Jiayin Group Inc.

Good day ladies and gentlemen, thank you for standing by and welcome to the GIYIN Group's third quarter 2024 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 Investor Relations of GIN Group. Please proceed.

Thank you, operator. Hello, everyone. Thank you all for joining us on today's conference call to discuss GIN Group's financial results for the third quarter of 2024. We released our earnings results earlier today. The press release is available on the company's website as well as from NewsWare Services. On the call with me today are Mr. Yan Dinggui, Chief Executive Officer, Mr. Fan Chunning, Chief Financial Officer, and Ms. Xu Yifeng, 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 Security 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 statement except as required under applicable law. Also, please note that Unless otherwise stated, all figures mentioned during the conference call are in Chinese. With that, let me now turn the call over to our CEO, Mr. Yan Jinglei. Mr. Yan will deliver his remarks in Chinese, and I will follow up with corresponding English translations. Please go ahead, Mr. Yan.

Hello, everyone. Thank you all for attending the third quarter of the Chinese Science and Technology Conference in 2024.

Hello, everyone. Thank you for joining Giant Group's Third Quarter 2024 Earnings Conference Call.

In the third quarter, China's economic fundamentals are at a critical stage. Part of the macroeconomic indicators show a positive change. In terms of demand, the total consumption of social goods in September increased by 3.2% and increased by 1.1% in August. to show the attitude of change. In the third quarter, we will be more active in increasing the amount, increasing the investment in goods and services, and fully complete the set goal. The loan exchange transaction amount is about 26.7 billion yuan, which is historically high. The corresponding service income is about 11 billion yuan, which is 18.1% of the growth. The core business continues to maintain steady growth.

In the third quarter, China's economic fundamentals were at a critical stage of adjustment, with several macroeconomic indicators showing positive changes. From the demand perspective, total retail sales of consumer goods increased 3.2% year-over-year in September, an improvement of 1.1% compared with August, reflecting marginal improvement In the third quarter, we took a more proactive approach to driving growth, increasing investment in operations and borrower acquisition. We successfully achieved our established goals with a loan facilitation volume of approximately RMB 26.7 billion, setting a new record. Correspondingly, revenue from loan facilitation services reached around RMB 1.1 billion. representing a year-over-year growth of 18.1%, with our core business continuing to maintain steady growth.

In terms of technology, we continue to improve our technology and polish our products. Thirdly, we further enhance the hardware of the language model and focus on strengthening the data platform. For example, we continue to improve our work efficiency and customer service experience We successfully upgraded the library of knowledge and knowledge, and launched a knowledge drive operation mode, and launched a self-proclaimed automatic machine learning platform, which can significantly improve the modeling efficiency under the current wind control and customer marketing scenarios. Jiayuan Technology has been in business for nearly a year. The technology attribute has been categorized as the most important label of the company.

In terms of technology empowerment, we have continued to refine our technologies and optimize our services. In the third quarter, we further deepen the application of large language models and focus on strengthening the construction of our central data platform. This endeavor aims to fully enable intelligent operations while continuously improving work efficiencies and customer services experience. We successfully upgraded the Wenquxin knowledge base, launching a knowledge-driven operational model. We also introduced our self-developed MeanE automated machine learning platform, which significantly enhanced modeling efficiency in credit risk measurement and marketing scenarios. It has been nearly a year since Giant Group's rebranding, and the technology aspect has now become the company's most distinctive attribute. Looking ahead, we will continue to leverage technological innovation as the driving force for our growth, deepening and expanding the application of technology to fully advance the company's digital and intelligent transformation.

Since September 30th, we have established cooperation with 70 multi-faceted financial institutions, and in the last quarter, we have successfully landed on the basis of joint operation projects and cooperated with the head of the互联网 platform. We have successfully landed on multiple distribution products. In addition, this quarter, we are actively promoting the landing of joint operation projects of two financial institutions and partners. Two other financial institutions are in discussion. Through active exploration and

Regarding institutional partnerships, the company has been expanding its cooperation boundaries and actively exploring diverse and innovative collaboration models. By leveraging a high-quality and sustainable network of financial institutions, we are achieving more stable growth As of September 30th, we had established partnerships with 70 diverse financial institutions. Building on the successful implementation of joint operation projects in the second quarter, we have collaborated with leading internet platforms to successfully launch borrower acquisition channels for multiple niche products. In the third quarter, we also actively advance the implementation of joint projects with two financial institutions partners, and two more are currently in discussion. By actively exploring and collaboratively developing innovative services, we look forward to achieving win-win outcomes and growing together with high-quality partners in the future.

