Yirendai Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
June 21, 2024

Key Takeaways

  • Revenue & Profit Growth: Q1 total revenue reached RMB 1.4 billion (+14% YoY) and net profit was RMB 486 million (+14% YoY), while net cash from operations surged 62% YoY to RMB 632 million, leaving cash and equivalents at RMB 5.9 billion.
  • Financial Services Momentum: Total loan volume hit RMB 11.9 billion in Q1 (+86% YoY) for the fifth straight quarter of growth, as borrower count was refined for quality and YiXiahua app MAUs rose 26% QoQ to 4.4 million.
  • AI Integration Results: AI Lab initiatives doubled daily outbound calls to 400,000 with 92% voice-recognition accuracy, improved telemarketing conversion by ~40%, and deployed anti-fraud models achieving 97–99% accuracy.
  • International Expansion: Overseas loan volume grew 60% QoQ, led by the Philippines market surpassing RMB 100 million in monthly loans, while customer acquisition costs fell by double digits since January.
  • Insurance Brokerage Pivot: Q1 premiums were RMB 112 million (–1% YoY) as life insurance fell 16% but property insurance rose 19%, commission rates improved by 5.5 pp, and an AI-driven renewal reminder bot is in pilot.
AI Generated. May Contain Errors.
Earnings Conference Call
Yirendai Q1 2024
00:00 / 00:00

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Operator

Good day, and welcome to the Yiren Digital First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star and then one on a touch-tone phone. To withdraw your question, please press Star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Keyao He, Investor Relations Officer. Please go ahead.

Keyao He
Head of Investor Relations at Yiren Digital

Thank you, Operator. Good morning, and good evening, everyone. Today's call features the presentation by the Founder, Chairman, and CEO of CreditEase, our CEO, Mr. Ning Tang, and our CFO, Miss Na Mei, and our SVP, Miss Mei Zhao, will also attend the Q&A session after the prepared remarks. Before beginning, we'd like to remind you that discussions during this call contain forward-looking statements made under the safe harbor provision of U.S. Private Securities Litigation Reform Act of 1995. Such statements accepted risks, uncertainties, and factors that can cause actual results to differ materially from those contained in any such statements. Certain 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.

Keyao He
Head of Investor Relations at Yiren Digital

During the call, we will be referring to certain non-GAAP financial measures and certain financial measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and 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 Ning for opening remarks.

Ning Tang
CEO at Yiren Digital

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've rebranded our Chinese company name from Yiren Jinke to Yiren Zhike. The term Jinke, meaning fintech, has been replaced with Zhike, 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.

Ning Tang
CEO at Yiren Digital

Now, I would like to go through our business highlights for this quarter. First, regarding our financial services business. The fourth quarter of 2024 saw a steady growth, with total loan volume reaching CNY 11.9 billion, marking an 86% increase year-over-year and the fifth consecutive quarter of growth. The number of borrowers experienced a slight decline to CNY 1.35 million from CNY 1.37 million 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 Yixianghua app, has seen a surge in popularity. Its monthly active users grew to over 4.4 million in the first quarter of 2024, up from 3.5 million last quarter, representing a 26% increase.

Ning Tang
CEO at Yiren Digital

This impressive growth is due to our improved customer services and enhanced efforts to boost the customer engagement. It's also worth mentioning that our AI integration into loan facilitation business has shown concrete progress. 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.

Ning Tang
CEO at Yiren Digital

Meanwhile, our international business has been showing strong momentum, with a 60% increase in total loan volume compared to the previous quarter. In the first quarter of 2024, our Philippine market achieved a milestone by surpassing RMB 10 million 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. 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.

Ning Tang
CEO at Yiren Digital

Now, turning to asset quality. In the first quarter of 2024, the overall delinquency rates of our loan portfolio increased, with the 15- 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. As a result, the asset quality of new customers continues to improve. The M1 collection rate in the first quarter 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.

