Jiayin Group Inc. (NASDAQ:JFIN) Q3 2022 Results Conference Call November 23, 2022 8:00 AM ET

Company Participants

Shawn Zhang - Investor Relations

Yan Dinggui - Chief Executive Officer

Fan Chun Lin - Chief Financial Officer

Xu Yifang - Chief Risk Officer

Conference Call Participants

Operator

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

Shawn Zhang

Good day, everyone. Thank you all for joining us on today's conference call to discuss Jiayin Group's financial results for the third quarter of 2022. 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; Mr. Fan Chun Lin, 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 translations. Please go ahead, Mr. Yan.

Yan Dinggui

[Foreign Language] [interrupted] Hello, everyone. Thank you for joining our third quarter 2022 earnings conference call.

We delivered another outstanding quarter with strong financial and operational results. Our loan origination volume grew by approximately 123.5% to RMB14.9 billion in the third quarter, making it the second consecutive quarter with over 100% year-over-year growth. Our net revenue increased by approximately 55% year-over-year in the third quarter to reach RMB894 million. Our margin profiles also continue to improve as we further refine our cost structure and optimize our operating efficiency resulting in consistent margin improvements.

Our exemplary third quarter performance attached to our commitment towards strengthening our partnership network, refining our risk management strategies, strengthening our technology capabilities and accelerating our global business expansion.

In the third quarter, expanding and strengthening partnerships with largest financial institutions remain our top business priority. Under the current macroeconomic conditions, we focus on reassessing the needs of financial institutions and building long term partnerships to safeguard our funding sources and optimize our funding structure. As of September 30, 2022, we have forged partnerships with 46 financial institutions and we are currently in discussion with another 60. Notably, national financial institutions in our partnership network still contributed to the majority of our total loan origination volume in the third quarter.

In addition to strengthening partnerships, since earlier this year we began collaborating with partner financial institutions to provide them with technology enabled services for their in house operations. We offered them access to our intelligent platform and automated solutions under our new collaboration model for partner institutions. Currently, we have empowered three financial institutions to digitize their in-house business from fund management, risk management, intelligent marketing, customer services to other operation processes, we are now interfacing with another three financial institutions and actively negotiating with six more institutions to foster the development of this new collaboration model.

On the borrower front, we continue to invest in online marketing programs to streamline our borrower acquisition efforts. Meanwhile, our focus remains on optimizing the structure of our borrower base as we expanded. We are categorizing our borrowers based on their credit profiles, risk assessment and borrowing behavior. The categorization enabled us to streamline our resource allocation towards premium borrowers and build a foundation for the future launch of more customized services and targeted borrower operation initiative. In the third quarter, our average borrowing amount per borrowing reached RMB10,158, increasing 58.1% year-over-year. Moreover, despite adding new borrowers in the quarter, our repeat borrowing rate still maintained at a healthy level above 60%.

We also remain committed to strengthening our core technology capabilities in the quarter. We successfully launched our Tai Hao AI modeling platform and a Mingcha anti-fraud system as part of our ongoing efforts in proactively recalibrating risk control strategy and addressing the COVID induced asset quality pressure. Our 61 to 90 day delinquency rate remained relatively stable in the quarter, reflecting our outstanding risk control capabilities under the volatile macro environment.

Moving on to our global expansion, we are increasing our investments in Indonesia to explore more business opportunities in the local market. We also substantially expanded the scale of our loan origination and revenue generation in Nigeria. Going forward, we will continue to focus on improving the profitability of our Nigerian operations, developing innovative partnership models as well as accelerating our product development and penetration in the local market.

Finally, I want to mention our recent efforts in the corporate social responsibility. Last year, we established the Jiajing Charity Special Found with the Shanghai [indiscernible] Foundation to raise social awareness of youth mental health and provide mental health support to the younger generation. In the third quarter, our charging charity special fund organized the led children's small charity fund raising even on Jiajing Charity Special Found organized the [indiscernible] Children Small charity fund-raising event on [Tencent] (ph) charity platform where we help fund 10,000 mental care service packages for the use. Looking ahead, we are planning to invest in more charitable initiatives to better leverage our unique strengths and fulfill our social responsibility.

In addition, the repeated COVID resurgence and the consequence control measures have had a negative impact on small business owners this quarter. As such, government agencies have unwilled a series of new regulations to help fulfill the pressing funding needs of small businesses. Following the government's call, we also continued our efforts in supporting small and micro businesses during the quarter by expanding our services for small and micro business owners who have long been underserved. By the end of September, our specialized loan program has served approximately [361.5000] (ph) small business owners in 31 provincial level regions across China. On a sequential basis, we have expanded the geographical coverage of this loan program will substantially boosted the number of small business owners we served.

