Jiayin Group Inc (JFIN) 2021 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Jiayin Group's Fourth Quarter 2021 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 go ahead.

Good day, everyone. 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 2021. We released the results earlier today. The press release is available on the company's website as well as from newswire services. On the call with me today are Mr. Yan Dinggui, Chief Executive Officer; Ms. Celia Chen, Co-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 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 Renminbi. With that, let me now turn the call over to our CEO, Mr. Yan Dinggui. Please go ahead, sir.

Hello, everyone. Thank you for joining our fourth quarter 2021 earnings conference call. In 2021, we continued to navigate a volatile macro environment while remaining committed to building upon our core competitive advantages. After we shifted our funding sources from individuals to institutional funding partners in 2020, we prioritized forging partnerships with financial institutions, diversifying our funding sources, strengthening our risk management systems and enhancing the credit profiles of our borrowers and improve our asset quality.

We have observed multiple policy changes in 2021, including the cap on loan pricing at 24%. We actively responded to the new policies and aligned our pricing strategies in line with the regulatory requirements of the funding partners.

As a result, despite intensifying regulatory oversight and macro uncertainties, we stayed at the forefront of the fintech space and delivered solid financial and operating results in 2021. Notably, loan origination volume increased by 89.7% year-over-year to RMB 21.91 billion from RMB 11.55 billion in 2020, while revenue grew by 36.9% to RMB 1.78 billion.

As we sustain our rapid portfolio growth, we also maintain a manageable delinquency rate by improving our overall credit risk profile of borrowers on our platform. Our 30-day delinquency rate finished the year at 1.31% compared to 1.34% at the end of September. The 90-day delinquency rate increased slightly to 0.72% from 0.6% at end of September, but still ahead of the industry average. In the fourth quarter, as we continued to expand our borrower base, we refined our marketing programs to prioritize acquiring new customers with high credit qualities.

As we improved the accuracy of our marketing programs, we were able to reach our target customers more [effectively] (corrected by the company after the call). Consequently, the number of borrowers with above-average credit profiles continued to rise, which in turn, enabled us to increase our platform's overall credit quality while expanding our borrower base.

We also continued to invest in the development of our integrated, highly automated platforms with industry-leading risk management capabilities to serve as the ideal partner to financial institutions.

By the end of 2021, we have forged partnerships with 38 financial institutions, and we are currently in discussion with another 46 institutions to further expand our partnerships and diversify funding resources. As of now, most of our existing institutional funding partners are commercial banks. We are actively developing collaborations with national banks and consumer financing service providers to mitigate the certain challenges we had in regional markets with our existing partnership structure.

Meanwhile, we remained focused on empowering our partnered financial institutions through our full suite of service offerings that span from borrower acquisition to loan facilitation services.

We are constantly optimizing these services to help our partners better execute their business initiatives while improving their operating efficiency and decision-making process. Going forward, we plan to explore more innovative ways to cooperate with our funding partners.

In addition to deepening our collaboration with financial institutions, we also continued to optimize our product portfolio during the quarter. For example, we launched a loan program for small business owners in the fourth quarter. Small business owners are one of the most marginalized and underserved groups for loan services, even though small and [medium- sized] (corrected by the company after the call) businesses contribute 50% of taxes, 60% of China's GDP and 70% of [technological] (corrected by the company after the call) innovation, 80% of employment and make up 90% of all companies in the country. To better serve the backbone of our country's economic development and common prosperity initiatives, we will continue to increase the investments in product offerings for SMEs.

In terms of our global expansion, we tailored our growth strategies for each region based on the current stage for our business development. The Mexican market, in particular, achieved robust growth momentum, and we are also on track to develop new partnerships with additional licensed financial institutions in Mexico to further expand our local operations and fortify our market leadership.

Notably, in Nigeria, where we have already obtained necessary financial service licenses, we continued to accelerate our business expansion. We are regularly developing and upgrading our products and services in the region, which enabled us to continue to improve the region's profit margins. Going forward, we plan to penetrate other very promising international markets, especially emerging markets in Southeast Asia, to build a multi-faceted, cross-field, and diversified global business matrix.

Looking back on 2021, we saw major changes on the regulatory front and unprecedented disruptions to the norm caused by COVID-19 as well as other increasing uncertainties in the macro-environment.

However, we remain undeterred by these challenges to achieve steady business growth, improve our credit risk profiles, expand our borrower base, and optimize our product portfolio. As evidence of the success in our efforts, we recorded RMB 21.91 billion in loan origination volume in the full year of 2021, near the higher-end of our previous guidance. For 2022, we are confident that our market leadership will enable us to carry through our growth momentum to achieve loan origination of RMB 36 billion.

With that, I will now turn the call over to our Co-CFO, Celia Chen. Celia, please go ahead.

Thank you, Mr. Yan, and thank you everyone for joining our call today. As Mr. Yan mentioned, we achieved robust financial performance in the fourth quarter and full year of 2021. In the first full year after our business transformation, we grew our loan origination volume by 89.7%, revenue by 36.9% and net income by 87.1% year-over-year. The solid growth further demonstrated the effectiveness of our strategies in diversifying our funding sources, strengthening our risk management and improving asset quality.

Now let me go through our financial highlights for the quarter. Please note that unless stated otherwise, all numbers quoted are in RMB, and percentage changes refer to year-over-year comparisons.

Net revenue was RMB 368.2 million, up 8.2%. Revenue growth was primarily driven by the significant growth in loan origination volume, which increased 75.3%. Other revenue was RMB 7.1 million, down 84.4%. This decrease was primarily due to changes in the consolidation of our overseas entities.

