Jiayin Group Inc. (JFIN) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Jiayin Group's First Quarter 2022 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.

Good day, everyone. Thank you all for joining us on today's conference call to discuss Jiayin Group's financial results for the first quarter of 2022. We released the results earlier today. The press release is available on the company's website as well as on 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 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 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 translation. Please go ahead, Mr. Yan.

[Foreign Language]

[Interpreted] Hello, everyone. Thank you for joining our first quarter 2022 earnings conference call. In the first quarter, we were faced with significant volatilities from the macro environment following the latest COVID-19 resurgence in certain areas of China. However, despite the pandemic-inducing economic deceleration, we continue to strengthen our core competencies by enhancing our risk management capabilities, acquiring high-quality borrowers and expanding partnerships with licensed institutions. Notably, our loan origination volume grew by 95.4% year-over-year to RMB 8,153 million in the first quarter. More importantly, we focused on achieving an ideal combination between business growth and profitability improvement. We further refined our cost and expense structures by enhancing our operating efficiencies, leading to continued margin expansions. In the first quarter, our income from operations reached RMB 182.5 million, and our net income was RMB 144.6 million.

[Foreign Language]

[Interpreted] One of our strategic priorities during the quarter was to further enhance the credit risk profiles of our borrowers to ensure the quality and sustainability of our solid portfolio growth. The success of our efforts here can be seen in our 30-day delinquency rate reduction to 0.78% from 1.31% at the end of 2021. The 90-day delinquency rate also dropped to 0.53% from 0.72% at the end of last year, illustrating the consistent improvement of overall borrower credit quality.

[Foreign Language]

[Interpreted] We also continue to optimize our borrower acquisition efforts this quarter. Our increased investments in our targeted online marketing programs enabled us to improve our borrower acquisition efficiency and the quality of our borrower base. Going forward, we will continue to invest in our online marketing initiatives to further expand our borrower base with enhanced borrower acquisition efficiency while maintaining our borrower credit quality at a very healthy level.

[Foreign Language]

[Interpreted] At the same time, we remain committed to expanding our partnerships with licensed financial institutions to continue diversifying our funding sources. As of March 31, 2022, we have forged partnerships with 40 financial institutions, and we are currently in discussion with another 45. More importantly, national financial institutions in our partnership network contributed to the majority of our total loan volume in the first quarter. In addition to that, we are also actively exploring new collaboration models by leveraging our integrated platform to empower our financial institution partnerships. Under the new partnership model, we provide specialized services, including borrower acquisition, risk and analysis and other operational services to enable our partners to digitize their own operations. We have already implemented the new partnership model with 4 financial institutions, and we are in discussion with another 3 institutions to further expand our partnership network.

[Foreign Language]

[Interpreted] In addition, we also upheld our corporate responsibility to support small and micro business owners during the quarter through loan services. While small business has the hardest time adjusting to the economic disruptions, their financing needs remain largely underpenetrated and underserved. As such, we continue to develop our loan program for small business owners in order to help them better recover from the economic hardships.

[Foreign Language]

[Interpreted] Finally, on our global expansion, we continue to roll our tailored services and products in each regional market. We also adopted a more prudent approach in response to the pandemic across different markets. However, we are still achieving solid progress in penetrating targeted markets. We are also actively developing new partnerships with local licensed financial institutions to expand our market share and fortify our leadership.

[Foreign Language]

[Interpreted] Recently, on April 29, the Politburo of the Chinese Communist Party introduced steps to support the healthy development of the platform economy. By our observation, the regulatory ratification process is nearing its final phase. We firmly believe that a better regulated industry environment will continue to benefit leading fintech platforms such as Jiayin Group.

[Foreign Language]

[Interpreted] To conclude, we upheld our commitment to strengthening our risk management capabilities, growing our borrower base and deepening our partnerships with the licensed financial institutions. As our strong performance in the first quarter again demonstrated [indiscernible] and resilience, we are laying on a solid foundation of improved profitability and asset quality to overcome any macro uncertainties in 2022. With that, I will now turn the call over to our CFO, Mr. Fan Chunlin, please go ahead.

