Q4 2023 Jiayin Group Inc Earnings Call

Participants

Shawn Zhang; IR; Jiayin Group Inc

Dinggui Yan; Founder, Director, & CEO; Jiayin Group Inc

Chunlin Fan; CFO; Jiayin Group Inc

Rong Hua; Analyst; Shanghai Jinyu Asset Management

Yuxuan Chen; Analyst; Huatai Securities Co., Ltd.

Presentation

Operator

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Jiayin Group fourth-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. Hello, everyone, and thank you all for joining us on today's conference call to discuss Jiayin Group's financial results for the fourth quarter and full year of 2023. We released our earnings results earlier today. A 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.
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 corresponding English translations. Please go ahead, Mr. Yan.

Dinggui Yan

(interpreted) Hello, everyone. Thank you for joining our fourth-quarter and full-year 2023 earnings conference call.
The year of 2023 was a pivotal year for our company with the changing macroeconomic landscape, amplifying our challenges, but also opening up unique opportunities for group. We are thrilled to share that throughout the fourth quarter and the entire year, we firmly executed our strategic initiatives, achieving remarkable results on both financial and operational fronts. The execution of these strategies will form the core competitive edge for our company's future growth.
Reflecting on 2023, the key words for China's macroeconomic scene were steady growth and structural adjustment. On the one hand, the recovery of this economy at the macro level face extended timelines and increased difficulties due to the ongoing multiyear impact of COVID and escalating geopolitical conflicts worldwide, maintaining steady growth while strictly controlling potential risk became a critical consideration for policymakers.
On the other hand, the importance of developing industries that are both strategic and emerging as well as stimulating domestic demand became even more pronounced, adjusting the structure of economic development and focusing on transforming and upgrading the engines of group emerge as primary discussions, particularly from the fourth quarter onwards, new holiday productive forces started to gain traction as a popular concept.
In 2023, we kept a close watch on significant changes within the macroeconomic landscape, particularly in the financial and technology sectors. We remain focused on our core competencies of technological innovation and risk management. We did this while striving to enhance our accommodation market share and improve our position in operations, thereby successfully meeting our business objectives.
In the fourth quarter, the company's loan facilitation volume was RMB20.1 billion, an increase of 6.3% year over year. Meanwhile, the company's total loan facilitation volume for the full year reached RMB88.1 billion, an increase of 58.7% compared to 2022, surpassing the previously set target guidelines and achieving a new historical high in volume.
In the fourth quarter, the company achieved net revenue of RMB1.6 billion, an increase of 51.8% year over year. Annual net revenue reached RMB5.47 billion, an increase of 67.1% year over year continuing a healthy growth momentum.
The recovery of the macroeconomy is closely linked to the support of credit services. And in 2023, the demand for consumer credit services in the Chinese market remained robust. Policies and measures such as the opinions of the General Office of the State Council on further unleashing the potential of consumer spending and promoting the sustained recovery of consumption, the National Development and Reform Commission's effort for restoring and expanding consumption and National Financial Regulatory Administrations notice on the financial support for recovery and expansion of consumption as State Council's initiatives to further facilitate the high-quality development of inclusive finance, each contributed to the growth of the consumer credit service market. Additionally, new requirements were introduced at the national level to regulate financial institutions and enhance service quality.
At the end of 2023, according to data from the People's Bank of China, the balance of various types of RMB loans from financial institutions amounted to [RMB203 -- RMB37.59 trillion], an increase of 10.6% year over year. Throughout the year, RMB loans increased by RMB22.75 trillion and additional RMB1.31 trillion compared with the previous year. Against the backdrop of the continuously increasing market demand, we are continuing to focus on optimizing customer structure, pursuing sustainable growth in business scale.
2023 was a year of transformation for our company in terms of technological empowerment, especially in the development and application of artificial intelligence technology. In the third quarter, our company officially changed its name to Jiayin Technology, marking as a strategic shift where technology took top priority. This move aligns with the chain of applying AI in various business scenarios.
AI technology has empowered us in areas like anti-fraud monitoring, marketing borrower acquisition models, and intelligent quality inspection for customer service. These [advancements] have boosted our risk control capabilities, improve borrower acquisition efficiency, and enhanced customer satisfaction and compliance.
In the fourth quarter of 2023, we combined large language models and AI GC technology to enhance our innovation and influence through automated high-quality image and video content creation. Internally, we're developing intelligent office tools, leveraging open-source large language models for better operational efficiency in the middle and back office.
By the end of 2023, we had partnership with 71 financial institutions, and we're in talks with an additional 36. Our collaboration with this institution covers operation, technology, risk, management, and customer rights protection, enhancing our market competitiveness.
In the fourth quarter, we welcomed one Internet bank, two Tier 1 city commercial banks, and several private banks as partners diversifying our funding. This led to significant growth in our loan facilitation business throughout the year. We believe our expanding ecosystem of partners will be crucial for our long-term growth.
In the fourth quarter of 2023, the company continues efforts in managing risk fluctuations and expanding a borrower base. We understand the importance of optimizing customer support structure and ensure asset quality amid market changes. The delinquency rate for 61 to 90 days remained at 0.68% manageable overall.
