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spk02: Good day, ladies and gentlemen. Thank you for standing by, and welcome to the GI group's first quarter of 2021 earnings conference call. Currently, all participants are in a 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 Ms. Julia Chan, Managing Director of the Blue Shirt Group Asia. Ms. Chan, please proceed.
spk05: Hello, everyone. Thank you all for joining us on today's conference call to discuss JRU Group's financial results for the first quarter of 2021. We released the results early 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. Sherry Bai, and Ms. Delia Chen, Corp. Chief Financial Officer, and Mr. Shi Yifang, Chief Risk Officer. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor revision of the U.S. Private Security Litigation Reform Act of 1995. forward-looking statement involves 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 finding with SEC. The company does not assume any obligation to update any forward-looking statement except as required under typical law. Also, please note that unless otherwise displayed, all the figures mentioned during the conference call are in Chinese R&D. With that, let me now turn the call over to our CEO, Yan Jinggui. Mr. Yan will speak in Chinese, and then our co-CEO, Shirley Bai, will translate his comments to English. Go ahead, Mr. Yan. 大家好,感谢大家参加嘉音金科2021年度一季度
spk00: Hello, everyone. Thank you for joining our first quarter 2021 earnings conference call. We delivered solid business growth this quarter, leading us on a great start to the year. 通过成功转型和有效地推动机构合作伙伴的增长, Long girl.
spk06: driven by our successful integration and the rapidly growing demand from institutional partners, reached RMB 4.2 billion, up 44% in year-over-year growth. Notably, net income come in at RMB 93.7 million, a 137% year-over-year increase compared to RMB 39.5 million from the same period 2020. This solid business and financial results are valid indicators of our sound business strategy and execution capabilities.
spk00: 我们的机构合作伙伴数量增加至28家,且另有46家机构正在协商中,预计合作伙伴数量将进一步扩大。 Now allow me to share our peace strategies for 2021.
spk06: First, we will continue to drive organic growth in China, deepening partnerships with financial institutions by leveraging our sophisticated risk management system and providing individual customized solutions. Thanks to our early development in process automation and seamless system integration, our founding partners increased to 28 in Q1. We are in discussion with another 46 institutions, aiming to further broaden partnerships. Our sophisticated credit assessment system produces behavioral drive analytics that steer our customer acquisition and rotation strategies, leading us to have the ability to select high-quality borrowers while maintaining current customers. This drives up a higher repeat borrowing rate of 74% in the first quarter of 2021, compared to the 70% in Q4 2020. We also published our delivery period in this quarter. which have shown satisfactory improvement and maintained a good trend. We will continue to invest in technology, improve efficiency, drive growth, as well as maintain asset quality at a good level for the rest of 2021.
spk00: Indonesia is a major market in Southeast Asia. As the world's fourth largest human resource country, Indonesia's consumption is steadily growing, and personal capital is constantly increasing. Strong local stock markets have also promoted e-commerce and technological innovation. We have achieved significant progress through cooperation and partnership with local enterprises, and customized risk management models and technical platforms. We expect to obtain financial technology online loan licenses in one to two seasons,
spk06: Secondly, we are making prudent overseas expansion by analyzing and entering markets where our technology has a competitive edge and can make significant difference. For Southeast Asia, we see Indonesia as a key market with huge potential. Indonesia is the world's fourth most populous country and has demonstrated steady consumption growth and increased individual net worth. with a robust local stock market fueling income and tech innovation. Through established partnerships with local enterprises, customized risk management models and technology platforms, we are making great progress and are well positioned to lead accelerated growth once we receive the FinTech online lending license, which we expect within the next one or two years.
spk00: At the same time, we are also opening up the African market, We are also entering the African markets, which present unique opportunities to easily build out our platform in a region continuously
spk06: leapfrogging to the next generation of technology. We established our first African business in Nigeria after rigorous research and obviously seeing the successful operations of various early Chinese enterprises. Products and services will be rolled out with a conservative approach and gradual.