Moving on to costs, origination and servicing expenses were RMB 84.8 million, up 30.7%, primarily due to the increase in credit assessment expenses, which was in line with the increase in our loan origination volume. Allowance for uncollectible receivables, contract assets, loans receivables and others were RMB 17.2 million, down 15.3%, since the outstanding loan balance of our legacy P2P lending business was reduced to zero in November 2020. G&A expense was RMB 46.8 million, up 9.1% as we continued to enhance our talents to support our business expansion.

R&D expense was RMB 46.6 million, up 11.2%. We recorded higher employee compensation and benefit costs and increased investments in developing our IT infrastructure in the quarter. Sales and marketing expenses were RMB 156.9 million, up 33.5%, which is in line with the growth of our loan origination volume. Consequently, we reported a net income of RMB 122.5 million, compared to RMB 81.1 million in the same period of last year. We ended this quarter with RMB 182.6 million in cash and cash equivalents, compared with RMB 117.3 million as of December 31, 2020.

Moving to our guidance, we expect our loan origination volume in the first quarter of 2022 to achieve a year-over-year growth of over 78% and a sequential growth of over 37%. With that, we can open the call for questions. Mr. Yan, our Chief Risk Officer, Ms. Xu and I will answer questions. Operator, please go ahead.

(Operator Instructions)

We have a question coming from the line of Andrew Scutt from ROTH Capital.

My first question is about the recent COVID lockdowns in China. I was wondering just how that will affect origination growth, particularly in the first half of the year. Any color you can provide there would be great.

Andrew, this is Yifang. I'm going to take on your first question. Thank you for your considerations about the lockdown situation in Shanghai. We are pleased to report that the current lockdown situation hasn't had any impact on our Q1 growth at all. In fact, we are expecting a [better than projected] (corrected by the company after the call) Q1 total lending volume.

We are actually seeing some expected higher rate in terms of our call collection volumes that has gone up by a few percent in terms of the number of calls collected by our customer service. At the same time, our investment in our IT infrastructure has enabled us to collaborate effectively even when we are working from a remote mode. So that I hope that answers your question.

Yes. My second question here is about your operations in international markets. I know you guys have one of the top players in Mexico, and were looking to expand in Nigeria. So I was just looking for an update on how origination growth is going over there, if you plan on any new markets, and if you might start sharing metrics in these other countries?

So Andrew, this is Yifang again. Let me take your questions on international expansion. As in the early disclosure about our international market, we are going to give a little bit more color into our each individual market. So in Mexico, as you said, we remain as a top player in the market from the volume-wise as well as the total number of customers and number of transactions, we remain to be the top player and the numbers are pretty stable.

What we'll be focusing on in Mexico is really to improve its risk metrics there. So if we move on to Nigeria, as we disclosed last time in Q3, it should be in the second half of the Q3 that we have secured the official lending licenses to operate online lending in Nigeria. So the Q4 for Jiayin had really been focusing on to ramping up the acquisition volumes at a faster pace.

So just give a little bit of more details into what the growth is looking like, the transaction volumes we are seeing month-on-month is in the high double-digit number for the entire Q4 period. As we are able to further train our fraud detection models and the risk assessment models, so the size of the loans we're extending in this market are also seeing some growth.

We are looking at a 20+ percentage growth in terms of the size of the loans, as evidence showing that we are targeting more healthier customers, and we are seeing improvement on our risk metrics there. But even saying that, we are facing some uncertainties in these foreign markets, one being the impact on the COVID. The collection operations is [still heavily] (corrected by the company after the call) relying on operating call center employees. So the COVID situation has some impact over there.

We are employee AI supported -- there are voice services there to help us to navigate through the downturn. But we are right now (inaudible) going back to office, operating in a steady state again. On the other side, on the customer acquisition, we are further expanding our customer acquisition channels, partnering with major online marketplace, but on the other side, we are also exploring some smaller partners. Overall, as we started to accumulate more repeat borrowers, we are seeing volumes in the Nigerian market growing as well as the risk metrics is getting more stable and improving. That's what we have in the Nigerian market.

When we move down to Indonesia, if you're looking at 2021, overall, in the first half of 2021, we're seeing some pretty healthy good momentum over there. Unfortunately, it was put on hold because of the regulatory changes. But overall, we remain pretty positive about the maturity of the Indonesian market in terms of online lending. We have a strong strategic fit in terms of our capabilities and proven track records in the Chinese online market where we can have a strong foundation for us to empower our growth in Indonesia.

We have already identified and are working on executing that strategy to re-enter the market in a legal and regulatory compliant approach to re-enter the market.

That's where have been our major markets, the international markets, where we were trading in 2021. Looking at 2022, we are evaluating some of the potential markets. But again, because of the COVID situation, we are taking a prudent approach in terms of making a big strategic, quick move into a new market at this point. I hope that answers your question.

Yes, that was very, very helpful. Last one for me. With you as an online platform and China now putting in new cybersecurity regulations in place. Do you believe you'll need to get reviewed? Do you believe this may impact shareholders over in the U.S. Can you just provide some background there?

On that question, we don't have too much to report on, but we expect a set of strict standards will be released for the public companies. At this point, as a technology company, we are pretty confident that we're meeting all the standards. As a result, we don't foresee any risk or benefit.

Thank you. I'm showing no further questions at this time. I will now turn the call back over to the management for any closing remarks.

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.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.