Q4 2024 Yiren Digital Ltd Earnings Call
Sanxing, Yunlang
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Ms. Chiao: May Press Star then two please note. This event is being recorded I would now like to turn the conference call over to Ms. Chiao.
Chiao: The floor is yours ma'am.
Chiao: Thank you operator good morning.
Speaker Change: And what you May never one today's call features the presentation by the found out of Canada, and the C. O all credit <unk>, our CEO, Mr Chao and our CFO, Mr. Haynesville well of the Q&A session. After the prepared remarks.
Speaker Change: Well I have to remind you that discussions during this call contain forward looking statements made under the safe Harbor provision of U S. Private Securities Litigation Reform Act of 90 95.
Speaker Change: Statement that that'd be great I'm sitting here and think that that can cause actual results to get the majority of them does contain any such statement.
Speaker Change: Studying the major way that include events. After the date of that test is included in our filings what do you add Securities and Exchange Commission.
Speaker Change: And then take any obligation to update any forward looking statements and request.
Speaker Change: Not at all.
Speaker Change: During the call well be referring to certain datasets, but doesn't that yet.
Speaker Change: If I go back yet to review and assess our operating performance.
Speaker Change: With NASDAQ Center, demerger and that be funded till they can't do that in Appalachia.
Speaker Change: But as I mentioned, the maintenance attach and presented in accordance with U S. GAAP.
Speaker Change: Well you can imagine about as non-GAAP measures and reconciliation to GAAP measures. Please refer to our any scratches.
Nate: Now I'll turn it to Nate.
Speaker Change: Mark.
Speaker Change: Thank you all for joining our earnings conference call today.
Speaker Change: We closed out the year on a strong note.
Speaker Change: Delivering another solid quarter of results that were in line with our previous guidance.
Speaker Change: The year 'twenty 'twenty four marked a significant milestone was driven by four key achievements.
Speaker Change: Firstly, we reshape and upgraded customer.
Speaker Change: Our financial services business.
Speaker Change: The improving asset quality and the paving the way for long term sustainable development.
Speaker Change: Secondly, we made meaningful progress in the development and application of AI.
Speaker Change: By integrating our proprietary AI, just a little off.
Speaker Change: Including customer acquisition customer service and asset management, we are seeing significant improvements in operational efficiency and user experience.
Speaker Change: Thirdly, our international business that really made progress throughout the year.
Speaker Change: Our faith objective of achieving profitability.
Speaker Change: Well expanding our operations in the Philippines. We are also working to replicate this success in more countries and regions moving forward.
Speaker Change: Lastly, our insurance brokerage business is actively adopting.
Speaker Change: Digitization and Internet driven model.
Speaker Change: Well the traditional model continues to be a major revenue contributor.
Speaker Change: Social media has emerged as an increasingly vital channel or client acquisition.
Speaker Change: Capitalize on this trend we have established a dedicated team focusing on social media to drive conversion rate and further expand our digital footprint.
Speaker Change: Together. These achievements are laying a solid foundation for our next phase of the highest quality well one that we'll continue to create value for our stakeholders in the years ahead.
Speaker Change: Now I will go into details of our operational highlights for the quarter.
Speaker Change: Our financial services business continued to grow during the fourth quarter of 'twenty 'twenty four with total loan volume, reaching RMB 15 point for a period of 32% year over year increase.
Speaker Change: The number of borrowers remained stable quarter over quarter at 1.6 million and grew 14% from the same period last year.
Speaker Change: For the full year 2024 total loan volume reached RMB $53 6 billion, representing an impressive 49% increase from the previous year.
Speaker Change: Surpassing our internal target.
Speaker Change: At the same time, our E lending platform maintain strong in popularity.
Speaker Change: $4 5 million monthly active users in the fourth quarter up 27% year over year increase.
Speaker Change: As I mentioned earlier.
Speaker Change: We are seeing clear improvements in asset quality.
Speaker Change: For full year 'twenty 'twenty four average of course, the payment default rate for 30 days.
Speaker Change: Great job by 13 basis points compared to 2023.
Speaker Change: In stronger anti fraud mattress.
Speaker Change: As of December 31st plenty plenty for delinquency rates or one 230 day and 61 to 90 day buckets decreased by 20 basis points, and 10 basis points, respectively from the previous quarter.
Speaker Change: Hold on one second let me yes.
