Q1 2023 Jiayin Group Inc Earnings Call
Participants
Chunlin Fan; CFO; Jiayin Group Inc.
Dinggui Yan; Founder, Chairman & CEO; Jiayin Group Inc.
Shawn Zhang
Yifang Xu; Chief Risk Officer & Director; Jiayin Group Inc.
Unidentified Analyst
Presentation
Operator
Good day, ladies and gentlemen. Thank you for standing by [and] welcome to the Jiayin Group First Quarter 2023 Earnings Conference Call. (Operator Instructions) 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 Investor Relations of Jiayin Group. Please proceed.
Shawn Zhang
Thank you, operator. Good day, everyone, and welcome to Jiayin Group's 2023 first quarter earnings conference call. We released our earning results earlier today via newswire services. You may check the press release and sign up for the company's e-mail alerts by visiting our IR webpage.
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 U.S. 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. Further information regarding these and other risks and uncertainties is included in the public filings with the SEC.
The company does not assume any obligation to update any forward-looking statements, except as required under applicable law.
Finally, we will post a slide presentation on our Investor Relations webpage soon, providing details of our results for the quarter. Also, please note that unless otherwise stated, all figures mentioned during the conference call are in Chinese renminbi.
Let me now turn the call over to CEO, Mr. Yan Dinggui. Mr. Yan will deliver his remarks in Chinese, and I will follow up with corresponding English translations. Please go ahead, Mr. Yan.
Dinggui Yan
(foreign language)
Shawn Zhang
Hello, everyone. Thank you for joining our first quarter 2023 earnings conference call.
Dinggui Yan
(foreign language)
Shawn Zhang
I am delighted to share with you today the exceptional performance of Jiayin in the first quarter of 2023. Our robust results this quarter are a testament to the steady recovery of the domestic economy and the solid foundation we have built through the consistent improvement of our operational efficiency.
In the quarter, we achieved a record loan origination volume of RMB 19.8 billion, surpassing our previous projections. Additionally, our net revenue for the quarter reached RMB 1.12 billion, marking a year-over-year increase of approximately 119.5%. Our profit margins also remained strong, maintained our robust growth trajectory.
Dinggui Yan
(foreign language)
Shawn Zhang
Looking at the first quarter from a broader perspective, the National Bureau of Statistics of China has reported a promising start to the year with a 4.5% year-over-year growth in China's GDP. This represents an increase of 1.6 percentage points from the fourth quarter of last year, marking an encouraging beginning to China's macro recovery in 2023.
Particularly, consumption contributed to 66.6% of economic growth with online consumption maintaining a strong momentum. The simultaneous recovery of urban and rural markets has led to a rapid release of consumer potential, indicating a swift recovery trend.
Additionally, the People's Bank of China's financial statistics for the first quarter revealed a cumulative increase in the scale of social financing of RMB 14.53 trillion, an increase of RMB 2.47 trillion from the same period last year.
Industry experts attribute this to the efforts of policies aimed at the stabilizing growth and promoting development, which have significantly boosted market confidence, accelerate the recovery of effective financing demand and [solidify] the trend of macroeconomic recovery.
Dinggui Yan
(foreign language)
Shawn Zhang
Amidst this macroeconomic environment, we have seen an abundant supply of funding and substantial market liquidity.
As of March 31, 2023, we have partnered with 64 financial institutions and are currently in discussions with another 68. The diversification of our funding sources and the ample credit lines provided by our partners formed the backlog of our rapid loan volume growth.
Furthermore, a majority of our funding are not restricted by geographic regions. Moreover, we have deepened our relationships with key financial institution partners, leading to an improved structure of our loan facilitation funding sources.
Notably, the contribution of loans we facilitated for banks has continued to increase in this quarter. These ongoing efforts have allowed us to continue reducing the average funding cost for the loans we've facilitated in the quarter.
We are confident that their size and quality of our partnership network will provide a powerful guarantee for the medium and long-term development of our domestic business.
Dinggui Yan
(foreign language)
Shawn Zhang
As we continue to enhance our fintech capabilities, we are also fostering more advanced partnerships. We are leveraging our technological progress to empower our partners, aiding them in their digital transformation.
By the end of the first quarter, we have assisted 5 financial institutions in digitizing their in-house operations and are currently interfacing with another 3. We are also in active discussion with 5 more institutions to explore potential collaborations.
Dinggui Yan
(foreign language)
Shawn Zhang
Leveraging the robust support of our current risk control system and capitalizing on the emerging borrowing needs spread by the recovery in consumption, we continue to implement an active borrower acquisition strategy. This strategy is pivotal in maintaining our current trajectory of rapid growth.
