement.
Speaker 3: Continue to grow at a fast pace, increasing 77% quarter over quarter.
Speaker 3: Next, on financial services.
Speaker 3: In the second quarter of 2023, total loan volume was RMB 8.2 billion, representing a 65% increase year over year.
Speaker 3: The total number of borrowers in the quarter increased 82% from prior year to 1.01 million.
Speaker 3: on e-shanhua, which continues to be our fastest growing loan product, monthly active user, number on our e-shanhua APP, continue to increase 11% from product quarter to 2.4 million.
Speaker 3: and the number of average transactions per user increased to 3.2 times this quarter, up from 2.1 times from the second quarter of 2022, indicating a significant increase in RTV over
Speaker 3: Tech, ratio, per borrower. Last quarter, I mentioned that we have started expanding internationally, in which we hope to leverage our expertise in the consumer finance sector to promote greater financial inclusion worldwide. We launched in the Philippines.
Speaker 3: love quarter and the brand easy puzzle and have seen rapid growth since.
Speaker 3: As our team continue to enhance local operational flows and refine our risk models.
Speaker 3: We have seen a continued improvement in margins.
Speaker 3: With initial success achieved in the Philippines, we have also started evaluating other regions and the expect to expand to one to two new countries in the near future.
Speaker 3: on the funding cost front. As we continue to diversify our funding sources, we noted a 7% decrease in institutional funding cost in June as compared to beginning of the year.
Speaker 3: On asset quality, delinquencies remain stable with 15 to 89 days delinquency rate at 2.9% compared to 3.0% last quarter.
Speaker 3: on consumption and lifestyle services.
Speaker 3: Total GMB generated this quarter increased 28% from power quarter to RB 390.
Speaker 4: Six nächsten continental
Speaker 3: The total number of paying members this quarter increased 57% from power quarter to 2.44 million.
Speaker 3: To conclude, I want to say that I'm really proud of our team for everything we've accomplished.
Speaker 3: So far.
Speaker 3: It's been a challenging few years, but I'm quite optimistic about the road ahead and grateful to you all for being on this journey with us. With that, I'll now pass it to Nath, who will go through the financials of this quarter. Thank you, and hello, everyone.
Speaker 5: On this call, I will only focus on our chief and national high line. Please report to our earning relief and our desk for further details.
Speaker 5: In the second quarter of this year, total revenue, which is 1.3 billion, is exempting 65% increased year over year, and the 34% increased from 12-year culture. During strong financial performance, it's tried a secret, more challenging macroeconomic system culture.
Speaker 5: On financial service, the continued sea strong demand for our cryic products will be total long for facilities and culture, which will be 8.2 billion. This has been 23% of the global overall travel culture as compared to analysis projection of an adoption average of the single digits growth.
Speaker 5: Our insurance was writing planning, which then be 1.3 billion, representing 67% increase year over year, and a 44% increase from private culture, probably drive by strong lasting insurance and tolerance is dealt.
Speaker 5: WIPEU, you found in short focus, which will indeed 400 and 4.0 billion for the culture. In case 100 and 15%, year over year, and representing 31% of total natural revenue.
Speaker 5: On succession, on the left, left, left, left, left, left. So the GNV for this quarter, which the NB 300 and the 96 leading, increased 28% from 12% of our culture.
Speaker 5: On the turn side, sales and the market tens increased to 40% to render 100 and 49 million from last quarter. Waiting due to outside of investment, we brand and the market with culture to draw our father growth.
Speaker 5: Original and the service cost increase to 73% of the foreign country's culture to render these 336 million. Made in drive by increased original and the service cost relating to our insurance work or sector. Culture over culture, earned
Speaker 5: 10th as the percentage of revenue for the insurance sector has remained relatively stable and around 70 to percent.
Speaker 5: GEN-8 increased the by-minded of 5% the culture over culture, for indeed 97 million. Allowing for counter-ISES and the receil books was indeed 61 million for this culture, remaining stable and the property 0% to send our total low-fability.
Speaker 5: And for our bottom line, we continue to deliver a strong profit of running the 427 million discolored, increased 24% of the total of the total. We generally appropriate the 780 million net catch from operating discolored.
Speaker 5: and increase of 84% from private culture. Photo packs and the package equivalent would be 5.8 billion as end of this culture. Early in June , we announced the release of licensed financial guarantee company China.
Speaker 5: which will enable us to provide financial guarantee for it and continue to try our credit business segment and as well as other business models. But before we will continue to seek out opportunities for new initiatives and the strategy and wise men to foster business growth.