Speaker Change: Yeah.
Speaker Change: Great.
Speaker Change: Moreover.
Speaker Change: One recovery rates in the fourth quarter for the rose by 23 basis points to reach a record high the upgrade in our customer base has clearly established.
Speaker Change: The foundation for our long term Roe.
Speaker Change: On the funding side, we made substantial progress in expanding our funding partnerships by adding 22, new funding partners in 2024.
Speaker Change: Our funding costs in the fourth quarter saw another 23 basis point decline sequentially.
Speaker Change: Translating into a total decline of 210 basis points compared to the same period in 2023.
Speaker Change: Moving onto our international business, we have upgraded our customer mix and has shifted towards higher quality borrowers with better credit performance in the Philippines. This led to a noticeable improvement in profitability, which had already turned positive and the reach.
Speaker Change: The high single digit.
Speaker Change: Currently monthly loan volume in the RMB 30 to 40 million range with total loan volume in 2025 expected to double compared to 2024. We are also exploring opportunities to replicate the successful model in other countries and regions and look.
Speaker Change: Forward to updating you on our progress in the near future.
Speaker Change: Our AI strategy, we have constantly prioritized the development and application of AI as a key element of our overall strategy homework in.
Speaker Change: In 2020 for research and development expenses totaled RMB $412 million a year over year increase of 177% of which approximately RMB 0.2 billion was allocated but typically to AI.
Speaker Change: Development.
Speaker Change: We have continuously build and refine our AI models for collections customer service quality assurance and overseas identity verification among other uses.
Speaker Change: These models have been widely applied across various areas of our operations, resulting in significant cost savings and the improvements in efficiency.
Speaker Change: While our domestic business operations as of the end of one quarter, 81% of they want overdue cases were handled by a I Robert Doorbells.
Speaker Change: Are you seeing labor cost savings by RMB, one 9 million during the quarter alone and approximately RMB 9 million for the year.
Speaker Change: Our AI powered intelligent funding routing system significantly.
Speaker Change: <unk> allocation efficiency.
Speaker Change: Optimizing distribution based on the borrower's credit performance funding partners with Congress and the funding cost.
Speaker Change: This resulted in cost savings of 44 million RMB for the year.
Speaker Change: We recently integrated deep sleep.
Speaker Change: Which is expected to further enhance our deep thinking and the customer analysis capabilities.
Speaker Change: In further support to our customer service strategy.
Speaker Change: Well overseas operations in the Philippines, our AI powered I'd be verification model achieved an accuracy rate of over 96% during the quarter.
Speaker Change: We also applied our AI systems to long collection, which improve the customer service the customer experience and reduce the customer complaints at 47% in the fourth quarter.
Speaker Change: Moving onto our insurance or pitch business 2024 was a challenging year for the entire industry due to regulatory change it with lower interest rates and the impact of the unified commissions and fees in reporting and in the Rockies.
Speaker Change: Policy.
Speaker Change: Total premiums in 'twenty 'twenty, four well over RMB, four 4 billion down 10% year over year.
Speaker Change: But physically life insurers products saw strong renewal rates up 96% in the fourth quarter much higher than the industry average, reflecting higher cloud client recognition of our services.
Speaker Change: Moreover, as Beth mentioned earlier, we have been proactively expanding our business online with the support of AI, driven customer service and the AI generated content.
Speaker Change: As of the end of 'twenty 'twenty four we have successfully on boarded over 10000 users who are now engaged with us and in the conversion pipeline.
Speaker Change: A strong start.
Speaker Change: Meanwhile, additional efforts to create synergies between our lending platform and the insurance services are beginning to pay off.
Speaker Change: By offering customized insurance products to our borrowers well momentum remained strong with December premiums from this channel increasing more than eight times compared to September plenty plenty for.
Speaker Change: For our property insurance total premiums reached over RMB 2.0 bidding in the four plus E. In the full year 2024, driven by our strategy of strong channel partnerships and the tailored solutions.
Speaker Change: Currently we have over 120 institutional partners, including more than or in the property insurance sector, and we offer more than 1100 property insurance products.
Speaker Change: Moving forward, we will maintain this strategy and explore collaborative opportunities in additional technological and emerging fields, including AI advanced modeling and the low altitude economy sector.