In the face of the diversification of demand in different consumer scenarios, our business investment and operation strategies are more positive, especially in terms of customer investment. On the one hand, we focus on deep operation in the vertical field of customer models to enhance self-sufficiency and customer capability, and pay attention to user storage and long-term operation effects. On the other hand, we use head-on online video In response to the diverse credit demands arising from various consumption scenarios,

we have adopted a more proactive approach in our business deployment and operational strategies. As part of that effort, we have significantly increased investment in acquiring new borrowers. On the one hand, we have focused on several things and extensive operating borrower acquisition models in vertical domains enhancing in-house acquisition capabilities, and prioritizing user retention and long-term operational outcomes. On the other hand, we have collaborated with leading platforms in online streaming, e-commerce, and lifestyle services to explore different types of acquisition channels, uncover potential needs, and obtain differentiated supplements to our existing borrower base. In the third quarter, we obtained 826,000 new borrowers, representing a year-over-year growth of approximately 71.3%. These sustained efforts in borrower acquisition have yielded notable results.

The expected rate of 61 to 90 days is 0.55%. Two consecutive seasons have been in a downward trend. In the face of a large number of new customers, from the IPA model front of the customer channel to the risk management of new applications and contract review, the strategy and model of each link continue to play an active role. We insist on the principle of whole-body operation to achieve balanced development of quantity and value. In addition, we have fully upgraded the intelligent model structure. Thanks to our precise and flexible risk management strategies, as well as the continuous iteration of our risk control models, our asset quality improved steadily in the third quarter.

the 61 to 90 days delinquency rate was 0.55%, representing a downward trend for two consecutive quarters. Facing a large number of new borrowers, our strategies and models have been playing an active role across all stages, from the prescreening of borrower acquisition channels and the RTA model to risk measurement in credit application and approval limits. We remain committed to a prudent operational approach, balancing growth in both quantity and quality. In addition, we fully upgraded our intelligent model architecture and continuously introduced richer data samples for model training. Through our self-developed Linshi AI Engine and Fushi model platform, we significantly improved modeling and deployment efficiency.

From the overseas market, the demand for in-house businesses continues to rise, and the number of new users in overseas businesses is growing rapidly. In Indonesia, the number of new registered users, the number of new registered users, has increased by more than a second in the scale of local business partners and new registered users. Despite the fierce competition in the Indonesian market, the leading participants technology support and brand influence has taken on a larger market size, but the overall market demand is still strong, especially among the people who are fully provided with financial services. There is still a wide range of business growth spaces. In Mexico, we also noticed that local monitoring of the price policy of financial apps is in progress. We believe that a normal, mature monitoring environment will allow the entire industry to move towards more harmonious and long-term development. In addition, in order to better From the perspective of overseas markets, the demand for loan facilitation services continues to increase with the number of new users for giant overseas business growing rapidly.

In Indonesia, the quarterly loan origination volume and new registered users for our local business partners further increased compared with the second quarter. Despite intense competition in the Indonesian market, leading participants dominate significant market share through their financial strength, technical support, and brand influence. However, overall market demand remains strong, especially among underserved populations, presenting vast opportunities for business growth. In Mexico, we have observed the local regulations regarding the listing of financial apps are becoming increasingly strict. We believe that a normalized and mature regulatory environment will benefit the industry by promoting greater compliance and sustainable development. Additionally, to better optimize our overseas business layout and focus resources on deepening and developing core markets, we strategically adjusted our business in the Nigerian market during the third quarter. Looking ahead, we are committed to providing even more exceptional services to our overseas clients.

At the end of September, the country has launched a series of mobile currency policies and innovation tools, improving market confidence and expectations. Our future development is more optimistic than in the past few seasons. We expect that the amount of loan payments in the fourth quarter will not be lower than 251 yuan, and we are confident in achieving our annual goal. In addition, as a result of the overall arrangement of the company's operation and cash flow management needs, the company board approved a reform of the stock market policy and adjusted the frequency of the send-off. According to the reformed stock market policy, since 2025, the company plans to announce and send off a single cash stock in each fiscal year. The total is not lower than 15% of the net profit after the last fiscal year. Regarding the subsequent information sent off by the stock market,

In late September, a series of proactive monetary policies and innovative tools introduced by the Chinese government boosted market confidence and expectations. Compared with previous quarters, we are more optimistic about future development. We anticipate that the loan facilitation volume in the fourth quarter will be no less than RMB 25 billion, and we are confident in achieving our annual target. Additionally, to better coordinate company operations and manage cash flow, the board of directors approved a revision to the dividend policy, adjusting the distribution frequency Under the revised policy starting in the year of 2025, the company plans to declare and distribute cash dividends once per fiscal year, with the total amount no less than 15% of the previous fiscal year's net profit after tax. Further details regarding the dividend distribution will be provided in upcoming disclosures.