spk00: In addition, South America is another important market for our overseas expansion. Although the competition intensifies, when we still maintain the advantages of the top platform,
spk06: 我们致力于实现高质量增长,并将持续优化战略执行和运营管理。 In addition, the South American market is yet another important market, and we are doing very well and maintaining our leadership position despite increased competition. We aim for quality growth and will continue optimizing strategic execution and operations. 第三,我们将继续投资金融科技发展,积极参与数字经济。
spk00: to become the core participants of the financial technology eye. The blockchain is based on the technology of transparency, security, and stability. The financial technology eye is the key moment in which the blockchain technology has a profound impact on society. As we mentioned in the last quarter's business conference, Biwei is mainly focused on the opening up of cryptocurrency technology, and is engaged in the design, distribution, and mining management of mining hardware. Since Biwei is not directly
spk06: Thirdly, we will continue to invest in financial technology development and actively participate in digital economics as a key player in the fintech evolution. Blockchains are built on principles for transparency, security, and stability. The fintech evolution is at a crucial turning point where blockchain technology and digital currencies are expected to profoundly impact society. As shared in our last earnings call, Bionet is primarily focused on cryptocurrency-related technology, from mining hardware design and distribution to mining management. There are limited downside risks, as Bionet itself does not mine cryptocurrencies, with integration of finance and operation functions steadily progressing. We expect completion within this month.
spk00: Billnet business development and operations will be under an independent separate team.
spk06: With more institutional involvement and more use cases in the financial sector, we believe growth potential is especially significant. Our strategy is to be flexible and participate in financial technology development with limited downside risks and no impact on our current business operations.
spk00: 2021 will be a year of rapid growth. Our first task is to steadily execute our previous strategy. We believe we will definitely achieve outstanding results.
spk06: In conclusion, 2021 will be a year of accelerated growth. We developed our top initiatives to execute the strategies I just outlined, and I am confident our team will be able to deliver outstanding results.
spk00: With that, I will now turn the call over to our co-chairperson, Celia Chen. Celia, please go ahead.
spk04: Thank you, Mr. Yen and Shelley, and thank you, everyone, for joining our call today. As Mr. Yen just mentioned, we kicked off 2021 on a strong note with impressive financial growth and a meaningful business progress, placing us firmly on track to achieve our growth target. Now, let me go through our financial highlights for the quarter. Before I go into details, please note that all numbers presented are in RMB and are for the first quarter of 2021 unless stated otherwise. All percentage change are on the year over year basis unless otherwise specified. In the interest of time, I will not walk through each item by line on this call. I will just highlight some of the key points here. Loan origination volume was 4.2 billion RMB, up 44.1% year-over-year and 35.1% sequentially. This was remarkable and was also the strongest growth since our IPO. This demonstrated the success of our rapid business transformation, which laid the good foundation for us to continuously achieve robust growth in the coming future. Net revenue was 343.1 million RMB, up 9.4%. This increase was primarily due to the increase of revenue from loan facilitation services, which grew by 24.7% year-over-year to 320.9 million RMB. Other business grew by 8.3% to 22.2 million RMB. The increase was primarily due to the development of our overseas business. Moving on to cost, we continued to optimize our cost structure to further improve operating efficiency. In Q1, total operating expenses were 229.3 million RMB, down 12.6% from 262.4 million RMB last year. Ordination and servicing expenses were 64.1 million RMB, up 0.3%, primarily due to the increase in credit assessment expense resulting from higher loan ordination volume, partially offset by reduced collection costs as the company no longer provided such services under its new business model. Allowance for uncollectible receivables, contract assets, loan receivables, and others was 8.0 million RMB, down 73.7% from 30.4 million RMB in the same period of 2020. The decrease was primarily due to the relatively lower credit risk of the new business model. G&A expense was 37.8 million RMB, down 1.3% primarily due to lower rental costs, partially offset by the increase in the other business-related expenses. R&D expenses was 28.1 billion RMB, down 22.8%. This was mainly due to a more streamlined team in technology-related departments as we continue to improve our operating efficiencies. Sales and marketing expenses were down 2.4% to 91.2 RMB, primarily due to the decrease in share-based compensation expense, partially offset by higher borrower acquisition expenses. We achieved attractive profitability through our long volume growth and improved operating efficiency. We posted net income of 93.7 million RMB up 137.2% year-over-year, and 15.5% sequentially. We ended this quarter with 123.3 million RMB cash and cash equivalents, compared with 117.3 million RMB as of December 31, 2020. Moving to our guidance. Even the recovery of Chinese economy and fast-growing consumer finance markets, we expect our long orientation volume in second quarter 2021 will be over 150% growth year-over-year and 35% to 45% growth sequentially. With that, we can open the call for questions. Mr. Xu, please. Our Chief Risk Officer, Mr. Xu, and I will answer questions. Officer, please go ahead.