Speaker Change: Some recent exciting news to share our insurance brokerage or close young insurance brokers has successfully crafted an insurance solution, but to Robinson R. 44 helicopters operated by Xinjiang hearing in General Aviation Company limited.
Speaker Change: We look forward to sharing more good news in the quarters to come.
Speaker Change: Last but not least we are pleased to announce attached dividend, but the second half of plenty plenty for all U S dollars 0.2 to her a D S.
Speaker Change: This dividend is expected to be paid or Iran. May 15, 2025 to holders of the company's ordinary shares on the Ats.
Speaker Change: As of the close of business.
Speaker Change: April 30th plenty plenty Fyfe, Hong Kong time, and New York time, respectively.
Speaker Change: In conclusion.
Speaker Change: Development and exploration.
Speaker Change: High quality growth and global expansion will be the key theme of our business journey in 2025.
Speaker Change: We will continue to embrace the changes shaping our current euro consistent they are exploring and are refining our strategy to deliver sustainable long term returns for both our company and our shareholders.
Speaker Change: Now I'll pass it to Union, who will go through our financial performance.
Speaker Change: Yeah.
Union: Hello, everyone on this call I will be focused on our key financial highlights please refer to our earnings release.
Union: For further details both available on our website.
Union: Jack.
Union: First of all we are pleased to report a solid year of strong financial performance.
Union: For full year revenue of between 90% annual growth, making our current full year guidance in particular total revenue.
Union: Fourth quarter 2010 before to obtain this growth momentum is up 40%.
Union: Looking for a seven year over year, even Chris.
Union: In the financial services segment total loan facilitation continued its strong momentum, reaching RMB 15, importing 4 billion in the fourth quarter of 32 year over year.
Union: Long haul and facilitated in the full year 2010, <unk> to RMB $53 6 billion jumped by 49% compared to 2020. This growth was primarily driven by robust demand for our small revolving loan about the steady increase in demand from repeat higher quality borrowers.
Union: The platform's ability to attract and retain these high quality borrowers.
Union: A contributor to the overall increase in longwall and consequently revenue from this segment in the fourth quarter growing 34% year over year to RMB 1000, 948 million, that's 1.048 billion.
Union: Sure.
Union: And our revenue for the whole year grow circa 8% nationally to RMB three 5 billion.
Union: In the insurance sector, our gross written premiums totaled RMB, one 1 billion in the fourth quarter of 2024.
Speaker Change: Our 9% year over year decline year.
Speaker Change: Year over year decline was primarily driven by a significant drop in large entrant sales, resulting from ongoing industry wide impact of regulatory changes and adjustment to our product offering.
Speaker Change: In the fourth quarter revenue from our insurance segment increased by 8% year over year to RMB 106 million. This increase was due to higher than expected renewal rate for the year of 2020 report revenue from insurance settlement reached RMB 408 million down 58% year.
Speaker Change: Our year end, we expect double digit recovery in 2019 tons you're flat.
Speaker Change: And then the consumption and lifestyle stockman athletes strategically scaled back corner Hawker and during this quarter. The total revenue dropped to 25% year over year to RMB 298 million revenue from revenue. This settlement was a year with more than RMB one nine.
Speaker Change: Certainly.
Speaker Change: Yeah.
Speaker Change: Currently we are conducting a strategic review of the segment to better understand the potential and identify the best ways to serve our customers based on our findings we will adjust our approach to ensure we effectively meet their needs.
Speaker Change: On the expense side sales and marketing spend in the fourth quarter increased 5% year over year to RMB 298 million. This yearly growth was primarily driven.
Speaker Change: <unk> growth of our financial services Division and improved marketing strategy aimed at attracting new and high value customers Mr.
Speaker Change: Research and development expense increased 246% year over year to RMB 165 minutes.
Stuart: This is Stuart.
Stuart: Ongoing investment in AI and enhancement to the development of advanced technology, and the strategic I am.
Stuart: Specialized talent.
Stuart: Okay mentioned servicing and other operating cost was RMB 197 million in the clutter up 7% year on year due to the expansion of our financial service business.
Stuart: G&A expenses for the core.
Stuart: Warner decreased by 16% year over year to RMB 42 million. This decline reflects our adjuvant efficiency improvements, resulting from the labor cost savings.
Stuart: It's an allowance for contract asset sensitive people both for the quarter was RMB 203 minute <unk>.
Stuart: 100, 103% year over year.