Going forward, Jiayin will maintain prudent and a flexible risk control strategies for new borrower acquisition, we pursued a stable strategy, focusing on existing multi-channel borrower acquisition metrics and achieved success in cost control. This led to an 11.9% reduction in Q4 2023 sales -- sales and marketing expense compared to the same period of last year. In borrower operations through a refund management, we deeply explored the lifetime value of core assets. Our repeat borrowing rate reached 72.9% with average borrowing amount per borrowing of RMB9,944.
The company's expansion into overseas market is progressing steadily. In Nigeria, we are mindful of the ongoing fluctuations in local exchange rates and market risks, which may pose challenges to further growth. We will continue to monitor the local business environment closely and make informed decisions accordingly.
Meanwhile, in the promising pan-African market like Tanzania, we are actively exploring expansion opportunities. Indonesia is also a key market of interest. By the end of 2023, Indonesian Regulatory Authorities have introduced new policies requiring lower rates and a tighter market oversight. We are closely monitoring these developments and plan to support our partner to optimizing their asset structures and targeting high-quality borrower segments. Additionally, we are keeping a close eye on Latin American market, including Mexico, for potential business development opportunities.
Throughout the fourth-quarter and full-year 2023, consumer rights protection remained a central focus for Jiayin's development. We actively responded to the customer rights protection initiative, defending consumer rights with determination, leveraging our digital technology advantages, we implemented lean operational strategies internally and established a robust consumer rights protection system.
Externally, we continue to empower our business and with technology, building a strong anti-fraud firewall to foster a harmonious and a stable consumer environment. In the 2023, consumer rights protection white paper released in January, we detailed our achievements and deep industry insights. This included educating 26 million individuals on consumer protection and assisting 9,900 borrowers in need. The company's outstanding performance was recognized with the best financial consumer rights protection award at the financial compliance annual award ceremony.
Reflecting on 2023, we are pleased to report that we achieved high quality growth, demonstrating the effectiveness of our strategies. Currently, as an industry regulation interest to a normalized stage, it is expected that the future industry environment will be more conductive to Jiayin's sustained development. We also made significant strides in technology-enabled business operations and expanding our overseas footprint.
We are convinced that maintaining a focus on technological and innovation as a cornerstone of our long-term competitive strategy, along with our commitment to expanding our business scale, optimizing our asset structure and [diligently] managing risk will ensure our continued and stable growth in both Chinese and international markets. We are confident in our company's performance in 2024, setting a goal for total loan facilitation to be ranged from RMB93 billion to RMB98 billion for the year, with RMB22 billion targeted for the first quarter.
Finally, I would like to talk about the company's efforts in boosting shareholders' returns. Over the past nine months, we have distributed two cash dividends to shareholders totaling USD0.8 per ADS. The total dividend amount reached USD42.7 million, accounting for 25% of the company's net income after tax for the fiscal year of 2022.
Going forward, we will continue to execute the company's dividend policy, which is to distribute dividends twice a year in cash with an annual total dividend of not less than 15% of the previous year's net income after tax, subject to dividend conditions being met.
Regarding our share repurchase program, as of now, the company had repurchased its ADS for approximately USD10.6 million and with our current effective share repurchase program limit to USD13 million, we'll look forward to reaffirming our commitment to creating value for our shareholders and our confidence in company's long-term growth prospects through these measures.
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 all percentage changes refer to year-over-year comparisons unless otherwise noted.
As Mr. Yan mentioned earlier, we currently have vast growth momentum for the past (technical difficulty) achieved new milestones in the fourth quarter. Notably, our loan facilitation volume grew by 6.3%, to RMB20.1 billion. Our net revenue was about RMB1.6 billion, up 51.8%.
Moving on to costs, facilitation and servicing expenses were RMB837.2 million, representing an increase of 329.1% from the same period of 2022, primarily due to increased loan facilitation volume and expenses related to financial guaranty services.
Allowance for uncollectible receivables, contract assets, loans receivable, and others was RMB43.8 million, representing an increase of 190.1% from the same period of 2022, primarily due to the increased balances arising from loan facilitation and guarantee services.
Sales and marketing expense was RMB329.5 million, representing a decrease of 11.9% from the same period of 2022, primarily due to lower commission expenses.
G&A expenses were RMB65.2 million, representing an increase of 9.9% from the same period of 2022, primarily driven by an increase in employee costs.
R&D expenses were RMB92.9 million, representing an increase of 44.3% from the same period of 2022, primarily due to the higher employee compensation as a result of the increase in research and development department headcount.
Consequently, our net income for the fourth quarter was RMB367.6 million, representing a decrease of 31.1% from RMB533.7 million in the same period of 2022.
Our basic and diluted net income per share was RMB1.72, compared to RMB2.49 in the fourth quarter of 2022.
Basic and diluted net income per ADS was RMB6.88, compared to RMB9.97 in the fourth quarter of 2022.
We ended the quarter with RMB370.2 million in cash and cash equivalents, compared to RMB180.3 million at the end of the previous quarter.
With that, we can open the call for questions. Mr. Xu, our Chief Risk Officer, and I will answer your questions.
Operator, please proceed.