Ning Tang
CEO at Yiren Digital

In the first quarter of 2024, our funding costs decreased by 43 basis points compared to the previous quarter, a trend we expect to continue throughout the year. 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 first quarter of 2024, our total premiums reached RMB 112 million, indicating a slight 1% decrease year-over-year.

Ning Tang
CEO at Yiren Digital

Specifically, life insurance premiums declined by 16% annually, consistent with industry trends. However, property insurance premiums increased by 19% year-over-year, generating RMB 118 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% 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.

Ning Tang
CEO at Yiren Digital

During the first quarter of 2024, Hexiang Insurance secured contract with Xinjiang Transportation Investment Group and ranked the top among its three 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 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. In the first quarter of 2024, we converted leads from our social media efforts into CNY 2.2 million in premiums. This momentum remains strong as we enter into the second quarter.

Ning Tang
CEO at Yiren Digital

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 RMB 625 million in the first quarter of 2024, making a remarkable 103% year-over-year increase, largely driven by our existing and expanding customer pool. 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 three comprehensive phases or three steps. Firstly, empowering existing business.

Ning Tang
CEO at Yiren Digital

We are leveraging AI to enhance and optimize our current operations, driving efficiencies and improving outcomes across all segments, as we are currently doing. 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 Z-Team Intelligent Decision-Making System has made over 1 billion decisions by the end of the first quarter 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, optimization capabilities, can serve not just us, but many other industries and enterprises as well. We are keen to explore such business opportunities.

Ning Tang
CEO at Yiren Digital

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. 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 side-by-side 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 Na, who will go through the financial performance for this quarter.

Na Mei
CFO at Yiren Digital

Thank you, Ning, and hello, everyone. On this call, I will only focus on our key financial highlights. Please refer to our earnings release and our IR guide for further detail. First of all, we are glad to deliver a solid performance with high net margin. In this quarter of 2024, our total revenue reached CNY 1.4 billion, representing 14% increase year-over-year. In the financial service segment, our total loan facilitation continued to grow strongly, with CNY 11.5 billion, an increase of 18% year-over-year, driven by the strong demand of our small working loan products. Revenue from financial service business increased by 53% year-over-year to CNY 738.1 million.

Na Mei
CFO at Yiren Digital

In the insurance sector, our gross lending premium was CNY 902 million, representing a decrease of 1% year-over-year. As mentioned by Ning earlier, the decline in our premium was mainly driven by a substantial drop in our life insurance sales falling by the local regulation change, which was offset by an increase of property insurance products. Consequently, the portion of our property insurance in our overall premium increased sharply. 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 CNY 125 million for this quarter. However, going forward, it will also impact our life insurance business to gradually rebound in line with market recovery. But the leveling insurance will impact the system in the short term.

Na Mei
CFO at Yiren Digital

In the consumption and lifestyle segment, the total GMV for this quarter reached CNY 625 million, 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 all our business lines. Therefore, as service penetration grows, we expect the GMV of this segment will grow to align with our business as increase in the number of combined consumers across various business segments. On the expense side, sales and marketing expense increased to 161% year-over-year to CNY 275 million. This growth was primarily driven by the rapid expansion of our financial service segment and enhanced our marketing efforts gain and acquire new high-quality customers as we continue to optimize our customer risk mix.

Na Mei
CFO at Yiren Digital

Research and development expense increased 59% year-over-year to RMB 51 million, due to our continued investment in AI upgrades and technological innovation. Origination and servicing costs increased 17% year-over-year to RMB 253 million. The growth is primarily contributed to our high channel base in the property insurance business compared to our life insurance. As the portion of property insurance and premiums increase, there is a corresponding increase to channel segment costs. Moreover, our G&A costs increased by 52% year-over-year to RMB 84 million, primarily due to necessary personnel adjustment, which include adding more personnel staff and providing additional incentives. The allowance for contract assets and receivables was RMB 102 million for the quarter, representing a 150% year-over-year, mainly due to the growth in our loan facilitation.

