Q4 2023 Yiren Digital Ltd Earnings Call
Thank you for standing by and welcome to the digital fourth quarter and fiscal year 2023 earnings conference call.
All participants are in a listen only mode. There will be a presentation followed by a question and answer station.
If you wish to ask a question that you will need to press the stocky followed by the number one on your telephone keypad.
I would now like to hand, the conference over to MS. Qiao Huh Al Officer. Please go ahead.
Thank you Nicole good morning, and good evening, everyone. Today's call features the presentation by me on that and then they are all quite use all of the al midpoint Maintop Oh, I think he made out with join us in the Q&A, but I think it's called.
<unk> remarks.
Before beginning wed like to remind you and especially as they look calls and painful look statement.
Thank you.
You all have a securities Litigation Reform Act of 90 95.
Well take myself back to do it.
You can hold off for a while to get BOL generally does contain any false statement.
But any commentary regarding future at all.
I think Gordon.
Well, Thank you all Securities and Exchange Commission.
We do not take any obligation to update any forward looking statements are required under the relevant law.
During the call well be referring to several non-GAAP financial model.
Most of them I guess, Jim you know some of them operating in Oklahoma.
And again on the merger and now being rolled out and it gets paid out in Appalachia.
Does that mean.
And that's really the maintenance attach all presented in accordance with GAAP.
We've been making about his mango magic I think you'd be able to get mad at Queens, we thought about any pending.
Oh, no but to me the opening remarks.
Speaker Change: Thank you all for joining our earnings call today.
In the year of global economic uncertainty, we wrapped up 2023 stronger than ever.
Okay, that's what I'm gonna be beauty of our business.
Yeah.
It's a pivotal moment for <unk>.
I believe firmly established ourselves as the pioneering I agree the financial and lifestyle services platform.
We will go to a T J could be categorized so you shouldn't.
Speaker Change: Line, we streamlined our operations.
Focusing on the.
The good growth drivers.
Our proactive integration of AI into our daily operation.
Trunk lines a significant shift.
Propelling our business forward amid dynamic economic landscape.
These strategic embrace of technology, not only optimize our efficiency minimize labor costs.
Our customer service, but also underscore our dedication to innovation and the strategic advancement.
Our achievements in developing and deploying AI highlight our ability to adapt and excel that you new benchmark for operational excellence and repeat it.
First our financial services business segment.
The fourth quarter witnessed continued robust growth.
Speaker Change: With total loan volume, reaching RMB 11 6 billion.
72% increase year over year.
Marking the fourth consecutive quarter of double digit growth.
The number of borrowers served rose to $1 4 million.
A 59%.
Yeah I'll bet you.
Highlighting our eighth consecutive quarter of growth.
The on the U R E Y E. P. P inquiries from $2 9 million last quarter to more than three points this quarter.
Speaker Change: Preventing an impressive annual growth rate of 17, 7%.
Demonstrating the growing popularity and the user engagement.
This growth is underpinned by our other bonds and continuously evolving.
It does.
What you said in the fourth quarter, our telemarketing rowboat assisted over 10 million borrowers.
Really creating more than RMB 1 billion in alone.
Regarding our international financial services business, we achieved a 49% increase in loan volume facilitated in the Philippines in the fourth quarter.
Compared to the third quarter.
Right.
Speaker Change: With the automation of information revealed processes driven by our AI.
We expect accelerated growth and expansion into additional overseas markets in 'twenty 'twenty four.
Another operational highlight that I would like to address is our strategic shift to the RTA or real time analysis customer acquisition model.
This approach integrates risk screening at the customer acquisition states, attracting higher quality customers and improving our customer mix as.
As a result, the proportion of new high quality borrowers served this quarter increased by four percentage points compared to the previous quarter.
Turning to asset quality, the fourth quarter, which saw a slight increase in 15 to 89 days delinquency rates, so three 5% due to industry wide credit quality fluctuations.
However, with the ongoing optimization to our customer mix and the.
Fine tuning risk control standards empowered by AI analysis, we observed a 15 basis point decline in our I P. D 30, plus delinquency rate in the fourth quarter from prior quarter.
Along with a further downward trend going into the fourth quarter 'twenty 'twenty four.
On the funding front, we're glad to see a continued decline in our funding cost by another 20 basis points.
Compared to the prior quarter.
As our institutional funding partnerships continue to expand nationwide, we expect a further 60 basis.
Fifth point decrease in the funding cost in 'twenty 'twenty four compared to 2023.
Now shifting to our insurance brokerage business.
The year of 2023 saw continued strong growth in our business volume.
With total premiums, reaching nearly RMB 4.9 billion.
Representing a 24% and new inquiry.
Significantly outperforming the industry average of nine 1%.
The full year Insurance Commission revenue reached nearly RMB 1 billion.
832% year over year increase.
However, in the fourth quarter alone due to new pricing regulations cartoon product returns at 3% life insurance premiums, so a 24% decline year over year mirroring the broader industry client.
This was particularly this was partially offset by a 26% annual growth in our property insurance premiums.
For the fourth quarter of 2023.
As we've previously discussed.
Strategic focus remains.
He didn't development product innovation and Digitization.
Life insurance products, we will continue to enhance our capabilities in serving high net worth cooks via our E.
Pete.
In 2023 there was a notable 45% right in the number of large ticket life insurance policies with premium all the RMB 3 million per policy.