With generally, we remain confident in our company's business, fundamental and growth of community. Therefore, we continue to ask our share with Portia's program. This culture, we have deployed close to $1 million to pay back our shares in the public market.
As of June 30, 2023, the company and the accumulative between the along-close U.S.D. 3.5 million for our pay-back show.
Based on countless preliminary assessment of fitness and the marketing conditions, the company projects a total revenue in the third quarter of this year to be between the ND Zero-Touch-Mile dealing to the ND1.1 dealing with the night-clothed margin, to be straightforward.
With that, we can call our close to max. Our Twitter will not open for questions. Thank you.
Yes, 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 pick up the handset to ask your questions.
And the first question comes from Andrew Lyon, from a private investor. Hello, sir. My question is, the CEO is 60% owner of the company. I guess you want to stop price increase. And currently the volume is, I just calculated it, and it's very low.
By banks, they are very hard to do with this volume. Would you consider a dividend as a J-fing, J-intech did as a dividend? Also, it will legitimize the company that is official. Another question, the second question would be about your auditing.
If you could go ahead and talk about the legitimacy of your numbers and the fact that it took three auditors and more than one year to get the latest financial statements audited.
The company looks amazing on paper, it has like 800 million dollars in cash and 200 million dollars in market cap currently. So I'm very curious about the legitimacy of the numbers and why that happened.
Yes, now we'll comment on the auditing question and I'll answer the first question. We have no intention to be missed.
the company because being a global, being fact company is our strategic objective. We believe that you can be so is our flagship.
for that strategic initiative and current geopolitical challenges.
as well as what you may well know about the past few years. Yeah, not so stable market conditions regarding FinTech.
collectively have cost trouble in terms of valuation, not only for apps, but also for other players in the sector. What we've been doing is going to work very hard.
with the market regarding our strategy and our precinct. And you may remember that a few years back, we were clearly good in the market.
and we are hoping and we are also confident with hard and smart work. We will regain our market leadership position and also we have
a relatively large, large, high-speed addition that can help us invest into the future, including things like AI and global expansion. As I mentioned, we are expanding to other markets, which is a very promising direction in my view. AI will be very significant. In my view, and my hope is that in three years' time, the company will be transformed into a new global syntax folder. Thank you. But again, could you comment on the on the dividend policy? Like, if you could do a dividend policy, Jay Finn, Jay Intek, it grew recently in Stockprize and in Volume. They are also owned by the CO 50%. I would like to Mr. Ninh Sang if he could comment on the possible dividend. I'm the founder. Yes. I'm the founder. Hello. Hello. Yeah. Yes. I've been speaking. Yes. And this is Ninh. And we have currently no such dividend policy. Yeah.
Okay, but if you want your snow price to increase, couldn't you consider like the discount value is very high by the back side of question. Also another idea would be X financial, X, Y, F ticker symbol. They bought back.
shares, the reporters shares from directly from employees that help stop. Maybe you could consider that in increasing the daily trading volume in order to move the needle of the stock price and also the volume. So buying from employees could you consider that? To be honest, we're also disappointed that that's
You know, we haven't been able to really, yeah, deliver value regarding share price. That's why I just said that we will do a try and do a much better job communicating with market, yeah.
stakeholders. Yeah, but regarding employee shares, I believe our team members love to enjoy upside with the company and they also deserve it. So I very much want them.
to enjoy the upslack as opposed to buying shares from them at the least low valuation.
Okay, consider again the dividend policy introduction, maybe for next quarters, and consider Jay Fin, which did the dividend policy and we had three X, four X stock price increase, and volume entered the company. It's much more healthy right now, because they made a big dividend of 30%.
the dividend yield in two months. So they're paying like six percent now and six percent later in six months or they paid six percent already. J. Finn is similar to YRD in my opinion.
Thank you for your suggestion.
And then I'll give my Ham heart answer the Malcolm closely.
Hi, Andrew. This is Lydia. And Vester really just on your second question, can I quickly clarify a few first? Your question is on auditing. Because I noticed that we release our annual report this year in April , which was actually on par with the end of the hour. So I just wanted to clarify on what you're asking on our own. Oh.
I know that we release our annual report this year in April . Which is actually on par with the end of the hour. I just wanted to clarify on what you're asking on our own. Oh, good.
Okay, then that was resolved. It was just, yeah, the change from the KKMG. Yeah, okay. Yeah, so, David, David, I just want to add more later, just because there was a team in the auditor. So, you know, it took, it took at the time for the new auditor to get out of slide with.
on number but for our 2022 annual report it was released on April , April , 28th of this year.
