Yirendai Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 20, 2024

Key Takeaways

  • Financial services growth: Total loan volume rose 59% y/y to RMB12.9 billion, with borrowers served up 47% and monthly active users up 88%, driven by higher-quality customer acquisition and AI-enhanced credit models.
  • International expansion accelerated as overseas loan volume nearly doubled in Q2; the Philippines business reached positive net margin in June and customer acquisition costs fell 18% q/q, highlighting scalable unit economics.
  • Asset quality strengthened with the 15–89-day delinquency rate down 10 bps to 3.8%, M1 collection rate up 290 bps to a historic high, and funding costs falling 82 bps to a record low, supporting improved profitability.
  • Insurance brokerage revenue declined 20% y/y to RMB1.1 billion due to life insurance regulation but grew 16% q/q on property insurance; management plans to optimize product mix, focus on liability and high-net-worth life business, and leverage AIGC tools.
  • Shareholder returns: Board approved a semiannual dividend policy of at least 10% of net income and declared a $0.20 ADS dividend for H1 2024, alongside US$13.5 million in share buybacks to enhance investor confidence.
AI Generated. May Contain Errors.
Earnings Conference Call
Yirendai Q2 2024
00:00 / 00:00

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Operator

Good day, and welcome to the Yiren Digital second 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, 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, good evening, everyone. Today's call features a presentation by our Founder, Chairman, and CEO of CreditEase, Mr. Ning Tang, and our CFO, Ms. Na Mei. Our new CFO, Mr. Yuning Feng, will also attend the Q&A session after the remarks. Before beginning, we would 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 accept risks, uncertainties, and factors that can cause actual results to differ materially from those contained in any such statements. Such information regarding future risks, uncertainties, or factors is included in the filing 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 law.

Bruce Oren
Analyst at Black Lab Fund

During the call, we will be referring to certain non-GAAP financial measures and fundamental 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 this non-GAAP measure and reconciliation to GAAP measure, please refer to our earnings press release. I will now pass it to Ning for opening remarks.

Ning Tang
Founder, Chairman, and CEO at CreditEase

Thank you all for joining our earnings conference call today. Despite the evolving market environment, we are pleased to report another solid quarter with strong unit economics, reflecting the resilience of our business structure and operational strategies, as well as our commitment to quality control, to quality growth over mere expansion. Additionally, our strategic investments in AI and the seamless integration of technological innovations into our operations has fostered dual growth in both technological advancements and operational efficiency. Our strategic direction positions us well to evolve into a leading AI-driven platform, paving the way for groundbreaking solutions and setting new industry standards. Now, I would like to go through our business highlights for this quarter. First, our financial services business.

Bruce Oren
Analyst at Black Lab Fund

The second quarter of twenty twenty-four saw a steady growth, with total loan volume reaching RMB 12.9 billion, marking a 59% increase year-over-year, and maintaining a resilient consecutive quarterly growth despite an industry slowdown. The momentum is largely driven by the concrete growth of our new customers with higher credit quality as we continue to optimize our asset quality of loan portfolios. Since the second half of 2023, when the entire industry experienced substantial credit risk fluctuations, we started to proactively upgrade our customer mix and diversify our online acquisition channels. The strategy has proven effective, leading to secure growth and improved asset quality. Meanwhile, we have refined our proprietary RTA credit model for borrower acquisition, which has notably enhanced our overall credit approval efficiency.

Bruce Oren
Analyst at Black Lab Fund

In this quarter, the number of borrowers served increased by 47% year-over-year to 1.5 million. Moreover, our loan facilitation platform continued to gain popularity, with monthly active users rising by 88% year-over-year to 4.5 million in the second quarter of this year, showcasing strong customer engagement and loyalty. As we maintain our focus on attracting high-quality borrowers and note that existing high-value borrowers repeatedly use our revolving loan products, we expect this growth momentum to continue throughout the year. Meanwhile, our international business is showing exciting progress. The total loan volume overseas nearly doubled in the second quarter of 2024 compared to the prior quarter. In the Philippines, monthly loan volume facilitated exceeded RMB 20 million milestone, with the growth rate remaining robust as we move into the second half of the year.

