Yiren Digital Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
June 21, 2024

There are 7 speakers on the call.

Operator

Good day, and welcome to the Yiren Digital First Quarter 2024 Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Kiyo He, Investor Relations Officer. Please go ahead.

Speaker 1

Thank you, operator. Good morning and good evening, everyone. This call features a presentation by the Founder, Chairman and CEO of CreditEase our CEO, Mr. Lin Tang and our CFO, Ms. Na Mei and our FCT, Ms.

Speaker 1

Mei Zhao will also attend the Q and A session after the prepared remarks. Before beginning, we would like to remind you that discussions during this call contain forward looking statements made under the Safe Harbor provisions of U. S. Federal Securities Litigation Reform Act of 1995. Such statements are subject risks, uncertainties and factors and can cause actual results to differ materially from those contained in any such segment.

Speaker 1

Further information regarding future risks, uncertainties or factors is included in our filings with the U. S. Securities and Exchange Commission. We do not undertake any obligation to update any forward looking statements as required under the relevant laws. During the call, we will be referring to certain non GAAP financial measures and supplemental measures to review and assess our operating performance.

Speaker 1

These non GAAP financial measures are now intended to be considered in isolation or as a substitute for the financial information prepared as presented in accordance with the U. S. GAAP. For information about these non GAAP financial measures and reconciliation of GAAP measures, please refer to our earnings press release. I will now pass it to Ming for opening remarks.

Speaker 2

Thank you all for joining our earnings conference call today. We are pleased to report another solid quarter with stable growth in our top line and overall business scale during a traditional off season in the industry, while maintaining healthy profitability. Moreover, we are excited to announce that our AI Lab initiative has begun to yield early results, as AI integration continues to permeate all aspects of our operations. Before delving into our business performance, I would like to highlight our recent branding upgrade. As you may know, we rebranded our Chinese company name from Yiren Jingke to Yiren Juke.

Speaker 2

The term Jingke meaning fintech has been replaced with Jike signifying intelligent technology or AI technology. This change underscores our commitment to ongoing technological innovation and our dedication to enhancing our customer experience. Our core mission of leveraging technology to deliver value to our clients remains unwavering. Now, I would like to go through our business highlights for this quarter. First, regarding our financial services business, the Q1 of 2024 saw a steady growth, with total loan volume reaching RMB11.9 billion, marking an 86% increase year over year and the 5th consecutive quarter of growth.

Speaker 2

The number of borrowers experienced a slight decline to 1,350,000 from 1,370,000 in the prior quarter, influenced by seasonal factors, as well as our emphasis on quality growth and a strategic shift towards a higher quality borrower segment. Additionally, our loan facilitation platform, the YiXiahua app, has seen a surge in popularity. Its monthly active users grew to over 4,400,000 in the Q1 of 2024, up from 3,500,000 last quarter, representing a 26% increase. This impressive growth is due to our improved customer services and enhanced efforts to boost customer engagement. It's also worth mentioning that our AI integration into loan facilitation business has shown concrete progress.

Speaker 2

Currently, our proprietary large language model based intelligent voice interaction model has been applied into our telemarketing, asset management and customer service, which has brought visible improvement in efficiency. For instance, our intelligent robots used for customer acquisition are now able to make over 400,000 phone calls daily, doubling the previous volume. In addition, our telemarketing team has seen an almost 40% improvement in customer conversion rate through the use of AI powered robots. Currently, the voice recognition accuracy of our system has reached 92%, and this ratio is expected to increase as we continue to fine tune our models and train them with more data. Meanwhile, our international business has been showing strong momentum, with a 60% increase in total loan volume compared to the previous quarter.

Speaker 2

In the Q1 of 2024, our Philippine market achieved a milestone by surpassing RMB10 1,000,000 in monthly loan volume, showcasing exceptional growth. Additionally, we've seen a continued decline in customer acquisition costs as we continue to optimize our products and enhance our conversion rate. Specifically, the cost of acquiring new borrowers in March decreased by double digits compared to January. Furthermore, our overseas operations extensively leverage AI technology. For example, our anti fraud AI models are highly effective in detecting image fraud.