We added nearly 0.5 million new borrowers in the first quarter, representing a year-over-year increase of approximately 96.4%.
At the same time, we have maintained a stable proportion of repeat borrowers at 67.8% with the average borrowing amount reaching RMB 9,913, marking a 13.5% increase year-over-year. These figures underscore our commitment to expanding our borrower base and extending the reach of inclusive finance.
To further this goal, we have strengthened our collaborations with several mainstream information platforms, diversifying our user engagement scenarios and enhancing the position of our target customer identification.
Our focus on high-quality borrowers who demonstrate superior loan demand and repayment capabilities contributes to a healthy and sustainable borrower structure as we continue to scale our business.
We remain committed to investing in high-quality borrower acquisition channels, ensuring continuous optimization of our borrower structure amid rapid business development.
Dinggui Yan
(foreign language)
Shawn Zhang
In managing our borrower base, our tech-enabled risk-control capabilities continue to be a cornerstone of our operations. These capabilities have proven effective in managing risk fluctuations and fostering robust, healthy business growth.
As of March 31, 2023, our 61 to 90-day delinquency rate has remained stable at 0.63% compared to 0.51% at the end of 2022, recognizing the fluctuations in our risk metrics. We will persist in refining our borrowers' [stratification] process, striking a balance between asset growth and quality improvement.
This approach is designed to foster a virtual cycle of enhanced asset quality, reduce funding costs and improve borrower quality.
Dinggui Yan
(foreign language)
Shawn Zhang
Turning to our international business. We have been vigilantly observing and adapting to the evolving dynamics in Nigerian and Indonesian markets. The Nigerian market encountered some risk fluctuations in the first quarter. These fluctuations served as a significant task for our robust risk control team and our continually refined advanced risk control models.
The outcomes in the regional markets have reaffirmed our risk control progress in international markets, and we can now utilize this successful case study to bolster our steady growth in other regions.
By the end of the first quarter, our Nigerian operations had achieved a substantial scale, thereby solidifying the foundation of our future expansion objectives in the African market.
Concurrently, we are strategizing to diversify our customer acquisition channels further, reduce our reliance on any single acquisition channel and persistently enhance our customer acquisition efficiency.
This strategic approach is designed to foster the sustained and healthy growth of our Nigerian operations.
Dinggui Yan
(foreign language)
Shawn Zhang
In Indonesia, we kept our investment in the market over the past few quarters, seeing an accelerated growth rate in the original business goal. We will persistently monitor the Indonesian market environment and adjust our strategies accordingly.
Dinggui Yan
(foreign language)
Shawn Zhang
Finally, on the policy and the regulatory front, the China Internet Finance Association is presently spearheading the creation of the risk control guidance for loan collection of personal online consumer credit in Internet finance, also known as the national collection standards.
We view post loan services as a crucial component of the comprehensive loan facilitation service cycle, and the establishment of these standards will offer a definitive regulatory framework for the industry standardization. We are also actively strengthening our dedication to ensuring the compliance of post loan services and safeguarding consumer rights.
In February this year, we published the 2022 consumer rights protection white paper, which provides a detailed account of our consumer protection initiatives, accomplishments and plans over the previous year.
We are confident that a regulated industry environment will substantially contribute to the sustained development of both the industry and our business.
Dinggui Yan
(foreign language)
Shawn Zhang
Moreover, in response to the regulatory mandate to terminate direct data connections or called (foreign language) in Chinese, we have proactively engaged with credit institutions to establish collaborative plans and have successfully completed all necessary technical and system preparations.
We are confident in our ability to meet the regulatory requirements ahead of the deadline, ensuring a seamless transition in our business operations. As a front runner in the fintech industry, Jiayin remains committed to safeguarding consumer information upholding data security within the industry and delivering high-quality financial services.
Compliance has always been at the forefront of our operations, and we will persist in this commitment as we continue to foster the growth of inclusive finance.
Dinggui Yan
(foreign language)
Shawn Zhang
In conclusion, the first quarter of 2023 has been a period of significant progress and robust performance for Jiayin. Our remarkable performance this quarter is a testament to the efficacy of our strategic initiatives, which have enabled us to expand our business operations, navigate risk fluctuations, optimize our borrower base structure and extend our reach in international markets.
We are confident that these concerted efforts will allow us to maintain our growth trajectory in the medium to long term and deliver outstanding results in the coming quarters.
As such, we reiterate our full year guidance for 2023 and are setting a new loan origination volume target ranging from RMB 23 billion to RMB 24 billion for the second quarter of 2023.
Dinggui Yan
(foreign language)
Shawn Zhang
With that, I will now turn the call over to our CFO, Mr. Fan Chunlin. Please go ahead.