Bruce Oren
Analyst at Black Lab Fund

Moreover, as our business continues to grow, we are benefiting from economies of scale, with customer acquisition costs decreasing by 18% quarter-over-quarter. In June 2024, our business in the Philippines achieved a positive net profit margin. It's worth mentioning that our rapid growth is closely tied to our AI development and integration. Our proprietary large language models have been implemented across various operations, including customer acquisition, customer service, risk management, and asset management. For instance, in our international operations, our anti-fraud AI models have processed over 10 different types of identification documents this quarter, achieving a 93% accuracy rate and significantly enhancing our risk management efficiency. Additionally, to standardize our services, our large language models are used in our overseas call centers to translate local languages, detect sensitive words, and analyze service quality and assurance, thereby boosting customer satisfaction.

Bruce Oren
Analyst at Black Lab Fund

As more data are processed, we expect continued enhancement of our models in both accuracy and their applicability to a wider range of scenarios and uses. Turning to asset quality, delinquency rates continue to show an encouraging trend as assets from upgraded borrowers increase. Specifically, the 15-89 day delinquency rate for the second quarter of 2024 declined to 3.8%, down 10 basis points. The FPD 30+ delinquency rate decreased for the third consecutive quarter, and the M1 collection rate for the second quarter of 2024 increased by 290 basis points quarter-over-quarter to a historic high. We expect a sustained improvement in asset risk performance in the second half of this year as we continue to optimize our customer mix and retune our credit risk models. Now, on funding cost.

Bruce Oren
Analyst at Black Lab Fund

Our effort in building an efficient funding management system is showing results. In the second quarter of this year, our funding costs decreased by 82 basis points quarter-over-quarter, reaching a historic low and exceeding our internal target. The downward trend will continue in the third quarter. Moreover, given the current market funding conditions, we are strategically increasing our loan volume under the risk-taking model to better balance risk management and profitability. Regarding our insurance brokerage business, we have focused more on property insurance and expanded our customer acquisition channels to hedge against the ever-changing regulatory environment and uncertainties in the life insurance sector. In the second quarter, gross written premiums totaled RMB 1.1 billion, reflecting a year-over-year decrease of 20% and a quarter-over-quarter increase of 16%.

Bruce Oren
Analyst at Black Lab Fund

The annual decline was primarily due to the impacted life insurance business, which experienced limited sales of first-year premiums as a result of product changes and the new regulations. The quarter-over-quarter growth in premiums is largely attributable to the property insurance business, where premiums reached CNY 557 million, marking a 19% increase from the previous quarter and setting a new record. Going forward, we will continue to focus on three key areas in our insurance business. First, strengthening channel partnerships and expanding the scale of property insurance, optimizing our product mix, and continuously increasing the proportion of higher profitability products, such as liability insurance. Second, in life insurance, we will focus more on high-net-worth clients, addressing their comprehensive protection needs for retirement and savings. Thirdly, we will enhance online customer acquisition by utilizing AIGC tools to improve market outreach and boost sales volume.

Bruce Oren
Analyst at Black Lab Fund

In our consumption and lifestyle service segment, our GMV increased by 40% year-over-year to RMB 554.6 million. However, due to the high penetration rate of these services among our current customer base, we are observing a moderation in growth rates. Moving forward, the company will focus on acquiring new customers and refining customer profiles to better understand and address their comprehensive needs. Moreover, with the aim to enhance shareholder returns and boost market confidence, we are pleased to announce that the board has approved a new dividend policy. Under this policy, the board plans to declare dividends amounting to no less than 10% of the company's anticipated net income after tax for each half year, starting from the first half of this year.

Bruce Oren
Analyst at Black Lab Fund

The cash dividend for the first half of 2024, set at $0.2 per American Depositary Share, is expected to be paid on or about October 15th, 2024, to holders of the company's ordinary shares and ADSs of record as of the close of business on September 30th, 2024, Hong Kong time and New York time, respectively. We would like to express our gratitude to our shareholders and investors for their ongoing support. Finally, we have a management change to announce. First, let me introduce our newly appointed CFO, Mr. Yuning Feng. Yuning possesses over a decade of experience in venture capital investment, investment banking, and financial control. Before joining us, he was a partner at CE Innovation Capital, where he led investments in Fintech, enterprise solutions, and AI sectors.