Speaker Change: That's why a 70% increase in policies exceeding RMB can meet it.
Speaker Change: Currently we are expanding our elite agent team and getting ourselves fully prepared for the rebound in the life insurance market.
Speaker Change: Which is expected to occur in the second or third quarter of this year.
Speaker Change: As the industry fully adjust to the new regulation and the product changes.
Our property insurance, we will continue to focus on higher margin business through product innovation and the channel partnerships in house and the medical care engineering, and construction and the travel and transportation for.
For example, the 'twenty to 'twenty three full year premiums of our overseas construction insurance products increased by 13% year over year.
Moreover, we have also strengthened our cooperation with high quality social platforms, such as little Red book.
The start of the fourth quarter of 2023 with close that nearly 100 high end medical insurance policies on that platform.
Marking and efficient new acquisition approach.
Consumption and lifestyle services the growth momentum continues as the fourth quarter I saw another 23% quarterly increase in our total G M b to RMB.
693 million the.
The number of transactions reached 3.4 million up 13% from the previous quarter.
The robust growth reflects our continued efforts to address our customers' nonfinancial need and our commitment to enhancing their overall quality of life, which in turn improve user engagement and stickiness, creating a reinforcing cycle.
Speaker Change: Within our ecosystem.
Speaker Change: Looking forward, there will be more attractive lifestyle and entertainment products and services driven by AI and high Tech coming.
Speaker Change: Onto our shelf.
Speaker Change: Last but not least I would like to emphasize our AI strategy atop our long term strategic directions.
Our AI lab initiative.
Speaker Change: We have been training and fine tuning, our large language models and developing our own large language model accretion or the so called I'll add them up.
Platform.
This endeavor will firstly deepen our integration across our operational spectrum.
T efficiency and enhancing customer experience.
Secondly, we aim to expand our AI expertise b.
That's intact verticals to more select sectors.
Empowering both b to B and B to C clients and partners with other banks the technological capabilities.
Moreover, we have recently encountered high quality AI companies and plan to expand our AI ecosystem through strategic partnerships and investments.
Horizon is bringing with exciting prospects.
Originally our CFO, what's scheduled to participate in it.
Me too.
Due to unexpected travel commitment. She is currently under wrote and unable to join US online in her absence I won't be taking the deed to share the prepared remarks, everyone.
So this part I will only focus on the key financial highlights. Please refer to our earnings release and IR deck for further detail.
First of all we are glad to report a solid full year 'twenty to 'twenty three with both our topline and bottom line realizing double digit annual growth.
Speaker Change: Our previous guidance.
Typically in the fourth quarter of 'twenty to 'twenty three our total revenue reached RMB, one 3 billion, representing a 17% increase year over year.
But the ear of 2023 total volume reached RMB, four 9 billion up 43% year over year.
Now on financial services, we saw a continued healthy growth with total loans facilitated this quote corner, reaching RMB 11 6 billion.
Speaker Change: Representing a 72% well.
Over prior year.
Revenue from this segment reached RMB 700.
And 81.3 meeting for the fourth quarter.
Representing an increase of 22% year over year.
Insurance.
Written premiums reached RMB, one 2 billion, representing a 9% decrease year over a year and a 15% decrease from the prior quarter.
This decrease was mainly due to the new regulation.
In life insurance returns of 3%.
<unk> from previous three 5% with sales, peaking for legacy products in the second and third quarters are plenty plenty of three the market responded to the newly priced products with low interest.
Consequently, we saw a substantial decline in the first year premiums of life insurance products.
Therefore revenue from insurance brokerage services in the fourth quarter decreased by 51% year over year to RMB $98 2 million.
Given that first year premiums overall have a higher commission rate.
Compared to renewal premiums the decline in revenue was greater than that of the premiums.
As mentioned earlier, we expect a gradual recovery in the second or third quarter of 'twenty 'twenty four.
Meanwhile, our property insurance remain solid with the fourth quarter premiums increasing by 26% year over year.
Consumption and lifestyle services total G M D.
For the quarter reached RMB 692.7 meet it.
Increasing 23% from prior quarter.
The customers for this segment come from our existing users across all business lines.
The growth rate of G. M. B is aligned with the increase in the number of our combined customers across diverse business segments.
On the expense side.
Sales and marketing expense increased 99% year over year to RMB 205, and 5.7 meeting.
Mainly due to the intensified promotional activities as we see a continued growth in our financial services business volume.
Research and development expenses increased to 44% year over year to RMB $47 6 million as we persist in ramping up our investments in AI and technological innovation throughout the company.
Origination and servicing costs decreased 13% year over year to RMB $184 7 million, mainly driven by a decrease in origination and servicing costs.
Speaker Change: Late at two of our insurance brokerage sector, I mean, the card and regulatory headwinds.
G&A remained stable year over year at RMB 50.5 meeting alarms.
Allowance for contract assets and receivables was RMB $98 7 million for the quarter.
But late teens into deal 0.8% of loans facilitated 10 basis point lower than prior quarter.
Onto our bottom line.
We continue to deliver a strong profit of RMB 571, 3 million this quarter.
Increasing 18% from prior year.
We generated approximately RMB 417.2 million cash from operations in the fourth quarter.
Speaker Change: <unk> up 12% from prior year.