Speaker 2

Our black and white document detection model boasts an accuracy rate of over 97% and our mobile screenshot detection model achieves an accuracy rate of 99%. These AI models have significantly enhanced our risk management efficiency, reducing potential fraud losses. Now turning to asset quality. In the Q1 of 2024, the overall delinquency rates of our loan portfolio increased, with the 15 to 89 day delinquency rate rising to 3.9% due to industry wide credit quality fluctuations. However, we are actively upgrading our customer base and fine tuning our risk control standards through AI analysis.

Speaker 2

As a result, the asset quality of new customers continues to improve. The M1 collection rate in the Q1 of 2024 has increased by 67 basis points compared to the prior quarter. As the proportion of assets from our new borrowers continues to increase, the risk indicators of our overall loan portfolio started to decline in May and continue to trend downward. On the funding front, we've experienced a consistent decrease in cost as our network of funding partners grows. In the Q1 of 2024, our funding costs decreased by 43 basis points compared to the previous quarter, a trend we expect to continue throughout the year.

Speaker 2

Moreover, to achieve a better balance between risk management and profitability, we began engaging more in risk taking model, where the company takes the credit risk of the loans facilitated. Therefore, the proportion of loans and the risk taking model is expected to grow in the coming quarters. Now regarding our insurance brokerage business, recent regulatory changes have impacted the overall growth of the life insurance sector. In response, our strategy emphasizes prioritizing quality over quantity, improving profitability and shifting towards a stronger focus on property insurance. In the Q1 of 2024, our total premiums reached RMB112 1,000,000, indicating a slight 1% decrease year over year.

Speaker 2

Physically, life insurance premiums declined by 16% annually, consistent with industry trends. However, property insurance premiums increased by 19% year over year, generating RMB118 million in revenue, a 12% rise compared to the previous year and marking a peak over the past 2 years. Notably, we have optimized our business structure by reducing the proportion of low margin products, such as auto insurance and focusing on liability insurance and overseas construction insurance. By prioritizing gross profit margin as a key performance indicator for the team, We substantially enhanced the profitability of our property insurance segment, achieving a 5.5 percent improvement in average commission rates. Moreover, our product innovation and customization capabilities have been recognized within the industry, resulting in a steady stream of high quality orders in our pipeline.

Speaker 2

During the Q1 of 2024, Hexiang Insurance secured contracts with Xinjiang Transportation Investment Group and ranked the top among its 3 major suppliers. This achievement sets a strong foundation for our future expansion in providing customized services within the construction insurance sector. In the realm of AI integration, our insurance business is actively exploring innovation, innovative applications and currently developing our proprietary AI driven insurance renewal reminder robot. Following rigorous voice training, program testing and data segmentation, we've already begun initial deployment in our operations. Additionally, we are making significant progress in customer acquisition through social media channels.

Speaker 2

In the Q1 of 2024, we converted leads from our social media efforts into RMB2.2 million in premiums. This momentum remains strong as we enter into the Q2. Moving forward, we will continue to focus on strengthening our channel partnerships and overall profitability. However, we maintain a conservative attitude towards the life insurance sector as the regulatory impact is expected to continue in the foreseeable future. In the consumption and lifestyle services segment, our total GMV reached RMB625 1,000,000 in the Q1 of 2024, making a remarkable 103% year over year increase, largely driven by our existing and expanding customer pool.

Speaker 2

As we continue to deepen penetration within our current customer base, we anticipate the growth rate of this segment will gradually normalize, aligning with our other business segments. To wrap up my prepared remarks, I would like to reiterate our AI strategy as the foundational direction for our future development. It is structured in 3 comprehensive phases or 3 steps. Firstly, empowering existing business. We are leveraging AI to enhance and optimize our current operations, driving efficiencies and improving outcomes across all segments as we are currently doing.

Speaker 2

Secondly, building advanced AI capabilities and ecosystem. While we integrate AI into our existing business, we have developed many high value tools, capabilities and partnerships. For example, our proprietary thinking intelligent decision making system has made over 1,000,000,000 decisions by the end of the Q1 of 2024 and has earned industry wide recognition with a prestigious award. Another example is our AI driven intelligent customer service solution, which was honored with the Outstanding Solution Award at the National Industrial Financial Collaboration Data Modeling algorithm competition, among others. Such tools together with our large language model training, fine tuning and optimization capabilities can serve not just us, but many other industries and enterprises as well.