Bruce Oren
Analyst at Black Lab Fund

Prior to that, Yuning was also served as an investment banker at China Renaissance and a financial controller at Goldman Sachs and UBS. We are confident that Yuning's extensive experience and proven track record will enhance our global strategy and AI focus, and we look forward to the positive impact this will bring. Also, on behalf of the board, I would like to extend our deep gratitude to Na, for her significant contributions and outstanding work during the past years. With that, I will pass it to Na, who will go through the financial performance for this quarter. As this marks her final earnings call with us, we once again thank her for her leadership and wish her continued success.

Na Mei
CFO at Yiren Digital

Thank you, Ning, for all the kind words and the support. Hello, everyone. On this call, I will only focus on our key financial highlights, and Yuning will join us for the Q&A section after the prepared remarks. First of all, we are glad to deliver a solid quarter with a healthy profitability. In the second quarter of this year, our total revenue reached CNY 1.5 billion, 30% increase year-over-year. In the financial service segment, total loan facilitation continued to grow steadily, reached CNY 12.9 billion, up 59% year-over-year. This is mainly driven by the volume of our new loans and the strong demand for our small revolving loan products. Revenue from financial service business increased 14.6% year-over-year to CNY 851 million. The momentum remains strong throughout the year.

Bruce Oren
Analyst at Black Lab Fund

In the insurance sector, our gross written premium was RMB 1.1 billion, a decrease of 20% year-over-year, but increase of 16% compared with the prior quarter. The year-on-year decline was driven by a substantial drop in our life insurance sales following local regulatory change. During the same period last year, sales of life insurance products with a capped 3.5% interest rate surged before being withdrawn from the China market due to the new regulation. Therefore, the second quarter of last year was exceptionally high, making a sharp contrast to the decline of the second quarter this year. Meanwhile, the quarter growth in our total premium was mainly driven by the expansion of our property insurance business.

Bruce Oren
Analyst at Black Lab Fund

Consequently, the part of our property insurance in our overall premium increased, translating into a lower average revenue ticket rate due to the lower commission fee rate compared with the life insurance products. In the second quarter of this year, revenue from our insurance segment reached RMB 91.5 billion, down 77% year-over-year. Going forward, we expect continued growth in our property insurance business in the foreseeable future, and gradually carry our life insurance products along with the market trend. In the consumption and lifestyle segment, the total GMV for this quarter reached RMB 555 million, an increase of 40% year-over-year, but a decline of 11% quarter-over-quarter. As mentioned by Ning, as the penetration rate of services and products in this segment grows into a substantial level, we expect growth rate of this segment will continue to moderate.

Bruce Oren
Analyst at Black Lab Fund

On the expense side, sales and marketing expense increased 31% year-over-year to RMB 285 million. This growth was mainly fueled by the swift expansion of our financial service segment and enhanced marketing efforts focused on attracting new and high-quality customers... as we continue to redefine our customer base. Research and development expense increased 69% year-over-year to RMB 156 million, due to our ongoing investment in AI enhancements and technological advancements. Our general and service costs decreased 29% year-over-year to RMB 247 million. This is primarily attributed to the decline in insurance business volume, especially the sharp decrease in the first premium for our life insurance product, which led to a low channel base and relevant settlement costs. Moreover, G&A costs increased 8% year-over-year to RMB 168.7 million, remaining largely stable.

Bruce Oren
Analyst at Black Lab Fund

The allowance for contract assets and the receivables RMB 123 million for this quarter, a 152% year-over-year increase and a 20% quarterly growth. The increase was mainly driven by the growth in total loan facilitation volume. Moreover, provision for contingency liability in this quarter increased to RMB 278.9 million, from RMB 12 million in the same period of last year. This is due to our rapid ramp-up in loan facilitation volumes by our risk-taking model, which led to a significant upfront provision and a current accounting policy. However, over time, this provision will periodically transfer to guarantee service fee. Actually, in the second quarter of this year, the revenue from guarantee service reached RMB 178.9 million, more than four times upside in the same period last year.

