Jiayin Group Inc. (NASDAQ:JFIN) Q3 2023 Earnings Call Transcript

Jiayin Group Inc. (NASDAQ:JFIN) Q3 2023 Earnings Call Transcript November 22, 2023

Operator: Good day, ladies and gentlemen. Thank you for standing by and welcome to the Jiayin Group's Third Quarter 2023 Earnings Conference Call. Currently, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. I will now turn the call over to Mr. Shawn Zhang from Jiayin Group's Investor Relations. Please go ahead.

Shawn Zhang: Hello, everyone. Thank you all for joining us on today's conference call to discuss Jiayin Group's financial results for the third quarter of 2023. We released our earnings results earlier today. The press release is available on the Company's website as well as from Newswire services. On the call with me today are Mr. Yan Dinggui, Chief Executive Officer; Mr. Fan Chunlin, Chief Financial Officer; and Ms. Xu Yifang, Chief Risk Officer. Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the Company's actual results may be materially different from the expectations expressed today.

A high-rise office building in the heart of the financial district, illustrating the company's presence in the world of finance.

Further information regarding these and other risks and uncertainties is included in the Company's public filings with the SEC. The Company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Also, please note that unless otherwise stated, all figures mentioned during the conference call are in Chinese renminbi. With that let me now turn the call over to our CEO, Mr. Yan Dinggui. Mr. Yan will deliver his remarks in Chinese and I will follow up with the corresponding English translation. Please go ahead, Mr. Yan.

Yan Dinggui: [Foreign Language] [Interpreted] Hello, everyone. Thank you for joining us today to discuss our outstanding results for the third quarter of 2023. This quarter, we have achieved new milestones in key financial and operational metrics. Our loan origination volume reached RMB24.2 billion in the third quarter, a 62.4% increase compared to the same period last year. Net revenue grew by 64% while net income further expanded to approximately RMB324 million. These results once again prove that our development path is healthy and sustainable and our strategy is precise and practical. We are confident and capable of continuously creating value for our investors and growing into a significant employer in the global fintech industry.

However, in the third quarter of 2023, both the Global and Chinese economies face significant challenges. Despite the complexity and the constant changes in the global economic environment and ongoing adjustments in monetary policies of major economics, we have observed that China's economy is undergoing a slow recovery process. Although the pace of this recovery has not reached the expected speed, it still demonstrates that underlying strength and the resilience of China's economy. In the domestic financial sector, we have noticed fluctuations in credit market risks during this period, with asset qualities and risk management emerging as key topics in our industry recently. We understand that continual prudent and detailed operation and management are crucial for our long-term stable and healthy development in the current environment.

Therefore, whether in the third quarter of this year, the upcoming fourth quarter, or the beginning of next year, we anticipate continuing our cautious business strategy under the premise of maintain stable development and profitability. We will also closely monitor market dynamics with a special focus on controlling risks and tracking changes in asset quality. Over the past two years, our fintech business in China has continued to grow steadily in scale with an expanding reach across financial institutions. By the end of the third quarter, the total number of financial institutions in our partnership network has reached 73, marking an increase from the 69 in previous quarter. As our business volume grows, the diversity and concentration of our partner institutions are also evolving.

In the quarter, we are pleased to see that the proportion of funds to be facilitated provided by Internet banks and private banks partners has already accounted for the majority. Furthermore, we are currently in talks with 76 financial institutions aiming to extend the powerful fintech capabilities of us to benefit even more licensed financial institution partners in the future. While expanding our institutional coverage, we are also focusing on deepening and broadening our cooperation with key partners. The cooperation model that supports financial institutions in carrying out their self-operating business is making continued progress. As of September 30th, we have launched cooperation with six financial institutions under this model with several more actively joining are currently in discussion.

