Jiayin Group Inc. (NASDAQ:JFIN) Q4 2021 Results Earnings Conference Call March 31, 2022 8:00 AM ET
Company Participants
Shawn Zhang – Investor Relations
Dinggui Yan – Chief Executive Officer
Jin Chen – Co-Chief Financial Officer
Xu Yifang – Chief Risk Officer
Conference Call Participants
Andrew Scott – ROTH Capital
Operator
Good day, ladies and gentlemen, thank you for standing by. And welcome to the Jiayin Group’s Fourth Quarter 2021 Earnings Conference Call. Currently all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow that time. As a reminder, we are recording today’s call. If you have any objections you may disconnect at this time.
I will now turn the call over to Mr. Shawn Zhang from Investor Relations of Jiayin Group. Please go ahead.
Shawn Zhang
Good day, everyone. Thank you all for joining us on today’s conference call to discuss Jiayin Group’s financial results for the fourth quarter and full year of 2021. We released the results earlier today. The press release is available on the Company’s website, as well as from newswire services.
On the call with me today are Mr. Yan Dinggui, Chief Executive Officer; Celia Chen, Co-Chief Financial Officer, and Ms. Xu Yifang, Chief Risk Officer.
Before we continue, please note that today’s discussion will contain forward-looking statements made under the Safe Harbor Provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the Company’s actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the Company’s public filings with the SEC.
The Company does not assume any obligation to update any forward-looking statement, except as required under applicable law. Also, please note that unless otherwise stated, all figures mentioned during the conference call, are in Chinese renminbi.
With that, let me now turn the call over to our CEO Mr. Yan Dinggui. Please go ahead, sir.
Dinggui Yan
Hello, everyone. Thank you for joining our fourth quarter 2021 earnings conference call. In 2021, we continue to navigate a volatile macro environment by remaining committed to building upon our core competitive advantages.
After we shifted our funding sources from individuals to institutional funding partners in 2020, with priorities forging partnerships with the financial institutions, diversifying our funding sources, strengthening our risk management systems and enhancing the credit profile of our borrowers and improved our asset quality.
We have observed multiple policy changes in 2021 – 2020 [ph] including the half on loan pricing at 24%. We actively responded to the new policies and airline our pricing strategy in line with the regulatory requirements of the founding partners.
As a result, despite intensifying regulatory, oversighting and macro uncertainties. We steadied at the forefront of the fintech space and delivered solid financial and operating results in 2021.
Notably, loan origination volume increased by 89.7% year-over-year to RMB21.91 billion from RMB11.55 billion in 2020, while our revenue grew by 36.9% to RMB1.78 billion.
As we sustain our rapid portfolio growth, we also maintain a manageable delinquency rate by improving our overall credit risk profile of borrowers on our platform. Our 30-day delinquency rate finished there at 1.31% compared to 1.34% at the end of September. The 90-day delinquency rate increased slightly to 0.72% from 0.6% at end of September, but are still ahead of the industry average.
In the fourth quarter, as we continue to expand our borrower base, we refined our marketing programs to prioritized acquiring new customers with a high credit quality, as we improved the accuracy of our marketing programs. We are able to reach our target customers more efficiently.
Consequently, the number of the borrowers with above average credit profile continues to arise which, in turn, enabled us to increase our platform’s overall credit quality while expanding our borrower base.
We also continued to invest our development of our integrated highly automatic platforms with industry-leading risk management capabilities to serve as ideal [ph] partners to financial institutions. By the end of 2021, we have forging partnerships with 38 financial institutions, and we are currently in discussion with another 46 institutions to further expand our partnerships and diversified funding resources.
As of now, most of our existing institutional funding partners are commercial banks. We are actively developing collaborations with national banks and consumer financing services provider to mid scale [ph] the certain challenges we had in regional markets with our existing partnership structure.
Meanwhile, we remain focused on empowering our partner financial institutions through our full suite of serving offerings that span from borrow acquisition to loan facilitation [ph] services.
We are constantly optimizing these services to help our partner’s better execution, their business initiatives [ph] by improving their operating efficiency and decision-making process. Going forward, we plan to explore more innovative ways to cooperate with our funding partners.
In addition to deepening our collaboration with financial institutions, we also continue to optimize our product portfolio during the quarter. For example, we launched a loan program for a small business.