Na Mei
CFO at Yiren Digital

Moreover, as Ning mentioned earlier, we need to increase the 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. Therefore, we have added a new item named provision for contingent liability to reflect the provision under this model. Additionally, as the loan volume under this model grows, we expect a great increase in our revenue from our guarantee service in the coming quarters. Onto our bottom line, we continue to deliver a strong profit of CNY 486 million this quarter, representing a 14% increase from the prior year. We generate about CNY 632 million net cash for operating this quarter, an increase of 52% from prior year.

Na Mei
CFO at Yiren Digital

On the balance sheet side, our balance sheet remains robust with CNY 5.9 billion in cash and cash equivalents as of the end of this quarter. We have already $2.1 million to perform our share purchase in the public market for the first quarter of this year, with our total requirement for the share purchase program to $5.5 million by the end of March 2024. We'll continue to do our share repurchase and maintain confidence in the fundamental direction of our company business and its growth potential. With our assessment of current business and the market condition, we expect our revenue for the second quarter this year to stand before CNY 1.4 billion-CNY 1.6 billion, with a healthy net profit margin.

Na Mei
CFO at Yiren Digital

This reflects our current and preliminary view, which is subject to change and uncertainty. With that, we conclude our remarks. Operator, now we are open for questions. Thank you.

Operator

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause for a moment to assemble our roster. Our first question today will come from Matthew Larson of Fincadia. Please go ahead.

Matthew Larson
Broker at Fincadia

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. I've been involved in and out of your company's stock since you went public. I've mentioned that on previous conference calls. I've done quite well over the last year or so. Your stock's done very well. I'm, you know, I'm hoping it can break out to kind of a more mainstream price level. Working against you is the, you know, just the lack of interest in Chinese securities here in the United States. You know, your local markets, the Hang Seng and Shanghai markets have not done well.

Matthew Larson
Broker at Fincadia

So you're kind of got the wind in your face, so to speak, versus, you know, the wind at your back. But, and I, 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, you know, catchwords like artificial intelligence quite often, which I think are accurate. All right? Your company has used algorithms and some level of AI for years to determine your lending activities and, and, acquiring new customers and things like that. So it's quite legitimate, and I'm, I'm glad that you are highlighting that sort of technology that your company has used for years.

Matthew Larson
Broker at Fincadia

And, you know, it hasn't helped the stock recently, but your stock has remained elevated, and I'm hoping the next move, you know, 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. It was broken out in two or three 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. Many of your peers that are listed in the United States do have a significant dividend. QFIN, Qifu, if I'm pronouncing it correctly, or XYF, just announced a tender offer and a dividend.

Matthew Larson
Broker at Fincadia

And then,Jiayin, JFIN, just announced another large dividend. So they're returning, you know, they're returning cash to their investors, and like your company, they trade at a very low multiple between one and two times earnings. I wish you would do that. You have a huge amount of cash on your balance sheet. You know, $30 million or $40 million 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, you know, several times that amount. So I continue with that suggestion. Your peer group is doing it, and then also your share buyback is still pretty small. But outside of that, thank you for another good quarter.

Matthew Larson
Broker at Fincadia

You know, I have confidence in your company, and if more interest in the Chinese stock markets is created here, you know, I think your stock could do well. So I'll leave it there. Thank you.

Ning Tang
CEO at Yiren Digital

Thank you, Matthew. A couple of thoughts following your very nice remarks. You know, one is that indeed we have improved, like, the way we communicate with the public. Thank you and some other shareholder friends making this great suggestion. And we'll continue to do that. And secondly, artificial intelligence is for us very, very real. And this time, it's the new, new, new thing, and it's the real thing. So, for all the industries and the companies, and we have strong conviction that we are well positioned to capture this great change element, opportunity.