Stuart: This is mainly driven by the increase in allowance for accounts receivable and financing receivables, reflecting our crude in response to heightened uncertainty near term market conditions.
Stuart: Provision for contingent liabilities this quarter increased to RMB $251 million from reverse Aldrin RMB $1 5 million in the same period of 2019.
Stuart: This reflects our sustained growth in loan volume facilitated under our risk taking model, which now province with our current accounting standard accounting standards require a substantial upfront provisions islands associated just guarantee that will be recognized drastically he's a perfect last name.
Stuart: And as guaranteed storage fees overtime.
Stuart: This introduced a time difference in revenue recognition under this program.
Stuart: Assessing our overall loan portfolio and long run probability will exhibit a U shape trail.
Stuart: In the fourth quarter as revenue from guaranteed search game.
Stuart: Reached RMB 207 million compared to nine in the same period last year, reflecting the growing loan facility.
Stuart: Facility under two rigs taking them all.
Stuart: Now on the bottom line net income this quarter was RMB 300, and so do you 1 million decreased 42% year over year to appropriate margin for the fourth quarter was 23%, maintaining a healthy stable level compared to 24% in the previous quarter.
Total net income for the year of 2024 was RMB.
Stuart: 1580, 2 million down 24% compared to prior year.
Stuart: The decline in net income can be attributed to three key factors.
Stuart: As previously mentioned there was a reduction in overall principally from a balance sheet that's in the insurance business.
Stuart: Second marketing and R&D expenses increased as we continue to invest in attracting new high quality borrowers for our financial services segment.
Stuart: Huntington and our in house AI, because it chip.
Speaker Change: And certainly.
Speaker Change: Substantial outbound provision allocated to do to grow and longwall that theres a risk taken hurdles.
Speaker Change: Regarding our cash flow well in a one time strategic outflow last quarter, our net cash flow from operations normalized.
Speaker Change: The 373 million this quarter.
Compared to RMB 417 million in the same period last year.
Speaker Change: Our balanced balance sheet, our cash on cash equivalents remained strong at RMB three 8 billion.
Speaker Change: Underscoring, our financial flexibility and position us to capitalize our strep <unk> opportunities.
Speaker Change: Now regarding shareholder return, we are glad to announce that the company has a balance of distributing a cash dividend for the second half of 2024 amounting to <unk>.
Speaker Change: So youre pointing to 'twenty two occur.
Speaker Change: And there are approximately 20% payout ratio.
Speaker Change: <unk> 17, or 14% for the first half of 2020 for the dividend is expected to be paid out.
Speaker Change: How 'bout named <unk> 2025, and our record day is out of the close of business on April 13th.
Speaker Change: Despite this our Hong Kong, New York time, this that ticket.
Speaker Change: Moreover, as of December 31st 2024, we have cumulatively repurchased five 2 million ADR.
Speaker Change: For the total of approximately $17 9 million.
Speaker Change: Amendment.
Speaker Change: 2022, a share repurchase program.
Speaker Change: Lastly, our defense outlook based on our assessment of current business and marketing conditions, we expect our revenue for the full year 2025 standard between the RMB five 5 billion to RMB six 5 billion, there's a healthy profit margin.
Speaker Change: This represents our current and preliminary assessment, which may be subject to changes and uncertainties.
Speaker Change: This concludes our remarks.
Speaker Change: Thank you.
Speaker Change: And I'll say it that way now open for Q&A.
Speaker Change: Okay.
Speaker Change: We will now begin the question answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys for any type of question has been addressed and you'd like to withdraw. Your question. Please press Star then two again to this.
Speaker Change: Star then one to ask a question at this time, we will just pause momentarily to assemble our roster.
Speaker Change: The first question, we have will come from Hao Nan Shan.
Speaker Change: Ah Virtus investment. Please go ahead.
Speaker Change: Uh huh.
Speaker Change: It is haunting problem.
Speaker Change: Capital.
Speaker Change: Thanks for taking my country.
Speaker Change: I have two questions here.
Speaker Change: And as the Chinese government now relaxes regulations will tenure with the company makes.
Speaker Change: And then you.
Speaker Change: Hi.
Speaker Change: More positively I think.
Speaker Change: Thank you.
Speaker Change: The first question.
Speaker Change: Yeah.
Speaker Change: So the question is about Oh, I asked a macro environment.
Speaker Change: Comps are more favorable.