Thank you, Shawn. Thank you, Mr. Yan. And thank you, everyone, for joining our call today. First of all, I'm glad to be back after departure from Jiayin for more than 1 year. I'm so pleased to review my role of CFO and meet investors and all the friends here. I also really appreciate the team of Jiayin for their great job during my absence. As Mr. Yan mentioned earlier, we delivered robust financial results in the first quarter marked by strong top line growth and margin improvements. During the quarter, we grew our loan origination volume by 95.4% and revenue by 49%. Importantly, our net income increased by 54.3% year-over-year, while net margin further expanded to 28.3% from 27.3% a year ago. Such achievements against the backdrop of increasing macroeconomic uncertainties and COVID-19 disruptions, again demonstrated the effectiveness of our growth strategies. 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 511.2 million, up 49%. Revenue growth was primarily driven by the significant growth in loan origination volume, which increased 95.4%. Other revenue increased to RMB 64.7 million driven by the increase in revenues from individual investor referral services. This increase was partially offset by a decrease in our revenues from overseas markets in the quarter. Moving on to costs. Origination and servicing expenses were RMB 93.4 million, up 45.7%, largely in line with the increase in our online -- in our loan relation volume. Allowance for uncredible receivables contract assets, loan receivables reduced by 50% to RMB 4 million, mainly as a result of the decreased loan volume from our overseas business during the first quarter of 2022. G&A expense was RMB 40.7 million, up 7.7% due to higher professional service fees we incurred this quarter. R&D expense was RMB 41.8 million, up 48.8%. We recorded a higher employee compensation and benefit costs as well as increased fees for professional services in the quarter. Sales and marketing expenses were RMB 148.8 million, up 63.2%, reflecting higher borrower acquisition and credit assessment expenses in line with the increased loan origination volume. We reported a net income of RMB 144.6 million compared to RMB 93.7 million in the same period of last year. We ended this quarter with RMB 170.3 million in cash and cash equivalents compared with RMB 182.6 million as of December 31, 2021. Moving to our guidance. We expect our loan origination volume in the second quarter of 2022 to be between RMB 11 billion and RMB 12 billion, and our full year guidance remains unchanged. With that, we can open the call for questions. Mr. Yan, our CEO; Mr. Yifang, our Chief Risk Officer; and I will answer questions. Operator, please go ahead.

[Operator Instructions] Your first question comes from the line of Andrew Scutt from ROTH Capital Partners.

Congrats on the strong quarter. My first question is about your international presence. Can you guys just maybe provide an update on the different international markets you guys are in? And just comment on if you guys are going to start reporting any origination metrics around the international business?

Andrew, this is Yifang Xu. I'm going to take on your questions about our international markets. In the early part of the call, we have hear some overall view of our international performance. Now I'm just diving into a little bit of detail in each of our markets. In Mexico, as we have previously communicated, we have been a strong player in the market which is continue -- we are taking that leading position in terms of the volume. In Q1 2022, our focus in Mexico has been focused on the product offering expansion. We are starting -- working on our strategy to move up to a better, higher-quality customers and providing a product that was a longer term. Then moving on to our Nigeria market. Last quarter, we have been reporting on our aggressive high volume growth, which is at a double-digit month-over-month growth rate in terms of the volume. In Q1 2022, we are maintaining our growth but not at a higher rate and higher double-digit rate. By the way, much more focusing on a bigger volume now continue to drive down the risk metrics, which we have been able to achieve both reasonable health growth while having a better and improved risk performance. If we -- going back to Indonesia, we are working on a relaunch -- to relaunch our presence in Indonesian market. Compared to our operational model in October 2021, we're exploring much more flexible and a different strategy to allow us, Jiayin, to continue to play in Indonesia lending market. In terms of the reporting metrics, due to the operational setup, it's slightly different from market to market. We are still working on how -- what's the best way to reporting on the exact operational metrics to providing our investors a better view on that. But I'm hoping what I have discussed above that can help understand a little bit about what our overall strategy in mutual market is and what's the movements we are focusing on. That will be all. Hope...