Ning Tang
CEO at Yiren Digital

So, yeah, we've already seen like, a very exciting initial results, yeah, as we embrace AI strategy. Yeah. So, we will continue doing that and also talking about that. Yeah. 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, yeah, other shareholder friends, yeah, regarding this issue, and, we are evaluating, further evaluating, yeah, this issue. And, yeah, this is where we are, and, yeah, we will, yeah, report more, as there's additional progress. Yeah.

Ning Tang
CEO at Yiren Digital

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. Lastly, regarding China, so indeed there is this impact, but we are also growing internationally. And so we are in more markets. So the business is more balanced. And so the story is not just a China story, but a global story. It's not just a fintech story, but an AI story.

Ning Tang
CEO at Yiren Digital

I think what we are doing is really, in terms of a business strategy, transforming the company to an AI player. In terms of a capital market strategy, we are, like, recategorizing the company, you may say. I hope, by doing this, yeah, well, for some time, yeah, we can best serve our shareholders, including ourselves. Thank you.

Operator

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

Marco Zhang
Senior Research Analyst at Gelonghui Research

Hi, thanks, management, for taking my question. This is Marco from Gelonghui 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 business. So as you mentioned in your last earnings call, you have a pretty big plan for expansion, international expansion this year into Southeast Asia, Latin America, and also Mexico. 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?

Ning Tang
CEO at Yiren Digital

Thank you. Again, going global, being truly global is our clear strategy. And so yeah, 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 Na can provide more details at this point.

Marco Zhang
Senior Research Analyst at Gelonghui Research

Got it. Yeah. Maybe we can talk offline and get this out. Yeah.

Ning Tang
CEO at Yiren Digital

Okay. Okay. Yeah. And our share-

Na Mei
CFO at Yiren Digital

Okay, yes, now I will...

Marco Zhang
Senior Research Analyst at Gelonghui Research

Yeah.

Na Mei
CFO at Yiren Digital

Hey, I-

Marco Zhang
Senior Research Analyst at Gelonghui Research

I think, yes.

Na Mei
CFO at Yiren Digital

Sorry. I can give you some detail, information for your reference, our international business revenue for this year. Yes, as mentioned in our, each, each colleague has mentioned on you, yes, also, the overseas business is mainly our, one of our main business strategy for our company. From 2022, after we acquired our licenses to Philippines, actually our overseas business volume increased by 5x. In this quarter, our overseas volume is CNY 32 million, representing 52% growth compared to the last quarter of 2023. For the second quarter of this year, we also have the confidence in our overseas business, and we think that we will maintain the high growth rate, basically same as the first quarter, and maybe higher than first quarter.

Na Mei
CFO at Yiren Digital

For the full year of this year, we planned our overseas loan volume is increased about five, six times compared to the last year, so we can look forward our future business. Of course, for the revenue, actually, for the first quarter of this year, due to we have only CNY 32 million volume, so the total revenue is not just significant compared to our total revenue. But for the whole year, based on our forecast and as we planned, the total revenue of our overseas is about 2%-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, to our profitability of the product.

Na Mei
CFO at Yiren Digital

Actually, in this quarter, our overseas product, especially in the Philippines, our margin has got a positive result. And so we, we hope, we ever have the confidence in our overseas department... and I always think that, by the end of this year, the overseas business can contribute more profit in terms of the revenue and the profit margin as well, overall financial revenue. Okay, thank you. I hope the information is useful for your question. Thank you.

Marco Zhang
Senior Research Analyst at Gelonghui Research

Yeah, perfect. Yeah, that answers my question about your international business. Yeah, 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 selected sectors. Is there any progress there that you can disclose? And also, as you have a much stronger cash position and you change your Chinese name from Yiren Fintech to Yiren Smart Tech, do you have any strategic plans in AI, such as acquisitions in the near future?

Ning Tang
CEO at Yiren Digital

Thank you. So, yeah, the new Chinese name is more like Yiren AI Tech or Yiren Intelligent.