I would now turn the call over to Mr. Fan Chunlin for financial remarks of the quarter.

Please go ahead.

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. Echoing Mr. Yan's remarks, despite the significant impact of ongoing microeconomic shifts, we have constantly met the performance benchmarks we aimed for. Notably, our loan facilitation volume reached $26.7 billion in the third quarter, a 10.3% increase compared with the same period last year. Our net revenue was $1,444.9 million, representing a decrease of 1.5% from the same period of 2023. Moving on to costs. Facilitation and service expense was $419.1 million, compared with $544.3 million for the same period of 2023. This was primarily due to decreased expenses related to financial guarantee service, which was partially offset by the effect of increased loan facilitation volume. Allowance for uncollectible receivables, contract assets, loans receivable, and others was $11.6 million, representing an increase of 36.5% from the same period of 2023. primarily due to increased balance of receivables arriving from loan facilitation. Sales and marketing expense was 550.3 million, representing an increase of 34.9% from the same period of 2023, primarily due to an increase in borrow acquisition expenses. G&E expense was 56.1 million, representing an increase of 5.5 percent from the same period, 2023, primarily driven by an increase in expenditures for employee compensation and related benefits. IND expense was 95.9 million, representing an increase of 36 percent from the same period of 2023, primarily driven by an increase in expenditures for employee compensation and related benefits. Consequently, our net income for the third quarter was $269.6 million, representing a decrease of 16.8% from $323.9 million in the same period of 2023. Our basic and diluted net income per share were both RMB 1.27 compared with RMB 1.51 in the third quarter of 2023. Basic and diluted net income per ADS were both RMB 5.08 compared with RMB 6.04 in third quarter of 2023. As of September 30, 2024, our cash and cash equivalents were $741.2 million compared with $880.2 million as of June 30, 2024. With that, we can open the call for questions. Ms. Xu, our chief risk officer and I will answer your questions. Operator, please proceed.

Thank you. If you would like to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A queue. Thank you. We'll now take our first question. Your question is from the line of Yushuan Chen from Huai-Tai Securities. Please go ahead.

Thank you for giving me the opportunity to ask a question. I have two questions. The first one is concerning this quarter. The company's revenue has dropped by 1.5%. The net profit has dropped by 16.8%. to ask the management to explain the reason behind the cost and the income structure of the company. In addition, we observed that the profit rate of the company has also changed, and we asked the management to ask the management about the future trend of the profit rate. The second question is that we also pay attention to the size of the loan integration in the third quarter of the company, which is 26.7 billion yuan, and there is growth in the same ratio. Let me do the translation. I got two questions. The first one is noticing that the net revenue for this quarter decreased by 1.5% and the net profit dropped by 16.8% year-over-year. Could the management please explain the underlying reasons from both the company's revenue structure and the cost of competition? Also, could you provide a forecast for the future trend of the company's profit margin? And the second question is, we also noticed that the company's loan facilitation volume for the third quarter was RMB 26.7 billion, showing growth both quarter-over-quarter and year-over-year. Looking ahead to the next few quarters, does the management expect this level of growth rate to continue, or is there potential for it to accelerate further? Thanks.

Okay, Yusheng, thank you for your question. Let me answer your first question, which is about I will answer your first question. So in this quarter,

The facilitation volume reached RMB 26.7 billion with a year-over-year increase of 10.3% and also a quarter-over-quarter increase of 11.25%. Q3 revenue reached RMB 24.4 billion.

The total revenue is slightly reduced. Our income structure has significantly improved. So just as Mr. Yin remarks, our, yeah, so our facilitation volume also reached

Okay, so our loan facilitation service volume also reached RMB 1.105 billion in the third quarter, which also is setting a new quarterly record with an increase of 18.1% year-over-year and more than 16% quarter-over-quarter. 担保服务相关收入的利润率比较低。

So for the guarantee service related revenue which has a lower profit margin and from

the company's perspective of overall business development and strategy, we have been gradually reducing the proportion of this kind of revenue in the recent quarters. And the guarantee-related revenue for this quarter was RMB 252 million, with a decrease of RMB 146 million compared to the RMB $198 million in the same period last year. And in the fourth quarter, we are seeing a further decrease for this proportion of revenue as well.