Yes, that was very, very helpful. Next question for me. Very exciting guide of, I believe it was RMB 11 billion to RMB 12 billion originations next quarter. Can you kind of talk about what's driving that growth? Whether it might be better acquisition of customers or the introduction of the small business loans? Just any commentary around that would be helpful.

Sure. This is Yifang, again. I'm going to get a little bit more details into your question about our growth -- loan growth. So I think if we're looking at 1.5 years back when we fully -- in Q4 2020, which is the time when we fully transitioned into loan facilitation model, I believe our last year, a little bit over a year, performance has proven to be welcomed and acknowledged by our institutional partners. As a result, our partnership licensed financial institutions have continued to grow and which we have seen a significant growth in Q1 2022. As we have brought a broader and deepened relationships with our institutional partners, we're seeing that our overall loan growth, we're happy that our overall loan growth was able to meet the needs of our institutional partners. On the other side of our loan originations that we are with long-term focus and investment in the technology and the lending capabilities, our operational teams were able to meet such a high demand on our loans and as well as deliver a healthy performance. In particular, we have been focusing on the online marketing acquisitions, especially due to the COVID resurgence in pocket areas all over in China, our focus on the online marketing has benefiting us to continue to drive the growth, while we are experiencing some uncertainties from the COVID situation in China. On the other hand, we continue to focus on the -- our R&D in our risk management. Aside from the technological investment, we also have pioneered the risk -- early risk metrics, both model implementation and model monitoring, which allow us to take a much early peak at both our prospects, risk profiles as well as our applicant level -- applicant risk profiles in addition to our mature day 1 risk and day 90 risk. So with that, we are able to drive a high double digits, even triple-digit growth in our portfolio. In the meantime, we are keeping our risk metrics at a healthy level, which is actually going even downward with a meaningful downward trend. That will be my comment on your...

Great. Yes, I really appreciate all the detail. And then last 1 for me, just my understanding, the government put out some notices on how to enhance the financial services market to spur economic growth during the pandemic -- ongoing pandemic issues that have been going on around the world. So can you kind of talk about how that impacts Japan moving forward, especially during the recent lockdowns that were put in place?

Okay. Andrew, I will take this one. So as you all know that Shanghai just underwent so-called [indiscernible], right, officially, we don't call that lockdown. So everybody is aware that the China economy is facing difficulties since March, and the challenges are very tough compared with the 2020 pandemic control here. So the central government and the local government, they are fully aware that economic development including the GDP growth, employment data, control of inflation is the foundation of China's overall development. And since the reopening of Shanghai most of the employees for Jiayin will say goodbye to the family and come back to office. And the good thing about Jiayin is: number one, almost all our business could be conducted online; number two, we are focused on consumer loan [indiscernible] exercise; and number three, our loan facilitating business is nationwide, and Shanghai only accounts for a small portion for our core business. So fundamentally, the impact to our business is minimal compared with other industry. Certainly, given the current macro environment we will keep closely monitoring on evolving macro environment and our particular segments. And the company is fully prepared to face any difficulties resulting from the macro economy and the pandemic control. So we're also happy to see that the nature of our business, I just mentioned, we haven't seen any like obvious deterioration of our delinquency data yet, right, and you cannot [indiscernible] head onto that. And on the contrary, due to our better asset quality and better matrix of delinquency data has proven to be further improved and invest current figures that we have seen. So in all, despite the [indiscernible] over the past 2 to 3 months in Shanghai, we have seen a lot of good news and measures coming out from the government as well, right? So which gives us a lot of confidence. And I think that, in short, we are optimistic about our future and the guidance we just gave actually pretty conservative, that's my view. Thanks. Thank you.

We have no more questions at this time. I will return the call to Shawn for closing remarks. Please go ahead.

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.

This concludes today's conference call. Thank you for participating. You may now disconnect.