Marco Zhang
Senior Research Analyst at Gelonghui Research

Yeah.

Ning Tang
CEO at Yiren Digital

Tech. Yeah. So, yeah, but it's smart. Yeah, thank you. And, so, what we are doing right now is that, as I mentioned, yeah, there are three steps. Yeah, the first step is that we utilize AI really well in our existing businesses and in our company management operations. Yeah, and because it's really not an easy, easy thing to do our existing business well, as you know, you know, given the like risk situation, like you know, there's always competition, so on.

Ning Tang
CEO at Yiren Digital

Yeah, so, we need to utilize AI really well in our existing business. 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, and is actually quite valuable, yeah, for many other companies and industries. Yeah. So, and also, many of the like agents, you'd say, like, you know, or, yeah, we use in our own business, the way we build the agents, the way we use them, yeah, is also very valuable for other companies and industries.

Ning Tang
CEO at Yiren Digital

So we are productizing. Is that the right word? Like, productizing. So making such capabilities, such tools into products which we can sell to other companies, industries. So that's like one key thing we are doing right now. At the same time, you know, 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. But there will be more coming out. We will report in a timely way.

Ning Tang
CEO at Yiren Digital

Regarding acquisition, yeah, so we have interested in doing smart M&A. Yeah, so, there's actually indeed one idea, yeah, we are currently evaluating, as it progresses, yeah, to a certain stage, we will be in a position to, yeah, 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, yeah, building advanced AI capabilities and ecosystem through like productizing the tools and the, yeah, solutions we use in our own business for, yeah, future like business opportunities.

Ning Tang
CEO at Yiren Digital

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

Marco Zhang
Senior Research Analyst at Gelonghui Research

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

Operator

Thank you. Our next question today will come from Andrew Corbett, a private investor. Please go ahead.

Andrew Corporate
Private Investor at Yiren Digital

Hello, Mr. Ning Tang, 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 are these still trading at 1.4, or even it was 1.5 price earnings, but the net profit increased quarter-over-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 one, 2023? And why? Like, why?

Mei Zhou
SVP at Yiren Digital

I beg your pardon. What about the 60%?

Andrew Corporate
Private Investor at Yiren Digital

The net cash from operations, it increased by 62% from last year. I was wondering, why this happened, or should we expect this in quarter two, quarter three, quarter four, better cash performance, better net cash? Net cash provided by operations, should we expect it to be 30%, 40% roughly, in quarter two, quarter three, quarter four? Year-on-year.

Mei Zhou
SVP at Yiren Digital

Can... Yeah.

Na Mei
CFO at Yiren Digital

Uh, yeah.

Mei Zhou
SVP at Yiren Digital

Yeah.

Na Mei
CFO at Yiren Digital

Yeah, then I will answer your question. Yeah, as you mentioned, in this quarter, our R&D is CNY 41 million, and also it requires increase to trying to compare to the fourth quarter of last year. But actually, it's a little decrease compared to last year in the last, in the 2023. In the first quarter of last year, the total research and the development plan is CNY 48 million. And the decrease in this quarter is mainly due to we take active action to do some staffing adjustment. For example, maybe replace some lower technical staff to replace some higher technical staff. So there is some staff cost of the technical staff will be a little decrease in this quarter.

Na Mei
CFO at Yiren Digital

Mm, however, although this quarter is compared to last quarter, it's a little decrease, we still have our more R&D involvement and expense in the next future. In our R&D plan, we hope in this whole year, our R&D expense is about CNY 100 million and CNY 200 million. Compared to last year, the total R&D is CNY 149 million. So compared the whole year, we have—we still put our inaudible to R&D spend. Okay.