Bruce Oren
Analyst at Black Lab Fund

Now, on the bottom line, our net income decreased 22% year-over-year to RMB 410 million this quarter due to three reasons. Firstly, our profitability in the insurance business declined as mentioned above. Secondly, marketing expense increased due to our ongoing investment to attract new high-quality borrowers for our financial service business. Thirdly, substantial upfront provision has been accrued as we ramp up our loan volume under the risk-taking model. Currently, our profit margin reached 27.4%, still the highest level in the industry. Regarding the cash flow, we generated RMB 369 million net cash from our operations in this quarter, remaining healthy and strong.

Bruce Oren
Analyst at Black Lab Fund

On the balance sheet side, our balance sheet remains strong, with RMB 5.5 billion in cash and cash equivalents as of the end of this quarter, and we are exploring diversified ways to enhance our shareholder returns. As Ning Tang introduced, we are pleased to announce a semi-annual dividend plan with no less than 10% of our after-tax income for the prior six months distributed to our shareholders. A cash dividend of $0.2 per American Depositary Share is expected to be paid on about October 5th, 2024, for holders of the company's ordinary shares and ADSs of record as of close of business on September 13th, 2024. Moreover, we are still doing share buyback.

Bruce Oren
Analyst at Black Lab Fund

In the second quarter of this year, we allocate $4 million to purchase shares in the public market, where our total deployment for the share repurchase program to $13.5 million by June 13th, 2024. Lastly, our business outlook. Based on assessment and current business and the marketing conditions, we expect our revenue for the third quarter 2024 to stand between RMB 1.4 billion to RMB 1.5 billion, with a healthy net profit margin. This represent our current and preliminary assessment, which may be subject to change and uncertainties. This concludes our remarks. Operator, now we are open for questions. Thank you.

Operator

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch tone phone. If you're 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 momentarily to assemble our roster. The first question comes from Ethan Yu with First Trust Group Inc. Please go ahead.

Ethan Yu
Analyst at First Trust Group Inc

Hi. Hi, good evening. Thanks for taking my question. Congrats on another solid quarter. My first question is about your AI development. As disclosed in your ESG report, the company has developed a range of AI systems. Regarding your AI strategy, have there been any notable advancements in AI applications or research? Can you share more details about any specific investment in AI sector? And also, have there been any significant breakthroughs in our AI product commercialization?

Operator

Excuse me, Ethan. I'm sorry, you're not coming through clearly. Is it possible to move the microphone closer to you and repeat, please?

Ning Tang
Founder, Chairman, and CEO at CreditEase

I got the majority of the question, yeah, and it's about the AI development, investment, commercialization, right?

Ethan Yu
Analyst at First Trust Group Inc

Yes.

Operator

... Okay, he accidentally disconnected. Just a moment. Well, he must have pressed something accidentally, so would you like to go to the next question and have him come back?

Ning Tang
Founder, Chairman, and CEO at CreditEase

Follow you.

Operator

Would you like me to have the next questioner ask, and then when,

Na Mei
CFO at Yiren Digital

Yeah, please. He will come back later, I think, yeah. Let's go to the next question.

Operator

Thank you. Okay, the next question is from Bruce Oren with Black Lab Fund. Please go ahead.

Bruce Oren
Analyst at Black Lab Fund

Yes, hello. I'd like to express appreciation to the board for the new dividend. I think that's a good move. I'd also like to congratulate and thank Mrs. Na Mei for helping to build an extraordinary company under circumstances that were often difficult. Thank you. I have two questions. The first is, could you add some insight into the large second quarter increase in net cash used in investing activities and net cash used in financing activities? And my second question is, where is most of the international business growth? Thank you.

Ning Tang
Founder, Chairman, and CEO at CreditEase

Can Na please cover them first?

Na Mei
CFO at Yiren Digital

Yeah, as I mentioned in my script before, our cash flow for our operating business, we can earn the nice income of pretty about. As we mentioned, in for to the purpose, our financial service segment, the management is from a financial leasing opportunity to pay likely our company is invested going on present, not.

Ning Tang
Founder, Chairman, and CEO at CreditEase

I cannot hear you very clear, Na.

Na Mei
CFO at Yiren Digital

Now it's better? I'm close to the phone now.

Ning Tang
Founder, Chairman, and CEO at CreditEase

It's better now. Yes, but I couldn't hear it very-

Operator

Thank you. Please repeat. Thank you.