Chunlin Fan
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 RMB and/or percentage changes refer to year-over-year comparisons, unless otherwise noted.
As Mr. Yan mentioned, we delivered exceptional results in the first quarter. Our loan origination volume surged 142.9% to RMB 19.8 billion, exceeding our forecast made last quarter.
Our net revenue was RMB 1.12 billion, up 119.5%, driven by a 94.1% increase in our revenue from loan facilitation services. Other revenue grew significantly to RMB 255.7 million from RMB 64.7 million in the same period last year, mainly driven by the revenue from individual investor referral services and guaranteed income from financial guaranteed services.
Moving on to costs. Origination and servicing expenses were RMB 274.2 million, up 193.6%, driven by the increased loan origination volume and post-loan services-related expenses. Allowance for receivables in the contract assets grew by 67.5% to RMB 6.7 million, primarily due to the increased loan volume from overseas markets.
Sales and marketing expenses increased by 155.9% to RMB 380.8 million, mainly reflecting an increase in borrower acquisition expenses and the commission fees for partnership referrals.
As a percentage of net revenue, S&M expenses increased to 33.9% from 29.1% in the same period last year as we continued our investments to attract and retain high-quality borrowers.
G&A expenses were RMB 46.4 million, up 14%, primarily driven by higher staff costs in the quarter. As a percentage of net revenue, G&A expenses reduced to 4.1% from 8% in the same period last year.
R&D expenses were RMB 64.8 million, up 55% from RMB 41.8 million, mainly due to increased employee compensation benefits expenses and professional service fees. As a percentage of net revenue, R&D expenses reduced to 5.8% from 8.2% in the same period last year.
As we continue to prudently manage our costs, our profitability remains strong. Our net income for the first quarter increased by 93.4% to RMB 279.7 million from RMB 144.6 million in the same period last year.
Our basic and diluted net income per share were both RMB 1.31 compared to RMB 0.67 in the same period last year. Basic and diluted net income per ADS were both RMB 5.23 compared to RMB 2.68 in the same period last year.
We ended this quarter with RMB 340.6 million in cash and cash equivalents, up from RMB 291 million as of December 31, 2022. As of March 31, 2023, we have bought back approximately 1.5 million of our ADS for USD 3.5 million and our USD 10 million share repurchase plan we announced in June 2022.
In addition to that, the company's Board of Directors just approved to extend the share repurchase plan for a period of 12 months on June 7, 2023. The extension will be commenced on June 13, 2023 and ending on June 12, 2024.
Pursuant to the extended share repurchase plan, the company may repurchase its ordinary shares through June 12, 2024, with an aggregate value not exceeding the remaining balance on the share repurchase plan.
With that, we can open the call for questions. Operator, please proceed.
Question and Answer Session
Operator
(Operator Instructions) We have questions from the line of [Martin Chen] from (inaudible).
Unidentified Analyst
(foreign language)
Let me do the translation first. Congratulations on the third strong results period marking from (inaudible). I have 2 questions. The first one is regarding the guidance.
The loan volume guidance in the second quarter is about RMB 23 billion, combined with RMB 20 billion in the first quarter account around 60% of RMB 70 billion for the full year guidance. Does this imply the volume in the second half of the year will slow down compared to the first half?
Yifang Xu
(foreign language)
Shawn Zhang
This is Shawn from the IR team of Jiayin Group, and I will do the corresponding translation for Ms. Xu.
And -- so generally, we believe that the loan volume we facilitate in the second half of 2023 will not be simply limited by the whole year guidance we just expressed before.
As you have mentioned that we maintain our whole year guidance as the same without any change, but we are very confident to complete the guidance in this year. We know that there are probably going to be some risk fluctuations during the year.
But we still see the -- generally, the economic environment is stable. So I think the volume would mainly depend on 2 things. So firstly, it will depend on the total funding supply from our partners. And certainly, it will depend on the requirement we have on the asset and our goal to strike a balance between risk metrics and our sustainable growth in the second half year.
Unidentified Analyst
(foreign language)
You mentioned refining your borrower base and the focusing on high-quality borrowers. How do you define high quality? And what strategy are you using to attract and return these borrowers in the future?
Yifang Xu
(foreign language)
Shawn Zhang
So to reach the better quality borrowers are one of the strategic goals of Jiayin Group from when we finish our business transformation that our funding sources just changed from former individual funding sources to the financial institutions.
So high-quality borrowers is also a requirement from our funding partners. So in brief, high quality, we call represents borrowers with better credit spending. We may find many similarity among those borrowers such as they are younger in their age, they may care more about their credit spending and they have rational use of the loan, et cetera.