Andrew Corporate
Private Investor at Yiren Digital

Okay. Again, I asked about net cash use provided by operations, so it's like cash from operations. It increased a lot, and I was happy about it. But okay. 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 CNY 6.4 billion. With the current projections in Q2 of CNY 1.4 billion-CNY 1.6 billion, if you continue doing CNY 1.6 billion in Q3 and Q4, you should achieve the mid-bound target of CNY 6.4 billion. I think you're expecting that, right? On the revenue guidance.

Andrew Corporate
Private Investor at Yiren Digital

So my question is actually the revenue guidance, which you provided in 2023 Q4, if you will reach mid-bound to upper bound of that guidance because you succeeded better, or how are you feeling in Q2, Q1? Q1.

Mei Zhou
SVP at Yiren Digital

Na, can you please... Yeah.

Andrew Corporate
Private Investor at Yiren Digital

Sorry. So, you gave a guidance in 2023 Q4-

Mei Zhou
SVP at Yiren Digital

No, no, no. I'm my colleague to respond. Yeah.

Andrew Corporate
Private Investor at Yiren Digital

Okay, my apologies. If you don't understand anything, I can repeat.

Mei Zhou
SVP at Yiren Digital

I thought... Yes.

Na Mei
CFO at Yiren Digital

Yeah, I think, for the whole year of this 2023, 2024, with our current assessment, we can meet our, the total outlook of the total revenue we released, in the quarter of the last year. But for this quarter, because, this is the like summer festival in China mainland, because like the Spring Festival, and during this festival, it's not our business peak season, and it's a low season. That is why you can say our revenue cannot increase that much. But in the future, we think, generally, we can meet the guidance or the outlook we released before. Yeah, we have the confidence that our business revenue contribution for the whole year.

Andrew Corporate
Private Investor at Yiren Digital

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 here in 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. My question is, what caused this increase year-on-year and also from quarter four, last quarter? They increased, I think by CNY 800 million or CNY 900 million. 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.

Andrew Corporate
Private Investor at Yiren Digital

Yes, it's like accounts receivable is increasing. It's a hard question, but okay, whatever.

Ning Tang
CEO at Yiren Digital

... Na is probably looking into the details.

Na Mei
CFO at Yiren Digital

Yeah, I will check that.

Andrew Corporate
Private Investor at Yiren Digital

Okay. Yeah, so pre-trading expenses, yeah, they increased a lot.

Na Mei
CFO at Yiren Digital

Yeah, yeah, yeah, yeah. So compared to the end of last year, our prepaid expense and other assets present some increase compared to the end of last year. Because consider our business development, some of our suppliers need to prepay some customer. So like, like some channel customer and like some AI investment, we should prepayment some amount our channel customer to our suppliers. So in order for the purpose of our prepayment to our suppliers, because we can have our cooperation with our partners and can fix some good access list and other good channel customer. So you can say there is some increase our prepaid items.

Na Mei
CFO at Yiren Digital

That is mainly due to our prepayment to our suppliers, and once about three or four months, to fix some good, good results and, good supply service.

Andrew Corporate
Private Investor at Yiren Digital

Okay. Again, I want to congratulate you for these results. I'm actually very happy, and you're executing great. A question for Mr. Ning Tang, or actually a suggestion: If you change the name in Chinese company to AI or whatever, not 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 where this 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-

Ning Tang
CEO at Yiren Digital

Thank you for the-

Andrew Corporate
Private Investor at Yiren Digital

The name change in Chinese.

Ning Tang
CEO at Yiren Digital

idea. Yeah. I really like the Yiren Digital English name.

Andrew Corporate
Private Investor at Yiren Digital

Okay, as you wish.

Ning Tang
CEO at Yiren Digital

Because, uh-

Andrew Corporate
Private Investor at Yiren Digital

Okay.

Ning Tang
CEO at Yiren Digital

Yeah. Digital is a great, yeah, like-

Andrew Corporate
Private Investor at Yiren Digital

Yes, but investors, the investors see the Chinese name. Investors don't see the Chinese name. You must Google Translate the Chinese name. So American investors on your stock exchange, they see digital, they don't see AI in the name.