Owners in the fourth quarter, small business owners are one of the most marginalized and underserved groups for loan success [ph] even though small and middle-sized business contribute 50% of the taxes, 60% of the Chinese GDP and 70% of the technical innovation, 80% of the [indiscernible] of all companies in the country to better serve the backbone of our country’s economic development and a common prosperity initiatives. We will continue to increase the investments in product offering for SMEs.
In terms of our global expansion, we handled our growth strategy for each region based on the current stage for our business development, the Mexican market, in particular, achieved a robust growth momentum, and we are also on track to develop new partnerships with additional licensed financial institutions in Mexico to further expand our local operations and fortify our market leadership.
Loan volume in the [indiscernible] we will – we have already obtained a necessary financial service license. We continue to accelerate our business expansion. We are regularly developing and on-grading our products and services in region, which enable us to continue to improve the region profit margin.
Going forward, we plan to penetrate as other very promising international markets, especially emerging markets in the Southeast Asia to build a market and tested [ph] cross-field and diversified global business metrics.
Looking back on 2021, we saw major changes on the regulatory front and unprecedent disruptions to the long chord [ph] by COVID 19, as well as other increased uncertainties in the macro environment.
However, we remain un-deteriorate by these challenges to achieve steady business growth, improve our credit risk profiles in expanding our borrower base and optimize our product portfolio. As evidence of this success in our efforts, we recorded RMB21.91 billion in loan origination volume in the full year of 2021 near the higher aid of our previous guidance. For 2022, we are confident that our market leadership will enable us to carry through our growth momentum to achieve loan origination of RMB36 billion.
With that, I will now turn the call over to our Co- CFO, Celia Chen. Celia, please go ahead.
Jin Chen
Thank you, Mr. Yan. And thank you, everyone, for joining our call today. As Mr. Yan mentioned, we achieved a robust financial performance in the fourth quarter and full year of 2021.
In the first full year after our business transformation, we grew our loan origination volume by 89.7%, revenue by 36.9% and net income by 87.1% year-over-year. The solid growth further demonstrated the effectiveness of our strategies in diversifying our funding sources, strengthening our risk management and improving asset quality.
Now let me go through our financial highlights for the quarter. Please note that unless stated otherwise, all numbers quoted are in RMB, and percentage change refer to year-over-year comparisons.
Net revenue was RMB368.2 million, up 8.2%. Revenue growth was primarily driven by the significant growth in loan origination volume, which increased 75.3%. Other revenue was RMB7.1 million, down 84.4%. This decrease was primarily due to change in the consolidation of our overseas entities.
Moving on to cost. Origination and servicing expenses were RMB84.8 million, up 30.7%, primarily due to the increase in credit assessment expenses which was in line with the increase in our loan origination volume.
Allowance for uncollectible receivables, contract assets, loans receivables and others were RMB17.2 million, down 15.3%. Since the outstanding loan balance of our legacy P2P lending business was reduced to zero in November 2020.
G&A expense was RMB46.8 million, up 9.1% as we continue to enhance our talents to support our business expansion. R&D expense was RMB46.6 million, up 11.2%. We recorded higher employee compensation and benefit costs and increased the investment in developing our IT infrastructure in the quarter.
Sales and marketing expenses were RMB156.9 million, up 33.5%, which is in line with the growth of our loan origination volume. Consequently, we reported a net income of RMB122.5 million, compared to RMB81.1 million in the same period of last year. We ended this quarter with RMB182.6 million in cash and cash equivalents, compared with RMB117.3 million as of December 31, 2020.
Moving to now guidance. We expect our loan origination volume in the first quarter of 2022 to achieve year-over-year growth of over 78% and a sequential growth of over 37%.
With that, we can open the call for questions. Mr. Yan, our Risk – and our Chief Risk Officer, Mr. Xu and I will answer questions. Operator, please go ahead.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] And we have a question coming from the line of Andrew Scott from ROTH Capital. Your line is open.
Andrew Scott
Good morning. Thank you for taking my questions. My first question is about the recent COVID lockdowns in China. I was wondering just how that will affect origination growth, particularly in the first half of the year? Any color you can provide there would be great?
Xu Yifang
Hi, Andrew. This is Yifang. I’m going to take it on your first question. Thank you for your instillations about our lockdown situation in Shanghai. We are pleased to report that the current lockdown situation hasn’t had any impact on our Q1 growth at all.
