Good day, ladies and gentlemen. And thank you for standing by and welcome to the Jiayin Group’s Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, we are recording today's call. [Operator Instructions]. Now, I'll turn the call over to Julia Qian, Managing Director of The Blueshirt Group Asia. Ms. Qian, please proceed.

Hello, everyone. Thank you all for joining us on today's earning conference call to discuss Jiayin Group's financial results for the fourth quarter and full year of 2019. We released the results early 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; Mr. Fan Chunlin, 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 Safe Harbor provision 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 statements, except as required under applicable law. Also please note that unless otherwise stated, all figures mentioned during the conference call are in Chinese RMB. With that, let me now turn the call over to our CEO, Yan Dinggui. Mr. Yan will speak in Chinese and then our IR Director, Shelley Bai, will translate his comments to English. Go ahead, Mr. Yan.

[Foreign Language].

Hello, everyone. Thank you for joining our fourth quarter and full year 2019 earnings conference call. Despites ever -- evolving regulatory environment and the economic uncertainties, we made progress on many fronts in 2019. Since our success for listing on NASDAQ in May last year, we have been strategically transforming our business model in order to drive sustainable long-term growth. As you know, we disposed Caiyin and integrated Geerong Yun, a fintech platform that’s committed to connect consumers with financial institutions. It uses AI and big data analysis as a core technology. This critical restructuring streamlines our operations, enhance our risk management system and accelerates our collaborations with financial institutions.

[Foreign Language]

In the second quarter, right after the IPO, we started transitioning funding from individual institutions. We are glad to see that 45% of loan originations were funded by institutions in March. So far, we have successfully on-boarded 10 institutions and have another 20 institutions in preparation. Our institutional on-boarding process was affected by the 6 weeks lockdown in China, starting in February 2020 due to coronavirus control.

[Foreign Language]

Our market has been changing rapidly. In the fourth quarter, all of our fintech peers faced with challenges of an accelerating decrease in loan origination volume as a result in revenue decline. Our fourth quarter results include challenges in our peer group.

[Foreign Language]

Our fourth quarter net income was a modest RMB22.6 million. We have taken all necessary actions to reduce expenses, including reduction in promotions lending by increasing our focus on repeat borrowers, closely monitor and prioritize R&D the expenses and reduce costs related to loan originations.

[Foreign Language]

We started 2020 in an incredibly challenging environment in light of the combined impact from the coronavirus outbreak, the macroeconomic slowdown and the regulatory developments, which have all adversely affected our industry. Set through geographic diversity, most of our clients are outside of epidemic center. Due to that and a higher level of repeat customers, we expect the Q1 2020 loan volume to be flat sequentially, which should be only modestly affect in Q1 and in fact has returned to previous levels.

[Foreign Language]

China appears to have contained the spread of the virus. We are still in operations. We believe that consumer demand will rebound quickly once the virus is fully contained.

[Foreign Language]

In 2020, we will continue to invest in our technology platform and our talent. Our management team is stable, solid and focused. We invest for long-term growth and are committed to explore and identify opportunities to recognize growth.

[Foreign Language]

We have laid out three key initiatives for this year. First, identify opportunities to drive business growth and expand scalability of our platform. We are very actively exploring an opportunity to acquire a nationwide online micro lending license. Several discussions are being planned and we expect to reach progress. We’re also continuing to focus on the transition of funding to institutions. The speed of transition will depend on how quickly the virus crisis subsides. Even as the coronavirus pandemic spreads globally, China is recovering after six to eight weeks of lockdown for the entire country. Businesses are reopening and the consumer confidence and spending are gradually recovering. We'll have more clarity on economic recovery in next several months. We remain optimistic.

[Foreign Language]

The second initiative is to build strategic partnerships with financial institutions, including the possibility of strategic investments. We have identified several partners for potential investments and cooperation.