Those characteristics made them without over borrowing from too many sources and add a better personal balance sheet position. So to reach those more high-quality borrowers we just mentioned, we are now selectively choosing borrower acquisition channels just like other platforms.
And we are providing more competitive products to those high-quality borrowers when they need and focusing on the borrowers with good credit who may grow up with us in the long run. Jiayin is a platform who has the business for over 10 years.
And so we are also trying to attract those borrowers through our service during the loans such as providing them with better products and lower rates.
Operator
Next question we have on the line line from (inaudible) from [BofA] Securities.
Unidentified Analyst
(foreign language)
I will do the translation for myself. I'm (inaudible) from [BofA] Securities. My first question is about the sales and marketing expense.
Can you share some details on your sales and marketing expense increase in the quarter?
Dinggui Yan
(foreign language)
Shawn Zhang
So the sales and the marketing expenses in the first quarter of 2023 reached RMB 380 million with a year-over-year increase of more than 150% and it's also a slight increase from the previous quarter. The S&M expenses mainly include borrower acquisition expenses, employees' compensations and other related expenses.
So the main reason for the substantial year-over-year increase was the increase in the volume of loan we just facilitated.
Dinggui Yan
(foreign language)
Shawn Zhang
So after we just transformed our business model from -- I mean the funding sources from the individuals to the -- our funding partners from institutions, so in line with the company's strategy on the rapid growth, we have adopted a very active borrower acquisition strategy and spending more on the acquisition process to ensure that we can [treat] those high-quality assets efficiently.
So the proportion of new borrowers of our platform has remained higher, and we plan to increase our spending on the high-quality borrowers' acquisition channels to ensure the LTV of our borrowers and to continuously optimize our borrower base where our business is developing rapidly.
Dinggui Yan
(foreign language)
Shawn Zhang
So from the perspective of our operation and finance, we will also carry out a top-level planning on the result of S&M expenses to our revenue and also some budget control to ensure the accuracy and the effectiveness of our sales and marketing.
In the first quarter of 2023, you can see our -- the S&M expenses accounted for above 33.9% of our revenue, basically at the same level as 33.1% in the whole fiscal year of 2022.
And if you compare it with the 35.5% in the fourth quarter of 2022, you can also see a slightly down.
Dinggui Yan
(foreign language)
Shawn Zhang
So just because we have a strong control and process on our sales and marketing, we are keeping our development at a very high quality, and we are confident that we will develop at a very sustainable way in the future as well.
Unidentified Analyst
(foreign language)
I will do the translation for myself. My second question is about accounts receivable. We noticed that account receivable accounts for a large proportion of the total assets within the company right now and very close to about RMB 200 million. Can you explain the (technical difficulty) main reasons?
Dinggui Yan
(foreign language)
Shawn Zhang
So you are right, Ms. [Li]. At the end of the first quarter of 2023, the company's balance of account receivable was RMB 1.93 billion, which accounted for about [45%] of our total assets, and you can see it has been steadily increasing at the end of each quarter.
Dinggui Yan
(foreign language)
Shawn Zhang
So the vast majority of accounts receivable we have or acquisition and risk control service fees for our loan facilitation services. At the -- So under the currently accounting principles at the same time as the loan is issued, the writing obligations under our facilitation services have been fully met.
So the corresponding accounts receivable and the income are recognized immediately when the loan is issued to the borrower. And you can see that as our loan facilitation volume continues to increase and projects we recently signed will be usually collected within 12 months during the whole long term.
So you may observe that the -- our balance of receivables also continue to increase.
Dinggui Yan
(foreign language)
Shawn Zhang
So under our currently business model, as our volume -- the volume we facilitate continues to increase the absolute value of -- our AR balance would surely increase accordingly.
Dinggui Yan
(foreign language)
Shawn Zhang
I want to mention that the collection of our accounts receivable is very good. And after our -- we just completed the transformation from personal funds to institutional funds in 2022. There have been almost no bad debts in the domestic loan facilitation business and no bad debt loss has been occurred -- accrued so far either.
And our management team and our auditors will pay very close attention to the recovery of account receivable.
Dinggui Yan
(foreign language)
Shawn Zhang
So generally speaking, the company's profitability is satisfying and our balance sheet also continues to improve. It has laid out very solid foundation for the healthy development of our business in the future.
Dinggui Yan
(foreign language)
Shawn Zhang
Hope that will answer your question.
Operator
We have no more questions at this time. I will turn the call back to Shawn for closing remarks. Please go ahead.
Shawn Zhang
Thank you, operator, and thank you all for joining our call today. If you have further questions, please feel free to contact our Investor Relations team. We appreciate your interest and look forward to reporting to you again next quarter on our progress.
Operator
That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.