spk02: Certainly. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone keypad and please wait for your name to be announced. We have the first question. This is coming from the line of Andrew Scott from Roth Capital. Please go ahead.
spk01: Hello, congrats on the strong results and thank you for taking my questions. So the first question here that I have, the model is really showing this successful execution you guys are making with the transition to institutional partners, especially shown in the strong gross margins you had in the quarter. Can you just maybe talk about the efficiencies you're realizing and you discussed on the call that are helping driving the strong results?
spk04: Yes, so this is Celia, and I will take this question. So, yes, as Andrew – hi, Andrew. As you have mentioned, we have successfully access to the P2P business. So cue the long facilitation models. So in the first quarter, we have seen very strong increase in the long facilitation volumes. And also, we have seen some cost savings under different expense items. So as we mentioned in the commentary, given the recovery of China's economy and a fast-growing consumer financial market, we actually have a very good confidence to grow and expand the book, as we did in the first quarter. So we expect that our loan origination volume will grow continuously in the in the remaining quarters of this year, and we will continue to improve our operation efficiency and to maintain very good profitability. Yes.
spk01: Great. Thank you very much. Sorry, I didn't want to cut you off there. Second question for me, if I may. R&D expenses look like they were down substantially in the quarter. Can you kind of talk about your expectations there going forward?
spk04: Okay. So, yes, the R&D expenses were down 22.7% year-over-year because we have successfully accessed the P2P business. So we actually... made some efforts to streamline our technology departments. And we optimized the personnel scheduling and related human resources. So in that way, we have a more streamlined team in technologies. So going forward, so we see some savings in the related salaries and compensations. and also the share-based compensation. So going forward, we plan to improve our R&D investment to continuously improve our technological capabilities and efficiency to propel further growth for our company. And if you look at the absolute number, I think it's a very good indicator for the remaining quarters of this year. So I think we are going from this level, and we plan to improve the R&D investment level from here. Hope that, yeah.
spk01: Yep. Thank you. That was very helpful. Next one, if I may. I was very excited to see the credit quality numbers in 2019. disclosed in the release this morning, and it definitely reflects the shift in institutional funding. So can you just kind of provide me some commentary on the numbers there and expectations going forward?
spk03: Sure. Thanks, Andrew, for the question. This is Eve taking on your questions on the credit results, the risk outcome. Yeah, as we are shifting our business towards institution funding portfolio, and we are facing a stronger desire from our partners to seek for better quality customers. This has been going on with our strategic intent starting from the early last year, 2020, if you recall. that we're trying to position ourselves towards higher quality customers in anticipating us partnering with institution funding partners. So as you can see, the risk numbers continue to improve over time. We are tackling from multiple fronts. Once from our customer acquisitions, we are trying to target better customers just from the put-at-risk point of view. In addition, our existing portfolio customers that we are focusing on the better spectrums of our long-term customers. In fact, as we learn more about our own customers, and we are able to really focus on the customer to have a longer and a better credit outlook, risk outlook. Just coupled with that, we also are long collection capabilities also improve as well as our overall external With the environment, as we have seen from our peer companies have been improving over time, our 30-day collection rate has pretty much reached an all-time high and has been able to stay there for almost over two quarters now. So that's something that I'd be happy to report. So just about with all things that go in place, we're expecting our overall risk is going even better, especially with our existing customer, repeat customer book or continue to grow at a significant pace. We're expecting our portfolio risk is going to be even better.
spk01: I'll be off. Great, thank you. That was extremely helpful. Also appreciate the update on the WeNet acquisition that you provided on the call. Can you maybe just talk through some of the next steps you guys have moving forward to integrate the company and anything else that needs to be done over the next few quarters?