Moreover, the proportion of non-regionally restricted funds to be facilitated continues to stay above 60%, which solidified our foundation for contributing to the development of inclusive finance across all regions in China where we expand our business scale. As we have emphasized in the past few quarters, optimizing the structure of our borrowing customers remains a top priority this quarter. On one hand, we strive to refine the stratification of our user structure while further providing high quality full life cycle services to our existing borrowers. On the other hand, we continue to invest in new borrower groups while ensuring high-quality acquisitions. Since the beginning of this year, we have observed that the risk fluctuations in the market have had a certain impact on the asset quality of licensed financial institutions.

As a trusted business partner of those clients, we deeply understand the importance of asset quality for the long-term stability and sustainability of their businesses. Therefore, during our group phase, we have never relaxed our high standards and strict demands for risk control. As of September 30th, 2023, our delinquency rate for 61 to 90 days has slightly decreased, maintaining a stable level at 0.52%. With the economy gradually warming up, we will closely monitor market risk fluctuations and changes in asset quality, making timely and accurate adjustments for our clients to address future uncertainties. We are actively aware of the significance of artificial intelligence technology in the fintech sector and the development and application of AI have been elevated to a very important position within Jiayin Group.

To further advance the application of large model AI technology in Jiayin's smart operations, we launched the Jiayin AI season series of events in the third quarter. This included the construction of our own Jiayin GPT lab and the numerous GPT training sessions as well as the GPT innovation competition, aiming to promote the application of AI technology across all business processes. Last quarter, I mentioned some of the application of AI technology at Jiayin Group, and today I would like to take this opportunity to share with you some of the latest developments over the past three months. First, in terms of proprietary tools, we completed an important intelligent upgrade of our knowledge base using LLM Plus vector database this quarter. This upgrade allows our staff to perform multi-dimensional and fuzzy searches through semantics, presenting knowledge points in seconds, quickly improving search efficiency and introducing intelligent functions that provide more efficient and high quality support for customer services.

Secondly, our Phase One auxiliary functions for customer service agents have been launched in the customer service CRM system, including real-time text transcription, customer intention tagging and agent behavior tagging. These features have effectively improved the efficiency and accuracy of customer service agents' work. Currently, the application accuracy rate of the session summary in various scenarios has been continuously improved to around 87%. Along with the launch of Phase One functions, the real-time knowledge recommendation of Phase Two auxiliary functions is also in development and internal testing. Once launched, it is expected to further enhance the depth of AI-empowered agent operation processes. The [indiscernible] quality inspection system, which I mentioned in the second quarter, has also got an important upgrade.

This upgrade comprehensively improved the coverage and accuracy rate of quality inspections using AI technology. Further expand support for various types of quality inspections and improve business efficiency through data mining. The progress and application of AI technology have not only enhanced our operational efficiency, but also enabled us to commit in providing more exceptional services to our clients. Here I would like to announce an important news. Our company's name will be changed to Jiayin Technology and we will adopt a new company logo. This change signifies that developing and applying technology has been strategically prioritized at the group level. And more importantly, it underscores that technology will become the foundation of our existence.

In the future, Jiayin will continue to closely monitor the development and application of AI technology, continuously strengthen the basics of fintech and let the technology attribute become Jiayin's most shining label. In the third quarter, Jiayin's international business continued to show a robust growth trend. The profitability of the Nigerian region has made significant progress. And for the first time, we achieved an important strategic goal in this region, turning a net profit positive. While we have seen significant growth in financial indicators, we are pleased to note that the important risk indicator of the 30-day delinquency rate has further improved significantly. We recognize that Nigeria's superior population size and demographic structure along with the continually increasing mobile penetration rate provide tremendous opportunities for the fintech sector especially cash credit services.

In the medium to long-term, our goal is to achieve sustained net cash flows in this area, thereby realizing the long-term healthy and stable development of our business here. In Indonesia, we have formed a collaboration with a local entity full of potential in an innovative way and continue to closely monitor the business environment and operating conditions. We believe that with the rapid progress of Indonesian regulatory policies and the industry environment in recent years, the loan facilitation business model is likely to be realized quickly in this region. We have seen our partners' profitability improving this quarter and have made a breakthrough in achieving the loan facilitation business access for the first local financial institution partner.