Speaker 2

We are keen to explore such business opportunities. Furthermore, we are actively seeking strategic investment and partnership opportunities and have built a healthy pipeline for execution. They can help build better access to top talents and technologies. Lastly, for the long run, long term goal, exploring future AI commercialization. We endeavor to build AI native businesses as our business expansion and company transformation strategy.

Speaker 2

We believe the high value tools, capabilities and the relationship as mentioned above serve as a solid foundation. Our AI strategy is not a sudden shift in business direction, but a solid, step by step approach to upgrading and sharpening our core competitive strength that we've built over the past decade of operations. We are excited to continue this journey with our partners and shareholders to embrace a bright future. Now, I will pass it to Nao, who will go through the financial performance for this quarter.

Speaker 1

Thank you, Ming, and hello, everyone. On this call, I will only focus on our key financial highlights. Please refer to our earnings release and IR guide for further detail. First of all, we are pleased to deliver a solid partner with high risk margin. In this quarter of 2024, our total revenue reached RMB1.4 billion, representing 14% increase year over year.

Speaker 1

In the financial service segment, our total loan facilities continued to grow slightly, with RMB11.5 million, an increase of 86% year over year, driven by the strong demand of our small revolving loan products. Revenue from financial service business increased 53% year over year to RMB 7881.1 million. In the insurance sector, our gross rental payments were RMB912 million, representing a decrease of 1% year over year. As mentioned by Ngo earlier, the decline in our planet was really driving a substantial drop in our life insurance sales, following by the local regulation change, which was offset by an increase in our property insurance products. Consequently, the portion of our property in our overall primary needs increased sharply.

Speaker 1

Compared to our life insurance products, the average commission rate in the property insurance sector is lower, resulting in a 36% year over year decrease in the revenue from our insurance broker segment to RMB125 1,000,000 for this quarter. However, going forward, it will also impact our line insurance business to gradually rebound in line with marketing recovery, but the revenue in France will start to persist in the short term. In the consumption and lifestyle segment, the total GMV for this quarter reached RMB625 1,000,000, representing an increase of 103% year over year, driven by our large consumer base. As mentioned previously, this segment was launched a year ago to serve our users across our business lines. Therefore, as far as penetration growth, we expect the G and A of this segment go through to align with our business as increased in the number of our combined consumers across our business segments.

Speaker 1

On the expense side, sales and marketing expense decreased to 161% year over year to RMB275 1,000,000. This growth was probably driven by the rapid expansion of our financial service segment and enhance our marketing efforts to gain and acquire new high quality customers as we continue to optimize our customer risk mix. Research and development expense increased 39% year over year to RMB41 1,000,000 due to our continued 1,000,000 AI upgrades and the technological innovation. Our internal and service costs increased 17% year over year to RMB233 1,000,000. The growth primarily contributed to our high channel base in the property insurance business compared to our life insurance.

Speaker 1

As a portion of property insurance requirements increased, there is a corresponding increase in China segment cost. Moreover, our G and A cost increased by 32% year over year to RMB84 1,000,000, primarily due to necessary personnel adjustment, which incurred in modern personnel staff and providing additional incentive. The allowance for control assets and the receivable was RMB102 1,000,000,000 for the quarter, representing a 130% year over year, mainly due to the growth in our loan portfolio facility. Moreover, as we mentioned earlier, there is improved balance between our overall risk management costs and the profitability. We have started to gradually increase the loan volume facility under the risk taking model.

Speaker 1

Therefore, we have earned a new item named provision for computing liability to reflect the provision under this model. Additionally, as the loan portfolio under this model growth, we expect a gradual increase in our revenue from our guaranteed service in the coming quarters. On to our bottom line, continue to deliver a strong profit of RMB486 1,000,000 this quarter, representing a 14th increase from the prior year. The general RMB632 million net cash from operating this quarter, an increase of 62% from the prior year. On the balance sheet side, our balance sheet remained robust with RMB5.9 billion in cash and cash equivalents as of the end of this quarter.