Yeah, okay. Thank you.
End.
Thank you. Once again, if you would like to ask a question, please press star them, one on your telephone, and wait for your name to be announced.
And the next question comes to Matthew Arson with Fincadia.
Hello, good evening. Thanks for taking my call.
There are a couple of things on the subject with the buybacks of I
I got cut off and had to call back. So maybe you mentioned it. You were scheduled to buy that $20 million for this stock. This year, you have volume constrained to a certain degree. But the volume of the last two months has average considerably higher than the first six months this year.
What are the restrictions as far as you have when it comes to the amount of shows you can buy back on a daily or weekly basis? What percentage?
Can now please answer that question regarding by-by. Yeah, yeah, yeah, I will answer this question. Yeah, as you mentioned, the well-published we have to follow up the situation of our shared provider mount.
Basically, the limitation of this picture is that the take back amount of the company in Plenty is the normal then the 50% of the average soundwakes are liquidated amount. So we have much, you know, you can find the way to move.
about the end of the 60 to 20% of the total marketing value.
Okay, and if you could tell me how much have you bought back a year to date of the 20 million now announced before the start of?
Yeah, as you mentioned, we announced the new Shell purchase payback of program last year, and as mentioned in my script by FFZ, June 25th, the cumulative amount is just $1.1 million.
And the latest amount of by today is about 5 million dollars for your revenues. Yeah.
okay so i mean you've been a pretty significant higher i mean it's gonna be tough to get your twenty million in there unless you get the volume up here's uh... i've been a long term investor often on with your company i've been on the conference call before few times i
frankly, participated in your IPO when I was at Morgan Stanley in December of 2015, when you were a peer-to-peer lender. And your stock had ultimately gone to $50 when that business was not as highly regulated by the governmental agencies.
PRC but you reinvented yourself. I mean you're still a lender. I guess a capital-life lender but your real growth seems to be from insurance and financial services and what-have you still have a loan book of about a billion dollars.
uh... do you keep any of those loans on your books that you've got eight hundred million cash uh... the uh... regulatory authorities uh... prefer that because that's what the banks have to do and uh... the capital light strategy is great uh... as far as a risk uh... point of view to you all
But the more loans you keep on the books, I think would appease regulators. Can you answer that for me, please? Yes, I will answer your question. Your estimation will have a big cash balance in our financial statement.
Actually, we have also used our own funding to service our own credit. We have cooperated with interest companies in this year, and by now we have 600 meetings in Yeminbi. We have cooperated with the trust to service our credit in Yihanhuang.
and we also have our own financial license company and we can also use this financial license with the service of Yixiang Hua. As I mentioned in my script, in June we also ask for the financial granting company.
Okay, a couple more questions. The previous caller commented on the stock price, which I always have. I mean, you trade for less than one times forward earnings.
you trade at about one quarter of your cash balance.
I mean these sorts of valuations would not exist anywhere on any exchange outside of the Chinese PRC stock. There are other companies that trade well below cash because there is a disillusionment in investing in the PRC right now. They are looking to put a sure amount of value to the Icarus and Insullaughs stock in the United States. But under the ACLU dollars, which I do grant you not a pound, is nearly $60,000.
You know, I believe in mean reversion, but people are distrustful, rightly so, of these sorts of valuations. The previous caller was asking about your auditors.
but you're not alone with other companies that trade below it but you are in particular place you're growing your uh... earnings dramatically and uh... your user base and what what have you in your a news release you mentioned in a i for three four five times uh... in my judgment you your company in
That's how you make your loan decisions from customers who use your service. You know, you do a quick algorithmic review of their credit worthiness.
and uh... then you approve it or don't approve it uh... and uh... i think you need to highlight that you put out very few news releases the only one that i've seen
since the last earnings call was the announcement that you bought the Chung King Jintong guarantee finance which you just talked about but you know, he didn't mention whether it'd be a creative or Really, you know what it was going to do other than we could draw on the conclusions
Well, why don't you put out more PR, more news releases, highlighting AI, that you're an AI company, you always have been, and you should be valued like companies that are employing AI?
AI for their productivity growth. You know, that's one of the problems. Nobody even knows about your company. When I'm on these conference calls, often I'm the only person, or maybe one other person, you don't have any research coverage, even though you used to be followed by Critty Twist and Morning Stanley and companies like that.