In summary, our efforts and accomplishments in the quarter have put us in a solid position to maximize our opportunities in the future. Despite the increasing uncertainties in the global economy, we believe that the underlying fundamentals of the fintech sector remains strong. We have proven our capabilities to develop leading financing service offerings, intelligent financial solutions and compelling value propositions, we are confident that we will continue to empower our partner financial institutions serve our broad borrower base and generate sustainable value for our shareholders in the long term.

With that, I will now turn the call over to our CFO, Mr. Fan Chun Lin. Please go ahead.

Fan Chun Lin

Thank you, Mr. Yan. And thank you, everyone for joining our call today. I will now review our financial highlights for the quarter. Unless stated otherwise, all numbers quoted are in RMB and the percentage changes refer to year-over-year comparisons.

As Mr. Yan mentioned, we delivered another quarter of robust financial performance. Our loan origination volume grew by 123.5% to RMB14.9 billion as we expanded and strengthened our collaboration with institutional funding partners, our net revenue was RMB894.3 million, up 55% driven by a 47.7% increase in our revenue from loan facilitation services. Our revenue take rates decreased slightly in the quarter as we adapted to evolving market dynamics and the regulatory changes. Other revenue more than doubled to RMB101.4 million, mainly driven by incremental revenues from individual investor referral services.

Moving on to costs. Origination and servicing expense was RMB148.4 million, up 68.1%, in line with our loan origination volume growth. Allowance for receivables and contract assets reduced moderately by 4.8% to RMB5.9 million, mainly as a result of the ongoing restructuring of our overseas business during the quarter.

Sales and marketing expenses increased by 36.6% to RMB323.6 million, reflecting higher borrower acquisition expenses in the quarter as we continue to invest in our online marketing programs. G&A expenses were RMB51.4 million, up 13.5%, primarily driven by expenditures in compensation and related benefits in the quarter.

R&D expenses were RMB56.4 million, up 52%. We recorded higher employee compensation and benefits as well as increased fees for professional services in the quarter. Our ability to carefully manage our expenses define our cost structures and improve operating efficiencies, while growing our business enabled us to further enhance our profit margins in the quarter.

Our net income increased significantly by 98.8% to RMB248.1 million from RMB124.8 million in the same period of last year. Our net profit margin also expanded to 27.7% from 21.6% in the same period of last year. We ended this quarter with RMB217.5 million in cash and cash equivalents, up from RMB213.9 million as of June 30, 2022. As of September 30, 2022, we have deployed approximately $2.1 million to repurchase approximately 0.9 million American depositary shares under the share repurchase plan we initiated since June 13, 2022.

Moving to our guidance. Given our better than expected performance in the first nine months of the year, we now further revised our full year 2022 loan origination volume outlook to RMB50 billion, which compares to the original RMB36 billion we provided in the first quarter and updated RMB43 billion we announced last quarter.

With that, we can open the call for questions. Ms. Xu, our Chief Risk Officer, and I will answer questions. Operator, please go ahead.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Thank you. We'll now take our first question, please stand by. Your first question is from the line of Sam Lee, an investor. Please go ahead.

Unidentified Participant

Good evening and thank you for taking my question. My first question is regarding the really strong growth, especially in the past few quarters. [indiscernible] some of the key drivers for the growth and how long do you expect to sustain a high double digit growth going forward? Thank you.

Xu Yifang

Hi, Sam. This is Yifang. I'm going to take your question. So your question is about our key drivers for strong growth. In my opinion, they were primarily coming from three fronts. The first is coming from our laser focus on strengthening and expanding our partnership with the licensed financial institutions. As Mr. Yan mentioned early on, we have established over 46 financial institutions with a deepened and broader network, the demand for our loans has been driven up as a result. The second are coming from our [diversified] (ph) customer base. Since the start of the Jiayin Group, we have already served over 12 million customers in terms of their loan needs, and we continue to drive higher growth on our overall customer base. But the last, but the most important is really the technological capabilities and expertise built over the years, focusing on data driven credit strategy and operational strategies. With such capabilities that will allow us to deep into our customer base and to properly assess their customer needs and payable terms driving up our overall loan growth.

So your question is about how long we'll be able to keep the growth. Of course, we like to see that as [indiscernible]. But as we all know, in terms of the absolute loan growth, we're really focusing on making sure the growth is healthy, sustainable and forward-looking, especially relative to overall economic outlook, legislation framework, as well as our market outlook. So that we're trying to balance both our growth and other risks as well. So, I hope that answers your question.

Operator

Thank you. And we have no more questions at this time. I'll turn the call back to Shawn for closing remarks. Please go ahead.

Shawn Zhang

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. This does conclude the conference for today. Thank you for participating and you may now disconnect.