While discussions are underway with several others, however, we also noticed that the regulatory policies in the Indonesian region are systematically supporting the orderly development of the internet finance industry in the long-term. Such a market environment represents both opportunities and challenges for all participants. We will continue to focus on and support the development of our Indonesian partner and discuss the possibility of further cooperation in the future. Furthermore, we are expanding our explorations and the feasibility analysis for business implementation in other emerging market countries in Africa, Southeast Asia and Latin America seeking potential expansion opportunities. We believe that our international business can not only contribute to the inclusive growth of local economies, but also create substantial value for our stakeholders with the goal of global expansion of inclusive financial coverage.

However, through this, we have decided to set the loan origination volume guidance for the fourth quarter at RMB20 billion. It is anticipated that the full year loan origination volume will exceed the previously issued annual guidance. Going forward, Jiayin will contribute to work diligently with our partners to manage risks and face challenges, striving for healthy and sustainable long-term joint development. Lastly, I would like to take this opportunity to announce to our shareholders and investors who have been long-term supporters and followers of our company's development that the plan for the second dividend distribution of this year has been almost finalized. For the outstanding ordinary shares, we anticipate paying a cash dividend of US$0.1 per share, equivalent to US$0.4 per ADS.

Specific details regarding this schedule and other relevant information about this dividend payment will be announced progressively in our subsequent disclosure announcement. For the specific financial results for this quarter, I will turn the call over to our CFO, Mr. Fan. Thank you all.

Fan Chunlin: Thank you, Mr. Yan, and hello, everyone, for joining our call today. I will now review our financial highlights for the quarter. Please note that all numbers will be in RMD and all percentage changes refer to year-over-year comparisons unless otherwise noted. As Mr. Yan mentioned earlier, we carried through our robust growth momentum over the past year to achieve new milestones in the quarter. Our loan origination volume grew by 62.4% to 24.2 billion, exceeding our previous guidance. Our net revenue was about 1. 47 billion, up 54% as our other revenue grew to 529.8 million from 101.4 million in the same period last year, mainly driven by the growth in guarantee income from financial guarantee services. Moving onto costs.

Origination and servicing expenses were 544.3 million, up from 148. 4 million in the same period last year, driven by increased loan origination volume and expenses related to financial guarantee services. Allowance for uncollectible receivables, contract assets, loans receivable and others grew by 44.1% to 8.5 million from 5.9 million in the same period last year. However, as a percentage of net revenue, it decreased to about 0.6% from 0.7% in the same period last year. Sales and marketing expenses increased by 26.1% to 407. 9 million, mainly reflecting higher borrower acquisition expenses. As a percentage of net revenue, S&M expenses decreased to 27.8% from 36.2% in the same period last year, demonstrating our improving efficiency in attracting and retaining high-quality borrowers.

G&A expenses were 53.2 million, up 3.5%, primarily driven by higher staff costs as a result of increased expenditures for employee compensation and related benefits in a quarter. As a percentage of net revenue, G&A expenses reduced to 3.6% from 5.8% in the same period last year. R&D expenses were 70.5 million, up 25%, mainly due to the higher employee compensation as a result of an increase in research and development headcount. As a percentage of net revenue, R&D expenses reduced to 4.8% from 6.3% in the same period last year. Consequently, our net income for the third quarter increased by 30.6% to 323.9 million from 248.1 million in the same period last year. Our basic and diluted net income per share were both RMB1.51 compared to RMB1.15 in the same period last year.

Basic and diluted net income per ADS were both RMB6.03 compared to RMB4.60 in the same period last year. We ended this quarter with 180.3 million in cash and cash equivalents compared to 288.9 million at the end of the previous quarter. Regarding our stock repurchase program, as of September 30, 2023, we have bought back approximately 1.8 million of our ADSs for a total of US$5.5 million on our US$10 million share repurchase plan we announced in June 2022 and extended in June 2023. With that, we can open the call for questions. Ms. Xu, our Chief Risk Officer and I will answer questions. Operator, please go ahead.

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