So from the proportion of revenue as well. So from the perspective of the proportion of different kind of service revenues, the proportion of loan facilitation services revenue in the total revenue increased from 56.3% in the

of in the first quarter to around 76% in the third quarter. Well, the guaranteed service-related revenue share of total revenue decreased from around 35% in the first quarter to around 17% in the third quarter. So the company's revenue structure aligns with our strategic expectations for high-quality growth.

So this is our revenue structure. So what Yu-Shan just mentioned is that my net profit is also falling. This is mainly because of my cost. There is a relative increase. Q3, our net profit is 2.7 billion. The same rate has decreased, but the return rate has increased. The return rate has increased by 13.2%. The reason for the decrease in the net profit margin is the company's continued strategic investment in goods and technology research. Q3, our goods and technology costs have increased significantly compared to last year. In fact, our Q3 net profit margin has decreased by more than 50 million yuan. But if we look at the goods and technology cost alone, we have increased by more than 100 million yuan compared to last year. In terms of results, our new customer base reached 32.2% in this quarter. The number of new customers in the third quarter of the company exceeded 820,000, which increased by 71.3% compared to the same period last year. In addition, the cost of research and development in the third quarter of the company also increased by more than 25 million, with a growth of 36%. The company continues to promote new systems and applications in terms of AI technology landing and business scenarios, and continues to improve our operating efficiency and improve the experience of users. You also mentioned the decline of our net profit year over year. So as you said, our net profit decreased from RMB 324 million in the same period

last year to RMB 270 million in the third quarter, which is a drop of RMB 54 million. And so the Q3 NAF profit margin was 18.7 percent, which is also decreased from the same period last year. But if you compare quarter over quarter, there is a increase of 13.2%. And I think the main reason for this is our strategy of pursuing high quality booths and also mainly because of our costs. So talking about our borrower acquisition and credit costs, this increased significantly compared to the same period last year. The borrower acquisition cost alone increased by more than RMB 100 million compared to the last year. And also the proportion of the new borrowers in the Q3 also reached 32.2%. And so the company will continue to focus on improving the conversion and retention rates of high-quality borrowers and exploring the value of users. The investment will strengthen the company's future performance growth and will contribute to a long-term healthy and sustainable development of business. Also, talking about our strategic investment in the R&D expense, our R&D expense increased by more than 36% year-over-year. the company is continuously launching new systems and applications to implement AI technology in business scenarios and improving efficiency through intelligent operations.

16.1% recently this quarter Q3 is 18.7. So what's next? This is to ensure that the relative income of the service is further reduced in comparison with the continuous optimization of the flow of new customers in the previous period. The company's long-term performance growth will continue to increase, and the scale effect and operating efficiency will continue to increase. We are also looking forward to further improvement in the level of profitability.

Okay, so for the last point of your question about our expectations of the net profit margin, in the first three quarters of the year of 2024, the net profit margin were 18.5%, 16.1%, and 18.7% for the most recent quarter, respectively. Going forward, as the guaranteed related service revenue, which depressed the profit margins, continues to decrease, and as the earlier investment in the new borrower acquisition continues to improve the borrower retention and conversion, contributing to the meet and long-term growth, We believe that the company's economies of scale and operational efficiency will further reflect and lead to an improvement in our profit margins.

The second question is about the growth of our performance. Let's have Mr. Yi to answer this question. Thank you, Mr. Ban.

Let's talk about the next step in the development of the integrated trading volume. I will talk about your second question. Generally, we are highly confident in the market's growth potential and also the development of our platform business. But if we talk about whether this growth will speed up the growth of progress, we want to talk about this for modern business. It has several periodic considerations. It has economic cycle considerations and seasonal cycle considerations. Here, we will talk about the speed of future operations. So when discussing whether our growth will accelerate, it's well understood that the

credit business is subject to both economic and seasonal cycles. And looking ahead, the pace of our operations will be carefully evaluated in the consideration of the broader macroeconomic trends and the development of borrowers' credit demand and also our outlook on the risks.

From an internal perspective, we will focus on the overall risk management capability, our overall data technology management capability, as well as the ability to respond to the sensitivity and response of the entire market's development trends. As we mentioned earlier, we are seriously looking forward to the overall market. We are confident that the next quarter and next year, 2025, we will be able to maintain a good state of development. Internally speaking, given our team's demonstrated capabilities in the business and risk measurement, their sensitivity to the market dynamics

and the overall market outlooks shared earlier by Mr. Yen. We are confident that in the coming quarters and also into the year of 2025, we can sustain strong growth trend. This position is to deliver even better long-term returns for our investors and exceed expectations in the journeys ahead. That will be my answers to your second question. Okay, operator, I think we can take the next question.