On the balance sheet side, our balance sheet remains strong with total cash and cash equivalents of RMB five 8 billion by the end of this quarter, providing a sufficient buffer for us to respond to any business opportunities in institution the operation.
International expansion and the strategic AI deployment.
Speaker Change: This quarter wait.
We've deployed USD 1.9 million to buy back shares in the public market.
As of fourth quarter end.
The company has.
Cumulatively deployed close to U S D.
Seven 4 million for its share repurchase program.
We remain optimistic about the cost one and the future growth opportunities of our company.
And RMB six 8 billion.
With a healthy profit margin.
This reflects our current and preliminary view, which is subject to change and uncertainty.
With that we conclude our remarks, operator, we are now open for questions.
Thank you.
Thank you if you wish to ask a question. Please press star one on your telephone and wait feel name to be announced.
Speaker Change: If you wish to cancel your request please press star two.
If you're on a speaker please pick up the handset to ask your question.
Your first question.
It comes from Mark Zhang with horses, how our research. Please go ahead.
Hi, Oh, congrats on your strong Q4, and plenty of time Eastwood, we self my first.
And it's all AI strategy. So what are your specific AI strategies for each business line and regarding the development of an AI ecosystem as mentioned in our remarks earlier could you elaborate on the latest progress and are there any.
Ossific investments or co that collaborations with other technology companies that you can't disclose thanks.
Thank you and first of all Oh, we are utilizing AI in our fintech.
Businesses, including like credit pet, Yeah, and our insurance pack and lifestyle and consumption of services.
For example, in our risk management, Yeah, we use yeah, our AI.
To do like collection.
Yeah.
And Oh, we.
They use our AI for our international like the business is a quality control like the in the Philippines and in.
Mexico, Mexico like we can monitor.
Remote yeah, how our teams are in those markets, yeah, I'll come back businesses, Yeah Ah. According to local regulations, yeah through AIA, it's like a translation and.
Speaker Change: Intelligent, yeah and for our.
Sure attack a business for example, like we are helping our clients yeah annualizing out there.
Speaker Change: <unk> policies are.
For.
Hum us and from other like Oh insurance companies and Egypt Yeah.
Yeah and Hmm for example, we are developing like AI cockpits for our lifestyle and consumption.
Consumption services to be exact we are developing like models for each of our fintech.
Business lines are through.
Speaker Change: <unk> like the open source a base a large language model plus our each business lines are our proprietary Paypal and ER business No hop through this process, we have developed a strong capability.
In our view a two a tweet.
Fine tune.
Model, Yeah, and this capability.
Uh huh.
Very like are in high demand in the market. Yeah. So we are now working closely with our strategic partner and on.
A building a product.
Speaker Change: For these model.
Large language model training capability.
So are these Uh huh al Al EM Ops platform will go live soon yeah, and so on that a platform. We can continue to train our models while others.
Can calm train there's yeah. So are we are a welcome like customers are from Oh, six sectors to calm train their models, we will oh offer.
Open source functions to them by the fall.
Those who are interested.
In a further.
Eloping their models are.
And if they need our help we can provide to them.
Speaker Change: Ah additional health are on a paid basis. So this will be a yeah.
Speaker Change: Our new business so in AI, yeah, a part of our our new AI businesses at the same time we.
Leveraging all these AI capability.
To try and work with like are industry leaders in legal in like psychology, a social compare padding like such a like a sectors, yeah, Oh, who have a great data.
And the great pieces Knowhow.
For their respective Oh verticals, but don't have great AI capabilities. So we will yeah try and worked with them strategically yeah, bringing AI capability are.
To their businesses yeah.
And so we all are in the process of closing a number of our strategic investments.
Speaker Change: Investments and partnerships.
Ah in AI and AR, Yeah, one time is the right or when we close each of those initiatives. So we will make up a decent no announcement.
Oh got it that's good to hear my second question is a little bit father regarding your international business. So what are your expansion plans are for a 'twenty 'twenty four regarding your international business.
What is the expected gross rate for loan facilitation overseas.
Let me first offer my yeah, a more strategic more macro view and then colleagues.
Me and our colleagues please added to it and so our international expansion.
Speaker Change: <unk> is a key to our team.
Took rope.
Yeah, and we've made very solid progress.
So far.
I've got a long way to go because the base is a still quite a small and if so any new business on top of that we will represent will likely represent that.
Speaker Change: Very high growth rate, but yeah, but yeah, we will continue our yeah, two Ah Ah grow our international a bit.
And as we are doing our work in southeast Asia.
Our first in the Philippines, but the more countries to go in Southeast Asia.
With Oh God started in a.
Our Latin America with Mexico to be the first so we are very are hopeful about the market and and subsequently Ah I hope and we do have a plan to yeah.
Explore like Africa, Yeah, Ah, but yeah. This.
This step by step yeah.
And may and yeah. Please provide the more oh.
Yeah, Yeah cause I think he mentioned that our Oh. This is a challenging and very key hum too right.
Last year, our objective is just to understand in the overseas market.
Two our buildout of our team and I think we are successfully and then you have a target in the last year and look for the 'twenty 'twenty four I think as we get into target or 18.
National business.
I mean, the Danville.
In the 'twenty to 'twenty four.
Speaker Change: Thank you.
Haven't darn confident.
This year, because we had a very solid foundation.