Question and Answer Session

Operator

(Operator instructions)
[Rong Hua, Jinyu Asset].

Rong Hua

(interpreted) Hello, management, and I'm Rong Hua from Jinyu Asset. I have two questions.
The first one is we have observed that the delinquency rates for periods of 1 to 30 days, 31 to 60 days, and 61 to 90 days, 91 to 190 days, and over 180 days, all higher than the level during the same period in 2022. Could you please share what levers the company intends to take in the future to keep delinquency rates low?
And then my second question is, also have a question about the shareholder return. In 2023, the company initiated dividend distribution. What can we expect for the future dividend policy and payout ratio? Thank you.

(interpreted)
Hello Ms. Hua. Thank you so much for focusing our delinquency rate as our investor. So just a call back from what Mr. Yan just said. In 2023, the overall domestic economic environment still face multiple challenges and uncertainties. And one very certain thing is that the economic recovery speed is still very slow.
And if you follow our updates in the past several quarters, you will see that since the second quarter of 2023, we have already adjusted and have faced the challenges to risk management given by economic cycles and under this perception.
Also under a prudent risk decision-making mechanism, we have strengthened our research on this sensitivity of our borrower group to external environmental impact, accelerated the adjustment and the adaptation of internal strategies and manage risk indicators throughout the whole lifecycle of our borrowers.
One thing I want to point out that in the post-facilitation stage, we have enhanced the intelligence and experience of repayment reminder and collections through technology and [modest strength in the] application of mediation and legal collection at different stages and improved the optimization of risk indicators at each stage and all under the premise of enhancing borrower operational experience and protecting consumer rights. And those are our measures to the risk control measures under the economic cycle.
Those are my answers to your first question, and I will give it to our CFO, Mr. Fan Chunlin, for your second question.

Chunlin Fan

(interpreted) Thank you, Ms. Hua.
Yeah, it's true that the rewards to our shareholders are very interesting. Just as Mr. Yan just said, based on our company's rapid development and robust management over the past few years, both operational and financial indicators have shown a continuous improvement trend. So our company's operating cash flow is relatively abundant, and the metrics on the balance sheet are increasingly solid. Therefore, the company has been and will continue to reward our shareholders through share repurchase plans and dividend policies.
It has been already two years since we just started our share repurchase plans and but the current stock trading price is just two -- the P/E ratio is around just [two]. Considering our company's fundamentals and strong profitability, our management believes that the stock price does not fully reflect the company's internal value which means we are undervalued. So our Board of Directors just approved an additional USD20 million share repurchase plan, raising the repurchase limit to USD30 million.
Over the past year, we have implemented two dividends, totaling USD0.8 per ADS. If you calculated based on our closing price yesterday, which is USD6.9 per ADS. The dividend yield exceeds 11.5%. So in the future, we will continue to -- our established dividend policy and rewarding our shareholders through regular dividends.
Thank you, Hua.

Operator

(Operator instructions) Yuxuan Chen, HTSC.