Speaker 1

We have already US2.1 million dollars to perform our share purchase in the packaging market for the Q1 of this year, where our total deployment for the share repurchase program to $9,500,000 by the end of March 2024. We will continue to do our share repurchase and maintain confidence in the fundamental direction of our company's business and its growth potential. This is our assessment of current business and the marketing condition. We spent our revenue for the Q2 this year to stand before RMB1.4 billion to RMB1.6 billion with a heavily net profit margin. This reflects our current and preliminary view, which is subject to change and uncertainty.

Speaker 1

With that, we conclude our remarks. Operator, now we are open for questions. Thank you. And thank you.

Operator

We will now begin the question and answer session. Our first question today will come from Matthew Larson of Syncadia. Please go ahead.

Speaker 3

Good evening, you all. Thanks for taking my call. Just a couple of comments. I mean, another good quarter. You guys generated quite a bit of cash and earnings and you do quarter after quarter.

Speaker 3

And I've been involved in and out of your company's stock since you went public. I've mentioned that in previous conference calls. And I've done quite well over the last year. So. The stock's done very well.

Speaker 3

I'm hoping it can break out to kind of a more mainstream price level. Working against you is the just the lack of interest in Chinese securities here in the United States, your local markets, the Hang Seng and Shanghai markets have not done well. So you're kind of got the wind in your face, so to speak, versus the wind at your back. But and I will give you guys tremendous credit for improving your public relations over the last few months. You've put out updates on your business and you've used catchwords like artificial intelligence quite often, which I think are accurate, all right.

Speaker 3

Your company has used algorithms and some level of AI for years to determine your lending activities and acquiring new customers and things like that. So it's quite legitimate And I'm glad that you are highlighting that sort of technology that your company has used for years. And it hasn't helped the stock recently, but your stock has remained elevated and I'm hoping the next move gets us significantly higher. So thank you, all right. However, an area that we've talked about, one other thing, also your earnings announcement today was a lot better.

Speaker 3

It was broken out in 2 or 3 parts. You're comparing it from the year before. It wasn't just a one line thing. So whoever you're using to get your news out is a great improvement. But we've talked in the past about maybe instituting a dividend.

Speaker 3

Many of your peers that are listed in the United States do have a significant dividend. QFIN, QIFO, if I'm pronouncing it correctly, or XYF, just announced a tender offer and a dividend. And then GIN, JFIN just announced another large dividend. So they're returning cash to their investors. And like your company, they trade at a very low multiple between 1 times and 2 times earnings.

Speaker 3

I wish you would do that. You have a huge amount of cash on your balance sheet. Dollars 30,000,000 or $40,000,000 presumably wouldn't change your business model or your growth prospects, but that would really be great for shareholders and it could very well raise the value of your stock several times that amount. So I continue with that suggestion. Your peer group is doing it.

Speaker 3

And then also your share buyback is still pretty small. But outside of that, thank you for another good quarter. I have confidence in your company. And if more interest in the Chinese stock markets is created here, I think your stock could do well. So I'll leave it there.

Speaker 3

Thank you.

Speaker 2

Thank you, Matthew. A couple of thoughts following your very nice remarks. One is that indeed, yes, we have improved like the way we communicate with the public. Yes, thank you. And some other shareholder friends, yeah, making this great suggestion and we'll continue to do that.

Speaker 2

And secondly, artificial intelligence is for us very, very real. Yes. And this time is the new, new thing and is the real thing. Yes. So for all the industries and the companies, yeah, and we have strong conviction that we are well positioned to capture this great change element opportunity.

Speaker 2

So, we've already seen like very exciting initial results as we embrace AI strategy. So we will continue doing that and also talking about that. Yes. And thirdly, regarding the dividend suggestion, while we continue to believe share buyback and investing into the future like AI can best serve our shareholders. We hear you and other shareholder friends regarding this issue.

Speaker 2

And we are evaluating further evaluating, yeah, this issue and this is where we are and we will report more as there is additional progress. And it is our intention to really serve our shareholders with great value creation in many different ways. Yes, and I appreciate the suggestion. You and some other shareholder friends have given us. And lastly, regarding yeah, China, so indeed, yeah, there is this impact, but we are also growing internationally.

Speaker 2

And so yes, and we are in more markets. So the business is more balanced. And so the story is not just China story, but a global story. It's not just a FinTech story, but AI story. So I think what we are doing is really in terms of business strategy, transforming the company to an AI player.