On the international business. It seems like I mean family leveraging AI capabilities, and we already have arent internationally.
Team and very localized.
Speaker Change: Thank God.
We have some very uncomfortable founded international.
International business. Thank you.
Speaker Change: Yeah.
Okay. Thanks.
Speaker Change: So my third question is regarding your loans that's it.
Loan facilitation business and not just overseas, but also domestic so and in the total so for 'twenty 'twenty four what's your expected gross drivers for this business in 'twenty 'twenty four and can you offer any guidance on the gross rate for new loan volumes for.
Speaker Change: For the year of 'twenty 'twenty four thanks.
Ken May please take that question.
Yeah Yeah.
Okay for the 'twenty to 'twenty four I think that for the overall economics, Atlanta I think although we have very after them.
Got it.
Constantly.
Now for this year, so we have to balance our business, Samsung and our asset quality.
Speaker Change: Our target for this year the growth is Oh.
About 30% I think of that so far in 2020 for a young target growth rate.
Speaker Change: Meanwhile, I think we have to keep you know optimize aren't.
Kimball villages.
This is no.
Two are they flying on our customer acquisition strategy.
Speaker Change: So I'll kind of score modeling and.
So on and so far so and also in the past.
And capabilities as well so also I think you know.
We have some I'm very comparable to all the answers yet, but I will do a very cautious on our asphalt business for.
How soon that I see some quality.
Speaker Change: Thank you.
Oh got it yes, congrats again, a strong result, operator, I I don't have any more questions.
Thank you.
Thank you. Your next question comes from Bruce <unk> with Black Lab Fund. Please go ahead.
There are a slew of congratulations on another successful year, especially the increase in overseas loans.
Bruce: And there great future potential.
Bruce: Two questions.
First is concerning the life insurance segment to further address the 17, 1% drop.
And.
How are you planning to adjust to the new regulations.
And then secondly, just you further.
Bruce: Our plan to have share repurchases. Thank you.
Speaker Change: Thank you regarding the first question Oh, yeah.
Speaker Change: Because the.
First half of the year or first part of the year saw like Oh quite too.
Great Yeah Ah business volume.
Due to the fact that people are we're expecting the regulation change so or.
Speaker Change: Put it another way are most of the work up that year was actually in the first part of it. So the second the part a including fourth quarter wasn't Oh.
Great, but yeah, we expect that to like you know around me, though mid of this year things will yeah.
Stabilize and Oh show, new properties and yeah.
Market sentiment will be back that yeah make and please provide us a more details regarding insurance.
Yeah Yeah.
Oh yeah.
The fourth quarter, I think for our home market.
The pressure on the Ruckus rule out yeah.
Got it.
Speaker Change: Hum, but I think that Oh, although in part on the.
All players in the market who have some pharma.
Start off coupons.
Well I think we are very confident because for me.
It's just the market just need some time to Oh consumables impart. So I think it's just like a mean Mong song you know for the new year, we cannot export some.
Our new product.
No.
Speaker Change: Also I think a customer Gary I'm, just picking stuff, but hum market the customers still have that kind of thing and shrink our demand.
So I'm I'm I'm pretty much a confidence we have a we bought them and then we come into the house on.
Oh.
Oh Wow.
Just like our own life insurance.
Sure.
Oh, it's a majority alphonso Smith, but still we can see but also demand from the L. A property insurance like Wow.
Such as our in play or a Q T O shrunk.
So on and so forth, we can keep on pulling demand. So I think as far as the 'twenty 'twenty four.
Our insurance policy Mcdonald to half more Uh huh.
Proposition shrimp sauce Wow. So I think it's I don't know if you help us to more volatile you shrunk bookcases. That's nice that's why thank you.
<unk>.
Speaker Change: Well that's cool.
That's correct.
At this point you have to one nine.
Can you find out Oh, no public market and that's for the fourth quarter at.
At the end of the fourth quarter had the company had accumulatively didn't quite close to USD 7.1, Young man, who our repurchase program.
Do you see.
Hum.
I'm very confident I don't know a close date and through chat as well.
Yeah.
Yeah, we'll do more a share repurchase.
Speaker Change: Oh.
Thank you very much have a good evening.
Thank you.
Your next question comes from Matthew Lawson with 10-Kt capital. Please go ahead.
Thanks for taking my call and congratulations on another really great year I've been.
Following your company since you went public through Morgan Stanley back in 2015, where I was participated on your I P. O. So it's nice to see the recovery in your business and.
The expansion.
Evaluation is just.
Really.
Astounding I mean.
Your company's cash position is almost twice what your market capitalization is and your earnings.
Your company's cash position is almost twice what your market capitalization is and your earnings.
You know establish yourselves at.
Speaker Change: Trading at just one and a half times earnings roughly so you know if one just put a five multiple on that youre looking at a stock that could be 16 or $18. Some of your competitors do trade at that multiple they also pay dividends you know Oh and.
And Oh, that's usually received well by investors here in the United States.
Speaker Change: In fact Oh.
One.
Competitor Lou facts, just announced today at $2.42 special dividend and the stock is up dramatically.
It's all your cash you've been buying back some shares not not a lot of them know the volumes picked up in the first quarter, which would allow you.
From volume restrictions to probably buy some more and you're trading well below book value. So I would.
Our recommend you perhaps instituted dividend.