Speaker Change: What is our.
Speaker Change: The action plan.
Speaker Change: Yeah Yeah.
Speaker Change: Okay.
Speaker Change: So yeah, indeed, the yeah, a macro environment is getting better.
Speaker Change: Better and we will.
Speaker Change: Continue to.
Speaker Change: Drive up repeat are bothering rate yeah, now yeah, it's below 70% we want it to be 70% are in this year. We're close yeah. So we will try and.
Speaker Change: Got there that will yeah.
Speaker Change: Make our yeah.
Speaker Change: Syed a yeah, a stable and improve.
Speaker Change: At the same time, we will do a better customer acquisition some out there customer acquisition. So we work with like Yeah, Oh in and stature. Yeah platforms are so long to do like a real time.
Speaker Change: Advertising basically we pick up.
Speaker Change: The.
Speaker Change: Prospects to target.
Speaker Change: Utilizing our.
Speaker Change: Our yeah, our AI driven and MBT motto.
Speaker Change: So that will Oh, yeah.
Speaker Change: Yeah make us more kind of a proactive yeah in the customer acquisition process.
Speaker Change: And also will explore a more.
Speaker Change: Acquisition channels.
Speaker Change: You know a non finance like our life blood related like the platforms applications yeah.
Speaker Change: Or more loan volume.
Speaker Change: And also as our customer mix gets operated we will inquiries.
Speaker Change: For your ticket size.
Speaker Change: Yeah now is like.
Speaker Change: Yeah.
Speaker Change: Seven to 8-K it will further go up.
Speaker Change: Lee.
Speaker Change: In the year.
Speaker Change: But yeah, we will keep the risk side stable outsize first Deb highlighted we'll do that by taking a variety of.
Speaker Change: Yeah keep doing a good job on that side.
Speaker Change: And we can also.
Speaker Change: Yeah.
Speaker Change: Offer a better customer experience I suppose.
Speaker Change: And yeah further.
Speaker Change: Streamlining the application process and yeah.
Speaker Change: Grading the user interface so.
Speaker Change: So so it will be yeah more competitive in the.
Speaker Change: Marketplace yeah. Thank.
Speaker Change: Thank you.
Speaker Change: Okay. Thank you. Thank you for the answer to your question.
And second question is a cashier some longtime goes fanta.
Speaker Change: The overseas business.
Like what's go where the business is going to change and how much we lost in the overseas business.
Speaker Change: And do you think that the logistics needs could be bigger than the domestic because one day.
Speaker Change: Thank you.
Speaker Change: [laughter] yeah.
Speaker Change: One day, yeah, so probably yeah.
Speaker Change: Is it because of the international market is a very very big yeah. So it's a big that's a domestic market. So yeah.
Speaker Change: I guess, the it's quite possible that one day it will be yeah, maybe hop off but we are beta yeah. It's still in the early stage right now so but we.
Speaker Change: We will try.
Speaker Change: To make the international.
Speaker Change: Business.
Speaker Change: A meaningful revenue contributor.
Speaker Change: Contributor in the next yeah, a couple of years yeah three.
Speaker Change: Year timeframe, yeah, so because oh, we can utilize.
Speaker Change: Hi, very well in those Mara.
Speaker Change: Markets and Oh, So we've had a good.
Speaker Change: Hum.
Speaker Change: <unk> developed a is the Philippines.
Speaker Change: And the success can be replicated and we've also done research other than southeast Asia.
Speaker Change: We make there.
Speaker Change: Progress yeah.
Speaker Change: In.
Speaker Change: America and Southern America.
Speaker Change: And also the middle East.
Speaker Change: So long so yeah, we are quite optimistic.
Speaker Change: Yeah.
Speaker Change: Uh huh.
Speaker Change: To grow globally and that that certainly.
Speaker Change: Our.
Speaker Change: Yeah strategic yeah objective, yeah, so because we are global.
Speaker Change: Player and yeah, so and our competitive advantages.
Speaker Change: The advantages are in domestic China, many of them can be applied.
Speaker Change: As we grow.
Speaker Change: Hello, Bali to other parts of the world.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: The conference call has now concluded.
Speaker Change: If you have any further questions you may contact <unk> IR department for any follow ups. Thank you for attending today's presentation. At this time you may disconnect. Thank you and have a great day.
Speaker Change: Thank you.
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