spk04: Yes, this is Celia. So currently we are in the middle of integrating the function of finance operations and other So, we expect to complete this consolidation within this month, by the end of June. So, in the next year or for the full year, we estimate that the green net would contribute additional 20 percent of net income if we can stick to the current business strategy. As we have been highlighting in the commentary earlier, VNAT is primarily focused on cryptocurrency-related technology, mining hardware design, and distributing to mining management. So actually, VNAT doesn't directly engage in cryptocurrency issuance, mining, or exchange, something like that. So from that point of view, currently, we are operating this business fully compliant with the regulatory requirements. And we will observe and watch very closely and make sure to adjust our business if necessary and keep our operations within the regulatory framework. So that is basically, yeah, the status of our M&A deal.
spk01: Thank you very much. And then last one, if I may. 30% to 40% sequential loan origination growth was great to hear. That's very exciting for 2Q. Can you just talk through your expectations for year-end? It looks like you've acquired some new customers this quarter, so any commentary you can provide on adding people to the platform as well would be great.
spk03: Just to keep on again, Andrew, I'm going to take on your question. Can you repeat the second half of your question again?
spk01: Yeah, so the repeat borrower percentage was down sequentially. It looks like you successfully added new customers to the platform. So any commentary you have there would be great.
spk03: Sure. So we are disclosing our next quarter's outlook, which is at a range of 30 plus range from quarter to quarter growth. which is even better than what we have seen this quarter. So we don't have a number for the overall yet, but I am definitely expecting a stronger growth for the second half of this year. So we're just going to take the numbers out a little bit. I'm just looking at the Q1 of our growth. So the growth primary is coming from two fronts. One is As we are transitioning fully close to our P2P book in November last year, we are seeing our institution partners have gained significant confidence and interest in our portfolio just because of our performance on the risk metrics. So we are seeing more traction from our institution partners And two, coming on board and we're seeing a pretty good growth from our number of institutions that are coming today and the healthy pipeline to go into place. So with a strong funding surprise that we are seeing our loan institutions are gaining the similar traction to us. So in Q1, we are in full speed in terms of our repeated customers. As you can see, our repeated percentage of the loans from the repeated customers have grown compared to our last quarter. And similarly, we are starting expanding our new acquisition portfolio in the middle of the Q1. It's very likely that in Q2, we're going to see a higher percentage of new acquisitions the book are coming from our new Orange Nation customers. That's a decision driven by the growth. I'm going to talk about the risk a little bit. So we are fully ready, we have a full fee to grow our new book. At the same time with our repeated customer book, we are so looking away as well from several aspects, from the product identification by offering a wide range of both rates as well as the product terms. And in our triple-based marketing capabilities, we are expanding to a full spectrum of the attachment lifespan. Lastly, but more importantly, is also the customer experience. We are getting into every detail of how we are interacting with the customers and trying to further improve our customer's engagement rate. So on the new customer acquisition fund, As I said earlier, Q1, middle of Q1, we are starting to get more traction from booking more new customers. And that has been true for Q2 throughout. So we are getting, we are buying customers through full spectrum of marketing channels, information-based marketing, our partnerships with other internet-based platforms, et cetera. And we are getting, we are booking deeper customers throughout all spectrums. So in the second half of this year, we're expecting that we're going to focus a little more on optimizing our acquisition cost from throughout these marketing channel metrics. So that even though we are working, as I said earlier, that we are going full speed on the Q2 in terms of new customer acquisition, we're taking a pretty prudent view on how in terms of the portfolio risk management. And this has always been... the core of our lending business, trying to take a very critical and slightly conservative view. We are maintaining a very healthy buffer for us in terms of our risk expectations. And so all the underwriting are handled under such a more comprehensive portfolio and channel-specific trying to make sure that we are gaining the growth but not at a cost of deteriorating credit risk. So that's our overall view of what we are expecting from the lending perspective in terms of that volume. Hopefully that will be fully supported by our continuous growth through our institution But in the second half of this year, we are definitely going to see a much stronger second half of the year compared to the first half of this.
spk01: Great. Well, thank you very much. And once again, congratulations on the strong quarter.
spk02: Thank you. Once again, ladies and gentlemen, it is star followed by one if you wish to ask a question. Seeing no more questions, I will return the call to Ms. Chen. Please go ahead.
spk04: 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.
spk02: Thank you. Thank you, ladies and gentlemen. That concludes our conference call for today. Thank you all for your participation. You may disconnect now.
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