Speaker Change: But accelerate your buyback because it's totally accretive to you all.
And in addition, you know I like your guidance it it's looking to be 20% to 40% greater for 2024 from 2023 and I think you should highlight that so you're in a very strong growth pattern now AI has been.
Discussing.
A number of times on this call and on your news release.
And I'm not sure the market really.
I understand that you are a pioneering artificial intelligence investment opportunity because you don't put out many news releases and in fact today has just announced the earnings.
In my judgment.
So that the investment.
Speaker Change: Buy side would understand your story better and.
Give your company or at higher valuation would be to put out earning I put out news releases that highlight your artificial intelligence capabilities.
If for example, you had put out that earnings for $3.29.
Helped by our artificial intelligence.
Capabilities that would.
You do highlight that you were in AI firm.
And.
Investors certainly here in the United States are hungry for exposure to the AI sector.
So if that is a possibility I would recommend it because your company is not widely known because no analysts follow you and you don't do road shows and what have you and it's a smaller price stock, but now that you're about $5. It. It puts you in a different arena where.
Our investors that might have a minimum.
The stock price.
To be able to employ their capital into your firm can do so.
So I look forward to another great year.
Thank you for the last one and.
Just a if you could take some of my advice and consider it.
Speaker Change: It could be very helpful.
Thanks for taking my call. Thank you.
Thank you very much yes, let me share my thoughts and then they may can add to it and first of all thank you very much but the Ah yeah long time tries to and yeah. So.
As we previously mentioned.
We will continue to do a share buyback.
And Oh, yeah, but regarding dividend to it has been.
It's got to add yeah, we put some serious thoughts.
Into it that's my fact, Oh, we've done that.
Before so it's not new to us the concept and the practice and we've also started a yeah a best practices.
Speaker Change: Yeah, our around the world and our in our peer group. So the idea is that we'd be D. A.
We have like a great.
Well opportunities, where we can deploy our capital.
Rather than he's doing a dividend for example, like our you know our a.
Our AI.
Is it work has been are done on.
A very low cost basis, because we want to be prudent until we want to be like a you know a very careful a bot that as we develop the our capability in Florida or are we may yeah, I'd be able to deploy.
A larger amount of our capital yeah, So Ah Ah Ah Ah.
So so so that's our strategic thinking and Oh. So yeah. Please yes, you bet.
A bit more time, we will showed that so yeah.
Yeah, our strategy regarding yeah, paying or not paying a dividend is a bedroom and regarding yeah.
I strategy definitely we will communicate with the market the more Oh. This time, yes, basically we just gave our strategic thinking are a work in progress.
Is it because you know it's a like so so so so you're my view there are two types of like AI work. One is like the so called the like the plots AI, meaning like our existing business like Ah Ah plots AI. So this is.
Great. This is something we must do like bright as a fintech leader pioneer like we need to utilize the most cutting edge technology, which is a I right now so a I.
It's been going into our Fintech businesses in our company management like Yeah Big time, but at the same time, we are thinking like about like really doing AI native kind of work.
Like developing a these are like model training our platform are starting to serve.
Customers from other sectors like the open sourcing a macho if the platform.
Speaker Change: So long and also a strategic co lead a building like a vertical models like afore, a psychology social companions. So so this is like a more kind of a I may P. Like Oh, I first yeah opportunities.
Speaker Change: So as they come along we will definitely communicate with.
The public more and the more and frankly, it's my vision that a yeah, a three five years down the road. We are not just a fintech player. We are a fintech player and a I kind of be there and our fintech business.
Lighting AI Big time is like that's our showcase right. We can't use utilize AI grade liked but our AI capability is also open to all so not just to our own like our Fintech business. So that's a strategic ups are thinking it's very like a it might.
Speaker Change: <unk>, a great great moment for us to do that and yeah, I hope to make that happen and yeah, that's our thinking behind.
Okay, great. Thanks for.
Speaker Change: Illuminating that and I look forward to again, hopefully seeing some more communication with the investment community here in the United States about your AI of initiatives.
Pioneering embrace of of AI and frankly.
You know you've been employing AI or algorithms to a certain degree for years to make your credit decision. So.
This is nothing new for you and if investors understood that Ah Theres No question in my mind that you're a company's stock would be given a significantly higher valuation. So thanks again and have a good evening.
Well, thank you, but I like to add that Matt said that that you know our previous like the biggest age not work was great. That's.
At current the AI is a whole new ballgame, yeah. So upset we are mastering that our capabilities. So we have this confidence.
Speaker Change: Okay, great. Thank you.
Your next question comes from Pacer RA with Bluebird Advisory. Please go ahead.
Okay.
Thank you.
Good morning.
The elephant in the room is your capital structure.
If you gave a $50 million dividend that would be about 5%.
Still have over 700 million U S dollars.
By an AI company.
In America, we say show us the money.
Speaker Change: And quit talking about AI every other sentence.
Speaker Change: Because.
Your attainment based Chinese company, you don't have a lot of credibility Mr. Tang.
Did not have enough respect for shareholders too.
Yeah on this call today I have great respect for the big companies built.
But he evidently doesn't want.
Or maybe this is my question do you need to ask the Chinese government.
To distribute a cash dividend or to buy back shares is there some legal Chinese reason, where you cannot distribute the money because they are an American shareholder who's looking at your balance sheet.