Speaker 2

And in terms of capital market strategy, we are like re categorizing the company, you may say. And I hope by doing this yes, well for some time, yes, we can best serve our shareholders, including ourselves. Thank you.

Operator

Our next question today will come from Marco Zhang of Delongue Research. Please go ahead.

Speaker 4

Hi, thanks management for taking my question. This is Marco from Glenohue Research. So following Mr. Tang's answer to Matthew's question earlier, not just a Chinese story. So my first question is about your international expansion this expansion this year into Southeast Asia, Latin America and also Mexico.

Speaker 4

Just for our modeling purpose, I don't know if you can disclose like how much of your revenue this quarter came from your international business and what's your target percentage by the end of 2024?

Speaker 2

Thank you. Again, going global, being truly global is our clear strategy. And so, yes, we are making very solid progress in Southeast Asia and also Latin America. And I mentioned certain information in our in my prepared remarks. And let me see whether Nao can provide more details at this point.

Speaker 4

Got it. Yes, maybe we can talk offline and get this out, yes.

Speaker 2

Okay. Okay. Yes. And our

Speaker 1

Okay. Yes, Nishna, sorry. I can give you some each call is as mentioned by you, yes, the OSA business is mainly our one our main business strategy for our company. And from 2022, after we acquired our license to say the game, actually our overseas business volume increased by digital clients. And in this quarter, our overseas volume is about RMB32 1,000,000,000, representing 52% of growth compared to the last quarter of 2023.

Speaker 1

And for the second quarter of this year, we also have the confidence in our OSCE business and we think that we will maintain the high growth rate easily same as the Q1 as maybe higher than the Q1. And for the full year of this year, we spent our overseas loan volume is increased about 5 to 6 times compared to the last year. So we can look for our future business. Of course, for the revenue, actually for the Q1 of this year, due to we have only RMB32 1,000,000 of volume. So, the total revenue is not adjusted significantly compared to our total revenue.

Speaker 1

But for the whole year, based on our forecast and we passed the total revenue of our fee, it's about 3% to 5% of our overall financial service for the whole year. Of course, except for the loan volume and the revenue, we also put more attention to our profitability of our OSI product. Actually in this quarter, our Z product expansion in the Philippines, our margin has got a positive result. And so we hope we ever have the confidence in our overseas department and always think that by the end of this year, the overseas business can contribute more profit, including the revenue and the profit margin as well as general service revenue. Okay.

Speaker 1

Thank you. I hope the information is useful for your questions. Thank you.

Speaker 4

Yes, perfect. Yes, that answers my question about your international business. Yes, and my second question is about AI. So congratulations on your successful launch of AI Lab last quarter. And you also mentioned in your last earnings call that you aim to expand your AI expertise beyond the Fintech verticals to more selective sectors.

Speaker 4

Is there any progress there that you can disclose? And also as you have a much stronger cash position and you changed your Chinese name from Yirend Fintech to Yirend Smart Tech. Do you have so do you have any strategic plans in AI such as acquisitions in the near future?

Speaker 2

Thank you. And so the new Chinese name is more like Yiren AI Tech or Yiren Intelligent Tech. Yes. So yes, but it's smart. Yes, thank you.

Speaker 2

And so what we are doing right now is that, as I mentioned, there are 3 steps. Yes, the first step is that we utilize AI really well in our existing businesses and in our company management operations. Yes, and because it's really not an easy, easy thing to do our existing business well, as you know, given the like risk situation, like we need to do better risk management, so on. Like there's always competition, so on. And yes, so we need to utilize AI really well in our existing business.

Speaker 2

At the same time though, we are preparing for the future. For example, we train our models, right, like the capability of training like our own models, fine tuning them, optimizing them is actually quite valuable for many other companies and industries. Yes. So and also many of the like agents you would say like or yes, we use in our own business, the way we build the agents, the way we use them, yes, is also very valuable for other companies and So we are productizing, yes, is that the right word, like a productizing, yes. So making such capabilities, such tools into

Speaker 1

products,

Speaker 2

which we can sell to other companies, industries. So that's like, yeah, one key thing we are doing right now. At the same time, as I mentioned, we are looking to do some like incubation and strategic investment work like focusing on AI native business opportunities. So we are still in early stage of exploration and implementation. Yes, but there will be more coming out.