In fact, we are expecting a pretty – very decent, probably better than have planned – has projected earlier for Q1 total lending volumes. We are actually seeing some expected higher rate in terms of our call [ph] collection volumes that has gone up by a few percent in terms of the number of costs collected by our customer service.
On the same time, we – our investment in our IT infrastructure has enabled us to collaborate it effectively or even when we are working from a remote mode. So that – I hope that answers your question. Thanks.
Andrew Scott
Yes. Thank you very much for the details. My second question here is about your operations in international markets. I know you guys have one of the top players in Mexico, and we’re looking to expand in Nigeria.
So I was just looking for an update on how origination growth is going over there if you plan on entering any new markets and if you might start sharing metrics in these other countries?
Xu Yifang
So Andrew, this is Yifang again. Let me take on your questions on the international expansion. As in the early disclosure about our international market, yes we are going to give a little bit more color into each individual market.
So in Mexico, as you said, we remain as a top player in the market from the volume-wise as well as the total number of customers, number of transactions. We remain to be the top player and the numbers are pretty stable. What we’ll be focusing on in Mexico is really to improve its risk metrics there.
So if we move on to the Nigeria, as we discussed last time, in Q3, should be in the second half of the Q3, that we have secured our – the official lending licenses to operate in online lending in Nigeria.
So the Q4 for Jiayin has to really be focusing on to ramping up the acquisition volumes at a faster pace. So just give us a little bit of more details into how – what the growth is looking like. The transaction volumes we are seeing month-over-month is in the high double-digit number in – for the entire Q4 period.
And as we are able to further train our fraud detection models and the risk assessment models, so the size of the loans we’re expanding in this market are also seeing some growth. We are looking at a 20-plus percentage growth in terms of the size of the loans, as evidence showing that we are targeting more healthier customers, and I’ve seen – we are seeing improvement on our risk metrics there.
But even saying that, we are seeing some – we are facing some uncertainties in these foreign [ph] markets, one being the impact on the COVID. The collections of the – the collection operations is heavily still relying on a operating – there’s a call center – call center employees. So the COVID situation had some impact over there.
We are an employee AI supported, so the voice service is there to help us to navigate through the downturn. But we are right now a regressing [ph] that is going back to the office operating in a steady state again.
On the other side, on the customer acquisition, we are further expanding our customer acquisition channels, coming with major online marketplace. But we are – on the other side, we are also exploring some smaller partners. So overall, that we are seeing – as we started to accumulating repeat borrowers, so we are seeing the volumes in the Nigeria market is growing, as well as the risk metrics is getting more stable and improving.
So that’s what we have in the Nigerian market. When we move down to Indonesia, if you’re looking at 2021, overall, in the first half of 2021, we’re seeing some pretty healthy good momentum over there. Unfortunately, it was put in hold because of the regulatory changes. But overall, we remain pretty positive about the maturity of the Indonesian market in terms of online lending.
We see it as a strong – we have a strong strategic fit in terms of our capabilities and proven track records in the Chinese online market where we can have a strong foundation for us to empower our growth in Indonesia.
So now we are working on – we actually – we have already identified and we’re working on executing that strategy to re-enter the market in a legal and regulatory compliant approach to re-enter the market.
We are – so that’s where we have been – the major markets, international markets were improving in the last 2021, looking at 2022, we are evaluating some of the potential markets. But again, because of the COVID situation, we are taking a prudent approach in terms of making a big strategic quick move into a new market at this point. I hope that answers your question.
Andrew Scott
Yeah, that was very, very helpful. So thank you very much. Last one for me, with you as an online platform and China now putting in new cybersecurity regulations in place. Do you believe you’ll need to get reviewed? Do you believe this may impact shareholders over in the US. Can you just provide some background there?
Xu Yifang
On that question, we don’t have too much report on, but we expect that the SCRIPT Standard [ph] will be released for the public companies. And at this point, as a technology company that we are pretty confident that we’re meeting all the standards. But we – yes, as a result, we don’t foresee any risk benefit [ph]
Andrew Scott
That is good news. Thank you very much for your answers. That’s all for me for now.
Operator
Thank you. And I’m showing no further questions at this time. I will now turn the call back over to management for any closing remarks.
Shawn Zhang
Thank you, operator. And thank you all for participating on today’s call, and thank you for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress.
Operator
Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.
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