It makes no sense why you do not have a dividend last quarter. Mismate. You said you wanted to be considered a growth company, which is why you didn't want to do a dividend.
Amongst shareholders because right now Chinese companies don't have a lot of credibility among maroquin investors and you did lift on the American exchange. So you did access American capital.
And you need to.
Respect that.
And I'm wondering is there a legal reason why you cannot distribute a dividend or do a bigger buyback than a few million dollars.
Thank you for your question and Oh, you are joining the call and Oh I respectfully disagree with some of your yeah.
A point, yeah, but yeah, let me say the following first of all there's no such restriction whatsoever and.
It's our decision yeah, so to put our.
And funding yeah money into a higher value generating activities.
And as a matter of fact, we did the dividend before so as I mentioned, it's not new to us and so yeah and.
Yeah.
Speaker Change: We've been doing a catch up like a share buyback.
And they will do more but our we are also.
Speaker Change: Aware that our float.
Speaker Change: It's not a that's great.
If we buy more and the more they will be limited to float.
For larger institutional investors.
Yeah.
So I'm not buying this kind of like yes, I I I respect a like a marathon you match search that global investors and yeah actually I felt.
Speaker Change: No good when our share price declined due to many factors out of our control, but oh, we've been trying so hard in the past years to Purdue.
Produce.
Great to be down quarter over quarter, and I D D, but with our new like the strategy.
With our ongoing dedication yeah. The company Oh, we'll do great and that's a matter of fact, so last year the value of the company grew over 100% of course this from very humble base, we were not happy about but we've.
Yeah also be unhappy about that its recent development.
Development.
Yeah.
So that's my feedback.
To you, Sir and yeah. So I think Oh, we will just have to work harder to Ah Ah yeah build.
Speaker Change: Solid company for our shareholders and partners. Thank you.
Well last quarter Mismate said that you would do a more proactive approach to speaking to retail investors.
You really have very few institutional investors and I don't think in the past three months, whether you've had any event, we have reached out to the retail American investment community.
And instituting a small percentage dividend.
It's $23 million a year.
Wood can state would instill some confidence in the investing public and even the institutions that you respect your shareholders that it's not just a company from Mr. Tang.
That you respect the shareholders and are willing to share some of the revenue at the display of strength.
You bounce from its lending to insurance and all your insurance is down 50% from last quarter. So evidently you're not really going to be a big insurance player now you're trying to pivot and you're looking to buy another company to try a different direction.
So theres a lot of lack of confidence in the strategic direction of this company and instituting a dividend as a prior person said like some of your competitors have wood would instill some good confidence it probably would get the stock price up significantly and on the radar screen you you need.
Speaker Change: To learn to walk before you can run and having a dividend would instill some confidence among American investors.
<unk>.
Thank you let me yeah.
Elaborate a bit.
More regarding the point you just made and first of all let me a report that are now we've done quite a bit of work.
Speaker Change: Gardening communications with our retail investors for example, we rebuilt our like our website our Investor Communications.
Kent and I was part of it and Oh I personally wrote our AI strategy and there are three pages that I'm very excited about so if you can go please.
Take a look at them and I'd love to have your Ah Ah comment and also yeah. We've taken some yeah remarks from like Kols in the U S.
Speaker Change: Like Yeah, we are incorporating.
Their suggestions.
Speaker Change: Our communications and so what the retail investor.
Communication work is.
Being done.
In a thoughtful way and secondly, let me say our insurance our business is our our core business and as a whole. It grew nicely last year 2023 and we expect that insurance business as well.
Our world nicely this year and in future years, and the last day I'm not sure where Oh.
The concept of us buying a company to do AI came from probably due to my lack of not doing great communication or making clear no. We're not going to buy any company, we're going to develop our own AI capability and also we're going to make some strategic investments.
Strategic partnerships in a small way. So this is how we're going to build our AI capability. Because there are just so feel great. A I need you guys out there right like a Microsoft had to invest in open AI to develop its capability it didn't.
Really you know just to do AI in the house. So so so I think Microsoft did the right thing we are doing the right thing you know doing it in house at the same time doing strategic partnerships and the investments that's really serving day going to serve the yeah sure.
Holders and to the company well in my view, but of course as I mentioned earlier, we're going to report our progress that in a thoughtful way hope Ah yeah.
One theres more.
T. Yeah.
Speaker Change: I'll feel more comfort thank you.
Oh I'm sorry.
Yeah.
Power and lots of indications as basketball have been increasing Halloween playing basketball occasional full hours.
And I think there's a couple of one time, we have been publishing more we got into the limit.
Okay. The problem. So we are statistically more access and.
In terms of annuities.
Hum like especially in the U S market.
And I'll pass on linear.
Doesn't mean anything.
When you say you're looking at when last time, we can say that I mean, if you can give us that.
Google as I can see us mhm.
Speaker Change: I think from a partner.
Speaker Change: We also did a bid out on social media.
Speaker Change: And we have an office in account linking.
Speaker Change: To that end.
Speaker Change: Welcome to hold off on that and we'll publish.
This doesn't mean that as well.
If you have any questions please call us.
Our first question from that as well.
I'm, hoping that well in the future we will.
Let me move and I.
Occasionally we have invested but not only that says that I need to do something about that as well and well intend more international conference on some of the animals.