Thank you. Your next question is from the line of Hua Rong from Jinyu Asset. Please go ahead.

Good evening, management. I have two questions. The first question is that we are concerned about the amount of receivables at the end of the third quarter, which is more than 280 million yuan, and the Q2 end has increased by nearly 400 million yuan. Could you please explain the situation of the Q3 receivables increasing and recovering? The second question is that we are also concerned about the 10.3% increase in the income of the housing business in this period. Hello, management. I have two questions. The first one is noticing that the accounts receivable balance at the end of Q3 exceeded RMB 2.8 billion, an increase of nearly RMB 4.8 billion. 400 million compared to the end of Q2. Could the management provide more information regarding the significant increase in account receivable for Q3 and the statue of its recovery? And my second question is at the same time, we also notice that the revenue from low facilitation service increased by 10.3% year on year in the period. but the average borrowing amount per borrowing decreased by 30.5% year-on-year. What's the main reason for this? Does this suggest that the users are currently showing a preference for smaller loan amount? Thank you.

Okay, thank you, Hua Lou. Let me answer your first question about the interest rate. The interest rate increase in the last three seasons Okay, I will answer your first question.

So regarding our accounts receivable, the increase in the balance at the end of third quarter compared to the previous quarter is primarily due to the growth in our facilitation volume and corresponding revenue in this quarter. As we previously mentioned, our loan facilitation service revenue reached RMB 1.105 billion setting a new quarterly record. And this revenue increased by more than 16% if you compare with the last quarter, which is in line with the growth of our accounts receivable balance and the company's accounts receivable collection. Yeah, so that's the condition of our accounts receivable position.

As a company operating in the green sector, you can see that the total balance of our revenue accounts in the last three seasons has exceeded 50% of the company's total balance. The company has always been very concerned about the timely recovery of revenue accounts. For example, the recovery of our revenue accounts is very good. We will continue to improve the control of this process, do this work better, and further optimize the financial structure of the company.

We also recognize that for a company with an asset line business model just like us, the proportion of accounts receivable to our total asset has already exceeded 50%. And we will continue to closely monitor the recovery of accounts receivable. So in the history, our account receivable collection is in a very good condition. And so in the future, we will improve our control processes and further enhance the company's cash flow.

Yeah, so I will take your second question. So your second question is about the average borrowing amount per borrowing in this quarter.

And talking about the decrease, you are compared with our condition in the same quarter last year. So if you focus on our average borrowing amount per borrowing every quarter, you could see that there is a decrease in every consecutive quarter.

And the changes in the average borrowing amount per borrowing are mainly due to our business strategy optimization and also the structural shifts driven by the recent growth. Let's take a look at the direction of management. In the old class, we pay more attention to the flow of high-quality customers, the improvement of flow management and customer experience. In terms of usage, we further strengthen the convenience of improving customer experience, and make it virtual. In this way, it also helps the flow of high-quality customers. In terms of demand in this category, we will see that there are high demand and low demand.

So firstly, I want to talk about our existing borrowers. So for them, we have consistently emphasized retaining high quality borrowers and enhancing their experience. So in terms of the credit line withdrawal, we have further improved convenience to elevate their borrower experience, ensuring responsiveness to their needs. This approach supports the retention of our premium borrower, and for them, their credit requirements varies from maybe large amounts to relatively smaller ones. 这个结构上条又在新货方向是增加了一些对于一些有潜在成长性客群的准入和他们的培养。 So for the new borrowers, we have expanded access for them who have a potential growth oriented in the future. But for this part of the new borrowers, their initial credit levels are often relatively lower.

We just talked about the structure and the development of TuckTileU. In terms of the structure, we will see that the customer base of our entire portfolio has become newer. The customer base is smaller.

If we talk about the structural strategy about our borrower base, due to our sustained focus on acquiring new borrowers, the average borrower base has been refreshed, indicating a better long-term growth potential.

So if you combine the two perspectives, this effort has led to an increase in the overall borrower base utilizing credit and a decline in the average borrowing amount for borrowing.

So that will be our answer to the question about the average borrowing amount per borrower. Thank you.

Okay, thank you. Thank you, operator. Thank you.

There are no further questions on the line, so I will hand back to the speakers.

OK. 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. Thank you.

Thank you all again. This concludes the call. You may now disconnect.