Speaker 2

We will report in a timely way. And so regarding acquisition, yes, so we are interested in doing smart M and A. Yes, so there is actually indeed one idea we are currently evaluating as it progresses to certain stage, we will be in a position to share more. But overall, I think we are doing the first step, which is utilizing AI in our own business. And the second step, which is developing like advanced building advanced AI capabilities and the ecosystem through like productizing the tools and solutions we use in our own business for future like business opportunities.

Speaker 2

And also, yes, we are looking to do like to build a strategic relationship through investment and yes, smart M and A. Hope I can share more next time.

Speaker 4

Okay, great. Yes, that's great to hear. And congratulation again on another strong quarter and we look forward to hearing more good news from the company. Operator, I have no more questions.

Operator

Thank you. Our next question today will come from Andrew Corporate, a Private Investor. Please go ahead.

Speaker 5

Hello, Mr. Nintang and the company. Thank you for your great results and great work on this company. I wanted to first start with a remark that where these still trading at 1.4 or even it was 1.5 price earnings, but the net profit increased quarter on quarter, so it's lower right now. And my question is, my question first question is, how did the net cash from operations increase by 62% from the previous quarter 1, 2023?

Speaker 5

And why?

Speaker 2

I beg your pardon? What about the 60%?

Speaker 5

The net cash from operations, it increased by 62% from past year. I was wondering why this happened? Or should we expect this in quarter 2, quarter 3, quarter 4 better cash performance, better net cash provided by operations? Should we expect it to be 30%, 40% roughly in quarter 2, quarter 3, quarter 4 year on year?

Speaker 2

And Tom, please yes,

Speaker 1

Yes. I will answer your question. Yes, as you mentioned, in this quarter, our R and D is 41, yin, and also it requires the increase to try to compare to the Q1 of last year, but actually it's a little decrease compared to last year in the 2026. In the Q1 of last year, the total research and development plans is RMB48 1,000,000. The decrease in this cost at the mailing due to we take active action to do some staffing adjustment.

Speaker 1

For example, maybe replace lower technical staff to replace higher technical staff. So there is some staff costs of the technical staff will be a little decrease in this quarter. However, although this quarter is compared to last quarter, it's a little decrease. We still have our R and D enrollment and expenses in the next future. And in our R and D plan, we're hoping in this whole year, our R and D expense is about RMB100 1,000,000 and RMB200 1,000,000 and compared to the last year, the total R and D is RMB149 1,000,000,000.

Speaker 1

So, comprised of whole year, we still put our upside to R and D expense.

Speaker 5

Okay. Again, I asked about net cash provided by second question is, your guidance is again I think reiterated in 2023 last quarter in 2023 Q4, you provided a guidance a middle guidance a mid bound guidance of RMB6.4 billion. With the current projections in Q2 of RMB1.4 billion to RMB1.6 billion, if you continue doing RMB1.6 billion in Q3 and Q4, you should achieve the mid bound target of RMB6.4 billion. I think you're expecting that, right, on the revenue guidance. So my question is actually the revenue guidance, which you provided in 2023 3Q4, if you will reach mid bound to upper bound of that guidance because you succeeded better or how are you feeling in Q2,

Speaker 2

Q1? And now can you please yes.

Speaker 5

Sorry. So you gave a guidance included in the half of

Speaker 2

asking my colleague to respond, yes.

Speaker 5

Okay. My apologies. If you don't understand anything, I can repeat. I thought. Yes.

Speaker 1

Yes. I think for the whole year of the 2020, 2020 for we based our current assessment, we can meet our the total outlook of the total revenue we released in the Q3 of the last year. But for this quarter, because this is the like some festival in China mainland because like the 20 festival and during this festival, it's not our business peak season and it's a low season. That is why you can see our revenue cannot increase too much. But in the future, we think generally we can meet the guidance on our local list before.

Speaker 1

Yes, we have the confidence that our business revenue contribution for the

Speaker 4

whole year.

Speaker 5

Okay. Just if you reach this mid bound guidance, you will have 31% or 30.6% growth increase in revenue with 1.4 price range for anybody hearing this call and you're also AI powered. Okay. My last question or one of the last is your prepaid expenses and other assets in the balance sheet, it increased quite a lot. It's a current asset from what I know.