Ning Tang
Founder, Chairman, and CEO at CreditEase

It's about the-

Na Mei
CFO at Yiren Digital

Also, now I will-

Ning Tang
Founder, Chairman, and CEO at CreditEase

Cash items and also our international business market.

Na Mei
CFO at Yiren Digital

Yeah, I'm going on explaining our investment cash flow, the reason why we increased so much in this quarter. And as I mentioned, as you remember that last year, we purchased a new financial guarantee company, Chongqing Jintong, to our financial service segment purpose. And, for this year, the management is still going on to improve my financial license to purchase for our this financial service business, like the AMC assets company and micro small lending companies and other financial guarantee companies for business development purpose. So for this financial license companies, before the formal come to the formal operations, the purchase process, based on the communication, the status, we should replace some investment amount to our partners, to lock the acquisition target.

Bruce Oren
Analyst at Black Lab Fund

So you can say our investment cash flow is remains the cash out, that most of our investment payment to our potential financial lease target. Think hope my question is answered. My question answer is ask your question.

Bruce Oren
Analyst at Black Lab Fund

Yes. Do you see the cash used plateauing or continuing to grow greatly?

Na Mei
CFO at Yiren Digital

Yeah, I think you can see for the cash from the operating will keep the healthy and the stable cash flow. And, also, we have used the cash to other investment opportunity, no matter the internal, financial license or the international overseas business development. Also, in our AI strategy, we also have many cash expansion, but in our forecast, we still have the confidence in our cash and the cash equivalent balance. We think a very strong status in the next quarter.

Bruce Oren
Analyst at Black Lab Fund

Thank you.

Operator

Once again-

Ning Tang
Founder, Chairman, and CEO at CreditEase

Our international business covers the Philippines and Mexico. We're also looking to expand to certain other markets in Southeast Asia and other parts of the world.

Operator

Thank you. Again, if you have a question, please press star then one on a touch tone phone.

Ning Tang
Founder, Chairman, and CEO at CreditEase

Is the first, yeah.

Operator

Yes.

Ning Tang
Founder, Chairman, and CEO at CreditEase

Gentleman, back?

Operator

Yes, we have him now.

Ning Tang
Founder, Chairman, and CEO at CreditEase

Okay.

Operator

Please go ahead.

Ning Tang
Founder, Chairman, and CEO at CreditEase

So we cover the AI investment implementation part. Yes?

Ethan Yu
Analyst at First Trust Group Inc

... Yeah, yeah, yeah. Hi, Ethan again. Can you hear me now?

Ning Tang
Founder, Chairman, and CEO at CreditEase

Yes, I can hear you very clearly. Actually, as I reported at the beginning, we use AI extensively in our operations. And we also try and leverage the technology capabilities developed internally for potential, like, external, like, opportunities. Like, you know, we have fintech partners, financial institutions that are interested in our solutions. And I hope we'll see some results later this year or first half next year. At the same time, we try and build a strategic investment and partnership infrastructure like ecosystem.

Bruce Oren
Analyst at Black Lab Fund

And so we've made a couple of small but, in my view, hopefully very promising investment in the AI space. But their contributions are very tiny. And as I going back to our like the AI like use cases internally, you know, for example, like we use AI in customer like acquisition, customer service. Like we use robots like and the large language models for like incoming outbound calls. Like say when we detect a customer like emotions change, it's time and to switch to like a human like operator, we'll do that.

Bruce Oren
Analyst at Black Lab Fund

And also, yeah, the machine can interact with, yeah, a customer up to the right point to switch to the human, and so on. And, of course, we use, like, voice recognition, like, technology. And, also, I gave the example, like, yeah, we, our large language models, yeah, used in the Philippines, right? Can do like, a great, like, visual recognition algorithm. Like, because, in the Philippines, like, IDs, personal identification, like a paperwork, it's really paper. So, it's not very digital, and, it takes, yeah, quite some skills to detect the risk. So, AI plays a key role there, and so on.

Bruce Oren
Analyst at Black Lab Fund

So, yeah, basically, yeah, we use AI extensively in our own operations and some like yeah technologies are really welcomed by outside like partners, prospective like buyers, yeah, so customers. So we'll try to monetize these technologies as well.

