Yiren Digital Ltd. (NYSE:YRD) Q3 2023 Earnings Call Transcript November 21, 2023
Operator: Thank you for standing by and welcome to the Yiren Digital Third Quarter 2023 Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Ms. Lydia Yu, Investor Relations. Please go ahead.
Lydia Yu: Thank you, operator. Hello, everyone, and welcome to our third quarter 2023 earnings conference call. Today’s call features prepared remarks by the Founder, Chairman, and CEO of CreditEase and our CEO, Ning Tang and our CFO, Ms. Na Mei. Our SVP, Ms. Mei Zhao, will join the presenters in the Q&A session. 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. Forward-looking statements involve inherent risks and uncertainties. As such, the company results may be materially different from the views expressed today. Further information regarding future risks uncertainties or factors is included in our filings with the U.S. SEC.
A finance executive tapping away on a digital tablet, demonstrating the company’s digital innovation.
We do not undertake any obligations to update any forward-looking statements as required under the relevant laws. During this call, we will be referring to certain non-GAAP financial measures, and supplemental measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a replacement for the financial information prepared and presented in accordance with U.S. GAAP. For information about those non-GAAP measures and reconciliations to GAAP measures, please refer to our earnings press release. I will now pass it on to Ning, our CEO, for opening remarks.
Ning Tang: Thank you, Lydia. Hi, everyone. Thank you all for joining our earnings conference call today. As China transitions into the post-COVID era, recent macroeconomic data shows economic recovery gaining traction, with China reaching 4.9% year-over-year GDP growth in the third quarter, beating market expectations, but still a decline on a year-over-year basis from the previous quarter. In the face of overarching challenges on the macroeconomic front, we have consistently directed our investments toward research and development, aiming to elevate customer experience and optimize operational efficiency. As a result, over the past few quarters, we have enhanced the quality of our earnings. Consistent improvement in our bottom line quarter-over-quarter.
Strategic approach positions us to capitalize on growth opportunities once the economy rebounds. We reviewed our new corporate positioning as an AI and technology driven financial and lifestyle services platform that is anchored by three key pillars: financial services; insurance; and consumption and lifestyle services. This quarter, we have started utilizing AI-assisted marketing tools to increase our advertising targeting accuracy and achieve greater social media visibility. We are also in progress of upgrading our chatbots to assist in early stages of the loan collection process. Let’s get into this quarter’s business update. First, on financial services. In the third quarter of 2023, total loan volume was RMB9.8 billion, representing a 56% increase year-over-year.
The total number of borrowers in the quarter increased 63% from prior year. 1.2 million view on our Yi Xiang Hua APP continue to increase for the sixth consecutive quarter by 23% from prior quarter to 2.9 million. And the number of average transactions per user maintained stable at 3 times, indicating high user stickiness and activeness. In terms of user distribution for Yi Xiang Hua, approximately 30% are first-time borrowers, while the remaining 70% are repeat borrowers. Borrower acquisition continue to explore new acquisition channels, as well as optimize our acquisition methods to attract high-quality new customers. During this quarter, we experimented with utilizing our WeChat [Technical Difficulty] Additionally, we initiated collaboration with selected media partners to fine tune our acquisition model and enhance the accuracy of user targeting.
Combined with utilizing AI-assisted marketing tools, these new initiatives resulted in loans facilitated to new borrowers, increasing by 49% this quarter from prior quarter. Our international expansion efforts have experienced significant growth in the Philippines market. Our third quarter results showing a remarkable increase of 172% compared to the previous quarter. We have also achieved notable improvement in risk management as we continue to join and fine-tune our risk models tailored for the local market. [indiscernible] continue to pursue growth in international markets and are excited for this [indiscernible] as a substantial driver for future growth. Our funding front continues to diversify our funding sources, we noted approximately 5% decrease in institutional funding costs this quarter as compared to last quarter.
Asset quality, it remains stable with 15 days to 89 days delinquency rates at 3% and [M1] (ph) collections rates improved by 0.5 percentage points this quarter. Consumption and lifestyle services seen continue rapid growth over the past few quarters, with total GMV generated this quarter, increasing 42% from the prior quarter to RMB563 million. The total number of active users this quarter also increased 22% from prior quarter to 2.96 million. The growth in our consumption and lifestyle services segment has also created synergies with our financial services segment, with active users further stimulating an increase in loan demand, resulting in a mutually reinforced loop in our ecosystem. Lastly, on our insurance brokerage business, gross premiums reached RMB1.4 billion for third quarter of 2023, up 43% year-over-year, and 7% quarter-over-quarter, which is significantly ahead of industry average.
Second quarter was the peak for first-year premiums due to the timing of the new pricing regulation capping future product returns at 3%. Breaking down, this quarter 62% of total premiums were attributed to life insurance premiums, while property insurance premiums accounted for the remaining 38%. [Technical Difficulty]
Na Mei: [Technical Difficulty] business volume expands. Research and development expenses increased 17% year-over-year to RMB39 million [indiscernible] and AI and tech innovation across our company. Origination and service costs increase 10% year-over-year to RMB245 million, mainly driven by an increase [indiscernible] service costs relating to our insurance brokerage segment. G&A decreased 30% year-over-year to RMB54 billion as we continue to realize operating efficiency. Allowance for contract assets and receivable was RMB84 million for this quarter, remaining stable and above 0.9% of loan facility. On to our bottom line, we continue to deliver a strong profit of RMB554 million this quarter, increased 105% from prior year.
We generated about RMB645 million net cash from operations in this quarter, an increase of 88% from prior year. On the balance sheet side, our balance sheet remains strong with the total cash and cash equivalent of RMB5.4 billion by the end of this quarter. This quarter, we deployed $2 million to pay back our shares in the marketing — public marketing. As of the third quarter end, the company has accumulated [$5.5] (ph) for our share repurchase program. We maintain confidence in the fundamental aspect of our company’s business and growth prospect. Based on assessment of our business and marketing conditions, we expect our 2023 full-year revenue to stand between RMB4.3 billion to RMB4.9 billion with net profit margin expected to remain stable.
This [indiscernible] our current and preliminary review [indiscernible] change and uncertainty. With that, we conclude our closing remarks. Operator, now we can open for questions. Thank you.
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