But they dropped covering you, you know, when your stock price got too low. And also the previous caller mentioned another company, XYF, which is a higher priced stock slightly. That was underwritten by Morgan Stanley as well. They don't follow that anymore.
but it does trade at a higher multiple and then the market leader in the
consumer finance area fintech which is qf i n is about five times earnings and it trades like two times three times book so i you know expect and really demand that if you're interested in a higher stock price which i assume you are i was a little bit too much
back on those days and just wish because the personal wealth for your employees and yourself would be dramatically improved. So please get a company to be in charge of public relations.
and uh... tell the story out there to uh... investors uh... many small uh... the price stocks uh... even many from the prc double or triple it a day on almost no news here you report of blowout quarter and you've got a growth of across you know almost all your uh...
little upward trajectory in the stock.
So that would be a strong recommendation on my part. And...
Let's see what else I have.
I think that's it. So you got to get the word out there. You have to keep using AI because what you're doing now, talking about AI, talking about your valuation.
Have you ever thought of doing a road show? If you had a $1 gain in your stock price, that would be a tremendous percentage gain. It would also make.
investors like myself significantly add to our positions. All right, I have, I've had large positions in it. I do relatively so, but I'm reluctant to put more money in the money. I'm a financial advisor.
because there's only so many $2 stocks that you can have in a client account as a percentage otherwise you bump up against compliance issues.
So the best way to get your stock up there is to get the word out, all right? Talk about your AI initiatives. And as far as making share buybacks, if you're restricted...
by the volume uh... by uh... your broker and by the scc rules what about some insiders i mean all these employees who uh... don't want to sell you their stock because they like you know they they want to grow with it uh... it'd be nice if you had some that could buy ten thousand shares or fifty thousand or something uh... that makes news
So, you know, you need somebody doing the PR area. My 18-year-old son, who's on Instagram and other social media, TikTok, he could take this story and triple your stock, I bet, just by getting it out, or getting one or two influencers.
to pick up the story whether it's reddit or uh... wall street beds uh... i mean does that make sense to you i mean uh... your company is worth at least uh... four or five times where it is now and that would still be undervalued okay because that would be four times earnings how about ten times earnings
All right, with all the cash you have, 10 times would your employees and would you all like to see your stock up tenfold? That would be my suggestion. I think it's common sense, frankly. I hope you take some of my suggestions and that of some of the other callers.
and also just look at your stock price do you want to be it you know did you do you want to be uh... uh... you know a uh... a war for a mouse i mean to be honest with you i appreciate your tremendous performance
Thank you very much and that's all I have to say but I hope to see some of these reforms. Got it. You'll see more and more. Last time I heard you loud and clear and now we have this AI. Yeah, more and more and yeah.
So appreciate that. We will double treat for our marketing, communications, efforts. Yeah, probably consider hiring your son for our marketing. Well, you know, I'm not suggesting he's, I'll make it clear, he's not doing this. I'm saying that.
TikTok, you name it. Just think if a thousand people knew about your stock and they all bought $8,000 worth of stock. That's an $8 million concentrated interest. That's how you get stocks to lift.
uh... he is uh... getting more than just one or two people knowing about it so anyway he's not he's not doing it uh... i want to make that clear uh... you know i like it absolutely after i yes yes all right so thank you very much have a great quarter
I'll continue to be an investor, but if the stock starts to lift, I buy on strength, okay, and in size, and I'm just one guy. So please consider some of my suggestions, be sure I've been on the buy side for 40 years.
Very well. Thank you for your time. Thank you for being with us.
Thank you. And we have a follow-up question from Andrew Lillian, a private investor.
Hello again, so following what the other shareholders stated, I would like to add the dividend again and maybe doing just a 0.1 dividend is enough to catch some eyes of investors like a 5% dividend. So again, I don't know if...
to Mr. Ning Tang, the CEO , he knows Ding Gu Yan, the CEO of Jia Ying Fintech. But they did the dividend and it caught eyes and it did bring investors and volume towards their company. Of course, everything what the previous caller stated is valid and I would also do.
on an insanely deep undervalued play. That's it and sorry to repeat myself but the previous caller did not state the dividend and yeah.
Got it. We heard you. We will. Yeah.
work on evaluating these and other possible issues. And road shows, road shows with health also. No. No. No. No. No. Thank you. Thank you. This concludes the question in the next answer to the question, as well as the call. Thank you for attending today's presentation in Minnato's Control Line. Thank you all very much.
for these constructive remarks and comments, suggestions. We will work along these lines. Yeah, thank you.
Thank you.