At the China, Hong Kong and also hopefully.
Well, so there's a lot of thing happening Oh, Wow I'm, Jeff Jeff. Thank you. Thank you.
Thank you.
Our next question comes from Boyd Hens with E. C. I. Please go ahead.
Oh, hi, Thanks for squeezing me in here.
Boyd Hens: I had a questions some questions about your e-commerce, our ER segment.
That appears to be the fastest growing segment within the company right now and I was wondering if you could just kind of give us a little bit more details about what are the what are the things that are driving that growth and what are your expectations.
So the growth in 2024, and if you could also talk with.
About its margins and how they compare with the margins in your other divisions that would be great. Thanks.
Thank you al first of all for some a big picture a strategic for US and me a 10 am please add.
Add to it and so basically this is our strategy to like yeah are in hands.
Strengthen our customer relationships.
Relationship.
And also basically cross selling.
To a ever growing and happy customer base.
Boyd Hens: And also by selling them, a more and more things they really need they really like we know them a bedroom. So yeah. So this is stuff that the strategic rationale as it seems this a business that had a low base.
Of course, the growth rate has been yeah quite a stellar Ah I I'm not sure. It is.
It can grow as fast going Oh, Fort worth but yeah.
It seems like.
Our like our AR products are cross sold to these yeah through Oh, yeah.
Our customers are quite well received.
But I I hope also with the like the AI.
Like contents like so we will be able to yeah.
Boyd Hens: Please them are more so.
But attached in.
The main please provide.
Further details.
Yeah.
Hello mate.
Boyd Hens: Oh, yes, as far as where are our Rd lifestyle.
I think.
Boyd Hens: We have a very.
But you know.
Well in the last year I think that the key.
Driver is our customer and they just have a more on a more on a new they can just hasn't.
More attachment.
Boyd Hens: And I think we have a lunch.
Some of their interesting.
Boyd Hens:
Our service is.
Like some.
South development you can we have some Oh program you know.
Our customer cannot learn from them.
Of course that there are interesting.
And then in cleaning our financial planning and Oh AIA women.
And also I think I'm the teacher.
As a growth customer acquisition and I think this part of the business to have some very healthy Oh Wow.
Boyd Hens: It's especially for.
Uh Huh and power.
Neal came into the business.
Boyd Hens: Services as well I think so we have a very confident things are near Hum and that didn't help our customer.
Well just to spend more time on App and I think a downward.
Uh huh, even better.
Understand our customer behavior and can have up out here a gentleman down there.
Even a payment a habit I smell.
I think that that kind of the I'm Mary are key to R. R.
Speaker Change: I'm, sorry did I Miss anything.
Yeah, it's a great I'd like to add like a you know a channel to sell digital goes like Hey, you know a V do you.
Like the content like membership like you know ITE membership and so on so yeah with them a good discount or yeah.
Can you speak to my question about the margins I know that your your overall margin for the year.
Speaker Change: And all divisions your pretax margins are.
Approximately 54%, which is which is a stunning number in terms of its profitability.
Speaker Change: You also sort of referenced in your guidance.
That you expect.
Healthy net margins to continue although you didn't really.
Give us a numerical value.
So I guess this is sort of a two part question. One is like asking about what are the kind of margins you're getting in your E. Commerce Division and how is that going to contribute to fiscal year 'twenty four and then in general.
As part of your guidance for the healthy margins to continue.
Does that mean that you expect margins to exceed.
What you achieved in fiscal year 'twenty three.
Do we have such a details are and can you. Please yeah of course.
<unk> Eastern means as I mentioned, we have some all kind of a member.
On Monday.
Hum.
Hum.
I think there's some margin just like in Shanghai.
Hum.
Speaker Change: Uh huh.
Oh, Yeah mhm.
That's the one.
Thank you.
Okay. Thanks, So I have nothing further.
Your next question comes from David <unk>, a private Investor. Please go ahead.
David: Yeah, good morning from Santa Barbara.
So my question.
It really is very similar to two other callers before and just to put a fine point on it.
You've got <unk>.
You've got a roughly $800 million in cash.
You're selling at less than two times earnings.
I repeat with both of these callers said if you instigated.
David: A dividend.
The last callers said you know.
50 cent something like that.
Yeah.
David: What effect would that have it would diminish your capital by.
5% nothing.
David: But it would.
Telegraph to the World that you were.
David: A real company.
That you did not have and I was happy to hear this from the last caller.
You were not constrained by your government to not pay out that money. So that's that's good I mean I hope that's true.
Yes.
But it would do that is to would be.
What it would do would be to attract a great deal number more of investors.
David: Which would enable you to buy back more stock.
Which would dramatically accelerate.
The price of your stock now you say well yeah.
You know you wanted to attract institutional investors or institutional.
Institutional investors.
Would get interested if that happened.
But right now they're less than 5% of your shareholders less than 5% focus on the 95% of your shareholders.
And everything else will follow all the good stuff, you're saying you're doing a great job with the AI and all that stuff.
All of that will become known if you do the simple thing and it.
Beyond me why are you why you're not why you're not doing that.
Other than that you know.
Keep on doing what you're doing but please consider this other change okay.
Thank you.
Speaker Change: I took your point.
Speaker Change: Thank you. Your next question comes from on dry Leann, who do with Julien. Please go ahead.