Yuxuan Chen

(Spoken in Chinese)
Let me do the translation. The first question is given the uncertainty in the current macroeconomic environment, could you please share what the (inaudible) you have made in the customer acquisition channels and the risk control, and also does the company have a detailed plan for future development based on these adjustments and the progress?
And the second question is, we have noted a significant decrease in the company's net income in the fourth quarter in 2023 and also a notable year-over-year increase in the accounts receivable. What are the primary factors and what's the company's projection for the net income this year?

(interpreted)
Okay. Mr. Chen. I will take your first question. So firstly, I would like to remind that in the past few years, the online credit industry has gone through a period of consolidation, followed by a slowdown in the economic recovery of the external environment. During this period, we fully leverage our long, accumulated data and users' advantages. With the record development of facilitation volume, the risk control indicators has also been satisfactory.
So today, as we consider the development of our business, we will place more emphasize on a sustainable long-term development goal, continuously empowering our financial partners in both China and international markets with our technological capabilities. So we will prudently consider the healthy growth of the platform's facilitation volume under the premise of controllable risks.
So in detail. Firstly, in terms of borrower acquisition channels, we will focus on balancing the channel mix metrics, prioritizing the development of channels that mainly acquire high-quality assets. Secondly, from this service and operational strategy perspective, we will enhance the management and retention of high-quality borrowers, increasing the mining and application of borrower behavior data, thereby promoting the elevation of borrower quality and asset portfolios towards high-quality borrower groups.
So certainly, in terms of risk strategy, we will continue to focus on the introduction and testing of market data products, systematically assess and monitor the impact of external environment risks on different borrower groups and stripping the iteration and optimization of our models. Strategically, we will conduct differentiated management by different borrower groups, implementing differentiated approval rates, differentiated pricing, and differentiated credit limit measurements.
So lastly, in the post-facilitation aspect, as previously mentioned, the introduction of various strategies and methods aim to enhance the optimization of risk indicator at each stage, so all under the premise of strengthening borrower operational experience and protecting consumer rights.
So those are my -- some ideas about your first question and as the same. The second question, we'll give to Mr. Fan Chunlin.

Chunlin Fan

(interpreted)
Okay. Thank you, Yuxuan, for your question.
So for the fourth quarter of 2023, the net income was RMB368 million, which is a slight increase compared to RMB324 million in the third quarter of 2023. However, there was a 31% decrease if you compare it to the RMB534 million in the fourth quarter of 2022. And I think there are some main reasons.
So firstly, the net margin in the fourth quarter of 2022 was exceptionally high, which is about 51%. So I think we have mentioned in the calls before that the primary reason was that several of our core operating entities obviously obtained the high-tech enterprise qualification in the fourth quarter of 2022, which adjusted the applicable income tax rate to 15%. And it is retroactive to 2021.
Therefore, we made a one-time financial adjustment for the tax benefit in the fourth quarter of 2022. If you exclude this one-time adjustments and other non-recurring items, the net profit -- the net income for the fourth quarter of 2022 would be much lower.
So in the detailed classification of our revenue of fourth quarter of 2023, the proportion of guaranteed income was higher than in the fourth quarter of 2022. And the profit margin of this kind of business is lower than our facilitation and the risk control services. So in the future, I think our listed company will continue to focus on the facilitation and risk control services. And we will also reasonably control the balance of different business segments in our revenue proportion.
So regarding the income statement figures, we are not going to provide any guidance today, but if you -- but we have already given a range for our facilitation volume this year, which is RMB93 billion to RMB98 billion. If you look at our net margin in certain quarters in the past, has fluctuated due to some non-recurring items. And always, our net margins for the past three years, which is 2021 to 2023 were 26.3%, 36.1%, and 23.7%, respectively. And also in the future, we will continue to operate steadily, maintain a stable take rate, increase investments in R&D, and improve operational efficiency to keep the overall margin at a very healthy level.
And yes, if you compare with the account receivables in the Q4 2023 to the Q4 2022, there is a difference, just as what you said. But if you compare the balance at the end of the fourth quarter, compare with the end of the third quarter, the balance was roughly flat and a little bit [decreased]. So our company's balance sheet will continue to improve.
All right. Thank you, Yuxuan, for your question.

Operator

Thank you. Seeing no more questions now. I would like to return the call to Shawn for closing remarks. Please go ahead.

Shawn Zhang

Okay. Thank you, operator, and thank you all for participating on today's call and thank you for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress.

Operator

Thank you all again. This concludes the call. You may now disconnect. Thank you.
Editor^ Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.