Speaker 5

My question is what caused this increase year on year and also from quarter 4 from last quarter they increased I think by RMB800 1,000,000 or RMB900 1,000,000. The prepaid expenses, they increased a lot, the current asset, prepaid expenses and other assets. What caused that? It's a good thing, I think. Yes, it's like accounts receivable is increasing.

Speaker 5

It's a hard question.

Speaker 2

No, it's probably looking into the details. Okay.

Speaker 5

Yes, so prepaid expenses, yes, they increased a lot.

Speaker 1

Yes, yes, yes, yes. So to comply to the by the end of the last year, our profile expense and other assets is to represent some increase compared to the end of last year because Consider our business development, we some of our suppliers need to as to pay payments on customer. So like some channel cost and like some AI investment, we should prepayment amount our channel to our suppliers. So, for the purpose of our prepayment to our suppliers because we can hold our cooperation with our partners and can fix some good assets at least and other good channel cost. So you can see there is some increase our proprietary assets that is mainly due to our procurement to our suppliers and the ones about those through our finance to fix down food and resources and for the supply service.

Speaker 5

Okay. Again, I want to congratulate you for these results. I'm very happy and you're executing great. A question for Mr. Ming Tang or actually a suggestion.

Speaker 5

If you change the name in Chinese company to AI or whatever from Yiren Digital to AI, Yiren AI or something, AI in the name, Could you change also the New York Stock Exchange name or the LTD which appears when you say search Yardi stock on Google or whatever, you see Yiren Digital Ltd. Could you change the name of the Ltd also to Yiren AI? Maybe it will catch more eyes of investors, if the name change or like the name change in

Speaker 2

Chinese? Yes. I really like the Yirendigital English name. Okay. As you wish.

Speaker 2

Okay. Yes. Digital is a great, yes. Yes. Yes.

Speaker 5

But investors see the Chinese name investors don't see the Chinese name. You must Google translate the Chinese name. So American investors and your stock exchange, they see digital. They don't see AI in the name.

Speaker 2

I see. Okay.

Speaker 5

If you did the name change in China, maybe you think about it. Thank you very much. And if you have one more question. Yes. Say, say, sorry.

Speaker 2

Yes, I really want our interested prospect investors, shareholders to look a bit further into all the details, right? And not just the name, but I would say investment banker on what rate like 98, 99. So I experienced like if you just add a dotcom, your name like all of a sudden your market cap goes up like 3, 4 times. But my sense is, yes, so it's probably good for the short term, but really, yes, I'm not so

Speaker 5

yes. You said in the Chinese, in Chinese, it's you ran artificial something or you said to the previous guy who asked the questions that the name

Speaker 2

The change made in China is mainly because the original Chinese name suggested FinTech. If we are more than FinTech, we better change the name. But the English name, Yiren Digital, doesn't suggest the FinTech. Yes, my sense is digital includes certain includes FinTech notion, but also includes like AI notion. But I took your point and I will think about it.

Speaker 5

Okay. Maybe Iran Fintech and AI or small AI capital, I don't know, whatever, as you wish. Thank you very much, sir. And the last question also about AI, You said I will have to read the transcript. You have so many achievements this quarter.

Speaker 5

But you said 400,000 calls were provided by an AI powered language model. So there was like an AI language model, smart language model selling or doing the sales rep as a sales rep, but it was AI? Did I understand correctly? 400,000 calls?

Speaker 2

Yes. I think it's outbound calls, yes, automated, yes, intelligent calls to prospect customers.

Speaker 5

Okay. So customers joined or they bought your whatever, they entered the year end digital because of this 400,000 calls, which were powered by AI. Very interesting.

Speaker 2

Yes. Yes. We made this number of calls to try and yes, sign them on.

Speaker 5

Very nice. Okay. Thank you very much, sir. And thank you also for the $2,000,000 repurchases, and I hope they will continue even though they are peanuts compared to your cash balance, but whatever. I hope you continue to grow and continue to execute and build something so beautiful, your team features of it, they're very nice.

Speaker 5

And thank you very much for you being also a great shareholder of the company and the CEO. Have a wonderful day. Bye bye.

Speaker 2

Thank you.

Operator

Our next question today will come from Peter Ruh of Bluebird Advisory. Please go ahead.