Hello, So great results, congratulations I had something of a shareholder for some final thoughts.
I wanted to clarify for the rest of it also passed with no question, but looking.
Looking at the other earnings calls and the fast foods, which I've been president also too.
You have two speakers most people question. So clear to me that I mean, you already most of which are under a company as you already I think I understand for the eighth person asking a question and usually you have one person or two people.
The people I think with him also.
Speaker Change: Mr. Ning Tang who's not here and I want to congratulate them. All so there's not a problem in my in my opinion, because maybe has her life. She was one of them.
Again in the last quarter lymphoma leukemia, and all of them are cool frankly, you can check it online.
Mr. <unk>, the CEO of one of them for all of them. So now maybe if you've seen the first price increase the b piece, though.
Why don't I'll go co location or something which is rightfully so.
For the pneumonia study because they are in this call I would like to state that does Mr. Lin song wasn't every earnings call when he had quit.
Quite quite insightful.
Questions and answers are we saw the one analyst, which was talking with a guy from Morgan Stanley, which I really appreciate both of them.
Now as far as the question on sports.
I wanted to also after.
Before asking your stuff.
I want to state that this is this is a crime and based company, but also Oh, Alibaba, which Charlie Munger oldest Warren buffett's partner, they're all kind of on based companies. So this is a threat of a Chinese company. So it's not the problem with that.
Why are you in digital is a Chinese based company because all of the major companies all the time on based companies.
Furthermore, I would like to.
Speaker Change: Congratulate to the fact that you ought to still grow and get the.
30% or even two.
Actually 220% actually growth in the middle range is the guidance that was 49% is the growth in revenue of 474, the upper bone.
So that's great growth I'll start going go.
5100%, but here in the last two years or something like that.
And I would like to ask you and the last thing, Saudi I'm, stating facts to close on 100 employees or something like that 2500 employees you have I would like investors also to search on in Chinese or like in on the Chinese sites. The post of the employees are having a team building and other activities. So this company is legit.
It has little tons of employees to have 2500 or something if you can clarify but the.
I found it on the Chinese side of your Investor Relations and it's quite hard to find but you couldn't especially in an old up then.
You will see that this company's very nice okay. My.
My last question My last question and my question actually is.
The dividend of course, everybody stated about the dividend.
How how you perform financially and I understand that she wants to invest into.
Speaker Change:
Our growth opportunities and also into AI.
Speaker Change: Company.
And you're already using guy before he was popular.
No. My my my only thing is could you talk with Mr. Ning Tang at four 5%, if we don't like it.
The last caller said that it would decrease your cash not even by 4% or 5% for a 10% dividend, but a 5% dividend because it's about 2%. It. It's just the caution us seeing door a door symbolic dividend I understand you wants to continue growing at 40%, but that was deployed to reinvesting in the business at Liberty.
But you could cost you don't if you want to.
My question is would you consider a smaller the dividend just for the sake of placing the.
Well be.
Be coming into the eyes of investors.
Thank you and this is mean kind of speaking and yeah, frankly, I didn't quite catch the first part of your.
Remarks, yeah due to lie on quality, but it sounded like you are expressed a yeah a comfort about that.
The debt that the business. That's good thank you and does the second apart I gotcha and yeah.
Again about the dividend and a point taken and we will surety consider all that'd be marks our suggestions ideas from our shareholders and also our interested parties. Please yeah really but we and Milan.
Speaker Change: I'm kind of so called them by the way I think.
Not not as long as the personal somebody that's not only about the so some the depths of the company anyway.
My question actually statements I want to say it is Oh, I think that many new investors or actually you should look at competitors with similar companies and it seems like Oh.
Speaker Change: <unk> just seen so giant tech a simpler company. It increased three times, 200% growth seem to surprise all study in March 29 of last year. It was issued under the dividend, which is 60% of our dividends for the pumping fleets. So it increased 50% from the current stock price by the way for the.
All of the scope of that study.
Currently it's smaller.
Speaker Change: So the days that they issue the dividend in the 'twenty to 'twenty nine months last year. So St. Peter that's today, let's say and stopped pressing cause it to Oh, sorry, three times, 200% three times from $2 to $7.
I'll start on the issue, but it does give you that.
So the news on the dividend. So that's the impact that that's a lever that we can do and today in the PE market Blue facts, Alex on are not like I think it increased 45% in the free market.
Because they use when she was dividend and these are companies, which have less cash and they are they're not anything less cash than you have done anything and you could do just a symbolic one or like that that are being less cash, but they have quite high dividends not sustainable for something like whatever.
Speaker Change: But none of my comments to say, but your companies are the best financially and it has 800 meter on the the oldest in cash which increased 200.
Speaker Change: $140 million increase in our cash from a let's see here.
I don't intend to do so in Q4 from.
From Q4 to Q4 year on year, you increased $240 million your cash and also your book value increased 200, offend me all of us.
Speaker Change: If it takes four classes minus total liabilities. So the company is trading below cash and its growing at 40% and dividends were being closer to the center.
Again your competitors are they.
The English the widely after dividends our free.
Yes.
Clear.
Got the point thank you.
Thank you very much also in the other.
Wonderful.
Thank you.
Speaker Change: I understand the questions at this time, if you do have further questions. After the call place to make them to our Investor Relations team.
That does conclude our conference for today. Thank you for participating you may now disconnect.
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