Ning Tang
CEO at Yiren Digital

I see. Okay. We'll think about it.

Andrew Corporate
Private Investor at Yiren Digital

If you did the name change in China-

Ning Tang
CEO at Yiren Digital

Yeah.

Andrew Corporate
Private Investor at Yiren Digital

I don't know. If you did the name change in China, maybe you think about it. Thank you very much. Yeah.

Ning Tang
CEO at Yiren Digital

Yeah.

Andrew Corporate
Private Investor at Yiren Digital

If you have one more question?

Ning Tang
CEO at Yiren Digital

Yeah.

Andrew Corporate
Private Investor at Yiren Digital

Sorry.

Ning Tang
CEO at Yiren Digital

Yeah. I really want our interested prospective investors, shareholders to look a bit further into all the details, right? And not just the name, but I was an investment banker on Wall Street, like 1998-

Andrew Corporate
Private Investor at Yiren Digital

Yeah

Ning Tang
CEO at Yiren Digital

... 99. So I-

Andrew Corporate
Private Investor at Yiren Digital

Yeah

Ning Tang
CEO at Yiren Digital

... I experienced, like, if you just add a . com, it-

Andrew Corporate
Private Investor at Yiren Digital

Yeah

Ning Tang
CEO at Yiren Digital

... your name, like, all of a sudden, your market cap, goes up, like, you know, it could go three-

Andrew Corporate
Private Investor at Yiren Digital

Yeah

Ning Tang
CEO at Yiren Digital

... times. But yeah, my sense is yeah, so it's probably yeah good for the short term, but really yeah, I'm not so yeah. Yeah.

Andrew Corporate
Private Investor at Yiren Digital

You said in the Chinese, in Chinese, it's Yiren artificial something, or you said to the previous guy who asked the questions-

Ning Tang
CEO at Yiren Digital

Uh

Andrew Corporate
Private Investor at Yiren Digital

... that the name-

Ning Tang
CEO at Yiren Digital

The change made in China is mainly because the original Chinese name suggested fintech. If we are more-

Andrew Corporate
Private Investor at Yiren Digital

Ah.

Ning Tang
CEO at Yiren Digital

than Fintech, we better change the name. But the English name, Yiren Digital, doesn't suggest Fintech. Yeah. My sense is digital includes, certainly includes Fintech notion, but also includes, like, AI notion. But I took your point, and I will think about it.

Andrew Corporate
Private Investor at Yiren Digital

Okay. Maybe Yiren 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.

Ning Tang
CEO at Yiren Digital

Yeah.

Andrew Corporate
Private Investor at Yiren Digital

You said... I will have to read the transcript. You have so many achievements this quarter, but you said 400,000 calls were provided by an AI-powered language model. So there was like a, 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?

Ning Tang
CEO at Yiren Digital

Yeah. Yeah, I think it's outbound call. Yeah. Automated-

Andrew Corporate
Private Investor at Yiren Digital

Uh-

Ning Tang
CEO at Yiren Digital

... yeah, intelligent calls to prospect customers.

Andrew Corporate
Private Investor at Yiren Digital

Okay. So customers joined or, they bought your... or whatever, they entered the Yiren Digital because of these 400,000 calls, which were powered by AI?

Ning Tang
CEO at Yiren Digital

Yeah.

Andrew Corporate
Private Investor at Yiren Digital

Very interesting.

Ning Tang
CEO at Yiren Digital

Yeah, yeah, yeah. We made this number of calls to try and sign them on.

Andrew Corporate
Private Investor at Yiren Digital

Mm-hmm. Very nice. Okay. Thank you very much, sir. And thank you also for the $2 million 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, they're very nice. And thank you very much for you being also a great shareholder of the company and the CEO. Have a wonderful day. Bye-bye.