Ethan Yu
Analyst at First Trust Group Inc

Okay. Thanks, Tang. My second question is, there is continued rise in your R&D cost. Could you share with more color about how these costs have been used?

Ning Tang
Founder, Chairman, and CEO at CreditEase

Yeah. So, for our, like, AI, like, large language model development, we take, like, open source, like, a model combined with our own data and business algorithm to develop our proprietary models. And we purchase hardware and develop software and so on. And, so, in the second quarter, I believe, it was about 56 million RMB. Yeah. So, I think this is a money well spent. And, so I think, and our investment in AI has been prudent, but strategic for the future.

Ethan Yu
Analyst at First Trust Group Inc

Thank you, Mr. Tang. I have another question about your overseas business. Can I ask one more question about your overseas business?

Ning Tang
Founder, Chairman, and CEO at CreditEase

Sure.

Ethan Yu
Analyst at First Trust Group Inc

Yes. Can I know what is the total loan volume of facilitation overseas in second quarter of 2024? I'm impressed with the growth rate achieved in Philippines, and also you have mentioned that you have made another progress in Mexico, and what is the growth rate achieved in Philippines?

Ning Tang
Founder, Chairman, and CEO at CreditEase

... Yeah, the growth rate is, say it again, sorry. The last part?

Ethan Yu
Analyst at First Trust Group Inc

Yeah, what is driving this growth? And, what's your outlook for the revenue generated from overseas business and profit in, let's say, second half 2024 or the coming 2025?

Ning Tang
Founder, Chairman, and CEO at CreditEase

I see. Well, yeah, the growth rate has been phenomenal, largely because the base is too small. Yeah, so we really hope to grow the base. So, yeah, the second quarter, like, a loan volume was RMB 63 million. And, so, yeah, and we expect to do like an over 100 million in this quarter. We hope to maintain, yeah, a relatively high growth rate, like, yeah, for the foreseeable future, just because the base is still small. And also you ask about the growth driver.

Bruce Oren
Analyst at Black Lab Fund

I mean, the Philippines, and some other countries, in Southeast Asia and, also in Latin America. You know, they are large countries, yeah, with population of over like one hundred million. And, also, the target customer base is very young, which we like very much. And, so, they have really strong demand for, like, convenient credit. Yeah, like, but, the market certainly lacks such yeah opportunities, yeah, means. So, we are there to, yeah, leverage the capabilities we've developed in mainland China.

Bruce Oren
Analyst at Black Lab Fund

I think this is a very, very big opportunity, frankly speaking, for us to do like credit tech outside of mainland China in these like large population young markets like where digital finance is still in very early days and booming. Yeah.

Ethan Yu
Analyst at First Trust Group Inc

Okay, understood. May I know the current customer acquisition cost for these countries, especially in Philippines?

Ning Tang
Founder, Chairman, and CEO at CreditEase

Now you have this number?

Na Mei
CFO at Yiren Digital

Yeah. Okay, I will. Yeah, for our Philippine business, due to the acquisition costs, is based on our new customer acquisition strategy. And based on the current data in this quarter, about one person is around $5 or $10, one unit person. But I think in the second half year of this year, as mentioned above, we want to we hope look forward our development growth, our Philippine business and other also business. So in the second half of the year, for our business development, we will improve my expense to our new customer acquisition. So with time, the acquisition rate of one person will be a bit increased in the third and the fourth quarter.

Bruce Oren
Analyst at Black Lab Fund

But in this quarter, it's about $5 or $2, one person. Yeah.

Ethan Yu
Analyst at First Trust Group Inc

Okay. Okay, got it. Thanks. Thanks again. Have a great evening. Yeah.

Ning Tang
Founder, Chairman, and CEO at CreditEase

Thank you.

Operator

Thank you.

Bruce Oren
Analyst at Black Lab Fund

The next question comes from Dylan Paul. Dylan Paul, [audio distortion], please go ahead.

Analyst

Yes. Can you hear me?

Operator

Yes.