Speaker 6

Thank you. Good evening. It's disappointing that the CEO and Founder is not on the call for the 2nd consecutive quarter.

Speaker 2

I'm the Founder and CEO of the company. This is Ning Tang speaking.

Speaker 6

Thank you. I apologize, Mr. Tang.

Speaker 2

I've been doing a lot of talking. I did prepared remarks, yes, and then I answered a number of the questions.

Speaker 6

Okay. Thank you. Yes.

Speaker 1

No, Xiaopo is here. Xiaopo is here. Yes. Hello.

Speaker 2

Okay. And I have actually participated in every earnings conference call since the company went public.

Speaker 6

Were you on last quarter? I thought you were traveling.

Speaker 2

Yes. Yes. No, the CFO, our CFO, my colleague was traveling. Yes. And she's with us now.

Speaker 6

Yes. Yes. And I do have trouble understanding your CFO, but it could be my phone. My question is, the reason your stock is so low is people don't have faith in you because of all the changes. I think having a dividend, you have a lot of cash.

Speaker 6

It's not a good use of shareholder cash. I know you're the main shareholder and I know I don't really care what other people say, but you just having money in the bank is not a good it hurts your return on invested capital. So it's hurting your fundamentals and you should either put that to better use or return it to shareholders. And like Matthew said, a small $50,000,000 dividend would probably greatly increase your overall market capitalization by that or more and it would instill some confidence in the market that you treat your fellow small shareholders with respect? My second question is, even though you made $90,000,000 of cash, your cash balance did not increase at all.

Speaker 6

In fact, it went down a little bit. And as the prior gentleman said, your prepaid expenses and other assets went up 200%. It's the 2nd largest item, 2nd largest asset on your balance sheet. And I did not understand what your CFO was saying prepaid expenses and other assets, what are prepaid expenses and other assets that went from RMB400 1,000,000 to RMB1.2 billion, an increase of over RMB800 1,000,000 a 200% increase. Could you, the founder, Mr.

Speaker 6

Tang, tell us because I can understand you better than your CFO?

Speaker 2

1st of all, thank you very much for your asking the the importance of this issue, but did you were you there at the beginning of the Q and A session? Was that clear about my yes. Well, yes,

Speaker 6

yes. I heard your answer to Matthew and you said that it is under consideration. I was hoping you would announce it this month since you've had 3 months to hear our feedback from the last conference call. And I don't know if I should sell your stock or keep it for another 3 months, if you're just going to tell us in another 3 months that you're still investigating it. You've had 3 months to think about it and you did nothing today with regards to the dividend.

Speaker 2

So I don't have to repeat my answer at the beginning of the Q and A session. And yes, we will try and do a good job evaluating this issue. And regarding the prepaid expenses, I don't know what additional color can Na provide, but Na can you please help out if you can?

Speaker 1

Yes, I can answer some information about our cash management we can do currently. And first, we now use our fund to source our current business. For example, we use our fund to cooperate with the trust company to set up the trust plan to facilitate our Yixuan Huan loan. And in the Q1 of this year, our cooperation with our trust supply is about RMB500 1,000,000. And we're also trying to use our fund to acquire some financial license, which our financial service business required.

Speaker 1

Yes, the first purpose. And the second purpose, as I mentioned in my script, we also continue to do our share payback continue and set up investment plan for our staff. And for this quarter, we have used 2 point $1,000,000 to our share purchase in the marketing and accumulate with about US10 $1,000,000 to do the thing. And we also keep on continuing our share process in the future. And we're also confident in all this new development.

Speaker 1

And finally, but not last, as we mentioned, there are any gains that we will keep on investing in our AI labs and LMP, except for cell technical development. We also from our external investment in AI areas. So also it's preliminary review. We can say we if something finalized about our investment, obviously, and the external analysts will find timely to show the public awareness. Okay.

Speaker 1

I hope I can give you some detailed information for you. Thank you.

Operator

Thank you. And ladies and gentlemen, at this time, we will conclude our question and answer session and we will also conclude the Yaron Digital Conference Call. If you have further questions, please contact the Investor Relations team at Yaron Digital. Thank you for attending today's presentation. You may now disconnect.

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Earnings Conference Call
Yiren Digital Q1 2024
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