Ning Tang
CEO at Yiren Digital

Thank you.

Operator

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

Peter Ruh
Founder and CEO at Bluebird Advisory

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

Ning Tang
CEO at Yiren Digital

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

Peter Ruh
Founder and CEO at Bluebird Advisory

Oh, thank you. I apologize, Mr. Tang.

Ning Tang
CEO at Yiren Digital

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

Peter Ruh
Founder and CEO at Bluebird Advisory

Okay. Thank you.

Na Mei
CFO at Yiren Digital

Yeah, no, Jeff is also here. Our Jeff is here. Yeah. Hello.

Peter Ruh
Founder and CEO at Bluebird Advisory

Okay.

Ning Tang
CEO at Yiren Digital

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

Peter Ruh
Founder and CEO at Bluebird Advisory

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

Ning Tang
CEO at Yiren Digital

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

Peter Ruh
Founder and CEO at Bluebird Advisory

Yeah, 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, well, all the changes. I think having a dividend, you have a lot of cash. It's not a good use of shareholder cash. I know you're the main shareholder, and I know you probably 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.

Peter Ruh
Founder and CEO at Bluebird Advisory

And like Matthew said, a small $50 million 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 million of cash, your cash balance did not increase at all. 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 second largest item, second 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 CNY 400 million to CNY 1.2 billion, an increase of over CNY 800 million, a 200% increase?

Peter Ruh
Founder and CEO at Bluebird Advisory

Could you, the founder, Mr. Tang, tell us? Because I can understand you better than your CFO.

Ning Tang
CEO at Yiren Digital

First of all, thank you very much for asking again about the dividend. So we understand the importance of this issue. But were you there at the beginning of the Q&A session? Was I clear about my

Peter Ruh
Founder and CEO at Bluebird Advisory

Well, yeah, yes, yes, 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 three months to hear our feedback from the last conference call. And, and I don't know if I should sell your stock or keep it for another three months, if you're just going to tell us in another three months that you're still investigating it. You've had three months to think about it, and you did nothing today with regard to the dividend.

Ning Tang
CEO at Yiren Digital

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

Na Mei
CFO at Yiren Digital

Yeah, I can add some information about our cash management we can do currently. And of course, the way we now use our funds to service our current business. For example, we use our fund to cooperate with the trust company to set up the trust plan to facilitate our Yixianghua loan. And in the first quarter of this year, our cooperation with trust company is about RMB 500 million. And we also plan to use our fund to apply some financial license, which our financial service business required. Yeah, the first purpose. And the second purpose, as I mentioned in my script, we also continue to do our share buyback and set up incentive plan for our staff.

Na Mei
CFO at Yiren Digital

For this quarter, we have used $2.1 million to do our share purchase in the market, and accumulate, we deploy about $10 million to do the thing. We'll also keep on continue our share purchase in the future. We're also confident of in our business development. Then finally, but last, but not last, as I mentioned, there during annual gain that we will keep on investing in our AI Lab and LLM is better for self-technical development. We're also from our external investment, like, in the AI areas. So also, it's a preliminary review.

Na Mei
CFO at Yiren Digital

We can say we if something finalized about our investment, obviously, and the external AI, we'll finding timely to show the public awareness. Okay. I hope I can give some more 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 Yiren Digital conference call. If you have further questions, please contact the investor relations team at Yiren Digital. Thank you for attending today's presentation. You may now disconnect.

Analysts
    • Andrew Corporate
      Private Investor at Yiren Digital
    • Keyao He
      Head of Investor Relations at Yiren Digital
    • Marco Zhang
      Senior Research Analyst at Gelonghui Research
    • Matthew Larson
      Broker at Fincadia
    • Mei Zhou
      SVP at Yiren Digital
    • Na Mei
      CFO at Yiren Digital
    • Ning Tang
      CEO at Yiren Digital
    • Peter Ruh
      Founder and CEO at Bluebird Advisory
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