Analyst

I'm going to switch off speaker, like you recommended. Yes, thank you so much. This is Dylan Paul here, private investor. Myself and my friend Dale Tiongson, who's very sorry he can't be here, have been following and invested in the company for a couple quarters now along, and we want to thank you all for this strong result. We'd like to hear... and also mention that we'd like to hear from any people listening to the call who are interested in sharing bidirectional insights. So please reach out to us via email or social media, which is easily found online. We have two questions. The first is related to the guarantee business.

Bruce Oren
Analyst at Black Lab Fund

And I will say that these questions actually that Dale is the one who's most talented in understanding and insights on the business, so I won't be able to ask any further follow-up, but I wanted to get them out there for his sake. The first is related to the guarantee business. It seems like this is becoming a growing part of the business, and we're interested in some additional color. Maybe you could speak towards how the guaranteed contracts work in terms of sharing of credit risk and what that means for our return relative to default relative to the default rate on the underlying loans. And we also understand the accounting to be a typical for provisions. Could you maybe explain just how the accounting works or provide additional color?

Bruce Oren
Analyst at Black Lab Fund

Would it be helpful to show progression of loss provisions to write-offs in the quarter, similar to how you do for contract receivables in the 10-K? And then the second or the final component, which again maybe I should be separating these. Actually, let me stop right there, and then it sounds like. Sorry, this is my first time doing a call before. It sounds like I can come back and ask that second question. I won't have any follow-up on the first because your answers, yeah, I won't be able to adequately process them the way Dale does, when he's listening to them. So let me just stop right there with those first, that first question there, or question.

Ning Tang
Founder, Chairman, and CEO at CreditEase

Yeah, yeah, so, now can, yeah, we can please, we'll try to cover that. Maybe I can suggest that, yeah, we can have a follow-on call to go into some of the details with your friend. Yeah.

Analyst

Oh, okay. Gotcha. Okay. All right. That's fine. And then, let me see then, whether you have the same recommendation for the second question then, which is, it's related to the parent, controlling, shareholder, structure, which, I guess we can, or Dale in particular, but we have continued to be confusing for us. And I know we have asked about it, before, but just wondering, is there any further color you can provide regarding CreditEase and how the relationship works with Yiren? Which again, I've been involved in that question before, and so I know you've addressed it. And then he's mentioned this before, that he knows there's a large transaction in two thousand and nineteen, but...

Bruce Oren
Analyst at Black Lab Fund

And this is maybe the new part that can be addressed, and nothing has happened since. But are you expecting any related party transactions coming up here, if you're able to speak to that? And thank you.

Ning Tang
Founder, Chairman, and CEO at CreditEase

Not as substantial as, like, the one you mentioned several years ago. Not even close. Yeah.

Analyst

Okay. All right, well, that's all of my, our questions or Dale's, more specifically. And again, most importantly, thank you for that tour that you guys gave me while I was in China and, you know, answering questions at that time, and all your efforts that you've done with both myself and Dale to help understand the company. And we are currently very bullish and excited about everything you guys have accomplished so far.

Ning Tang
Founder, Chairman, and CEO at CreditEase

Thank you. You are more than welcome to come back, see us.

Analyst

All right.

Ning Tang
Founder, Chairman, and CEO at CreditEase

So, yeah, we'll book a follow-up call to cover yeah...

Analyst

Okay.

Ning Tang
Founder, Chairman, and CEO at CreditEase

All the details.

Analyst

Yeah. Yeah. And again, Dale's the technical guy. That stuff confuses me, too. I can't follow him sometimes on this stuff, so thank you.

Operator

This concludes-

Na Mei
CFO at Yiren Digital

Yeah, uh-

Operator

Go ahead, please.

Na Mei
CFO at Yiren Digital

Okay. Thank you for visiting our company. I hope you will come in again later. Okay. Thank you.

Operator

This concludes our question and answer session, and concludes the Yiren Digital conference call. If you have any further questions, please contact the Investor Relations team at Yiren Digital.

Analysts
    • Bruce Oren
      Analyst at Black Lab Fund
    • Ethan Yu
      Analyst at First Trust Group Inc
    • Keyao He
      Head of Investor Relations at Yiren Digital
    • Na Mei
      CFO at Yiren Digital
    • Ning Tang
      Founder, Chairman, and CEO at CreditEase
    • Analyst
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