[Foreign Language]

The third initiative is to continue to expand into Southeast Asia and Latin America, more so notably India, the Philippines, Indonesia and Mexico; via our financial technology platform companies, our advanced risk management system, AI based consumer behavior analytics, and operational experience can be easily utilized in these markets. Of course, our roadmap for overseas expansion will be dependent on the status of the virus outbreak in those regions as well.

[Foreign Language]

We’re [still] up to resume growth. We are confident that we can emerge from this challenging period with an agile platform, loyal customers and strong execution. With that, I will now turn the call over to our CFO, Chunlin, who will offer more details on fourth quarter financial performance. Chunlin, please go ahead.

Thank you, Mr. Yan and Shelley. And thanks everyone for joining our call today. Before I go into details about our financial results, please note that all numbers presented here are in RMB and the percentage changes on year-over-year basis, unless otherwise stated. Our press release contains all the figures and the comparisons you need. So I will only highlight some of the key points here. We are pleased to have sustained healthy profitability in 2019. Despite very challenging headwinds, we posted a modest net income of RMB22.6 million in the fourth quarter. These results reflect the challenging marketing conditions and an evolving regulatory environment. During the quarter, we decreased our outstanding loan balance, reduced the number of investors and reduced number of borrowers. This caused lower loan origination volume and resulted in the top-line decline. While we wait for further clarification on the regulatory situation, we are managing our business prudently by closely watching our costs and sustaining margins by operating more conservatively and efficiently. We shifted our focus to repeat lenders and repeat borrowers. As you know, serving repeat customers is more cost effective and has less credit risk. We were also able to effectively reduce our sales and marketing expense and costs related to loan originations. At the same time, both average investment amounts and average borrowing amounts were up significantly. This further reflected our lenders’ and borrowers' strong confidence in our platform. We also closely monitored and managed R&D expense. We made significant investments in technology in the current -- in first half of 2019. With a challenging environment now, we reprioritized R&D expense in Q4 resulting in meaningful reductions. General and administrative expenses was up, but this was mainly due to the increased share-based compensation expense allocated to G&A. In addition, in Q4, we continued to accelerate the transition of funding to institutions and the proportion of institutional funding improved steadily. As Mr. Yan mentioned earlier, 45% of loan volume were funded by institutions in March this year. If coronavirus outbreak is fully contained, we expect even more progress. The coronavirus outbreak has adversely impacted our industry. The impact to our business is modest due to our geographic diversification and our focus on the repeat high quality customers. Loan volume in Q1 2020 should be flat compared to Q4. We have seen some early signs of improvements in recent weeks. As the country opens, people are returning to work. We hope economic activity will pick up and consumer spending will resume. Our balance sheet is solid with RMB122.1 million in cash and equivalents compared with RMB41.4 million at end of 2018. This solid cash position will enable us to execute our 2020 strategy and reignite growth. With that, let's open the call for questions. Mr. Yan; Mr. Xu, our Chief Rick Officer; and I will answer questions. Operator, please go ahead.

Thank you. Ladies and gentlemen, we'll now begin the question-and-answer session. [Operator Instructions]. We have a question from the line of Craig Irwin of Roth Capital Partners. Please go ahead.

The first thing I wanted to ask about is the -- with the change in borrowing base, with the virus, are you seeing any industry-wide deterioration in credit quality? What's been the current delinquency rate on loans and how does it compare to 6 months ago, a year ago? And is this already starting to improve given that I guess we're at full 90 days after the end of the December fiscal quarter?

Thanks, Craig. This is Yifang Xu. I'm going to take all those questions. So in terms of very specific delinquency numbers, we are ready to publish that in our annual report but we’ve been generally talking about the trending and the impact coming from the coronavirus pandemic outbreak. So as you mentioned early in your question that we are seeing some adverse impact from this outbreak, we are seeing something very similar on our business as well. However, overall assessment on impact is modest. So here how we are approaching this impact from a management -- from a business perspective? First, we are taking a constructive position in terms of new loan generation. We are limiting our loan growth in our Q1. As a result, you're likely going to see a flat growth in terms of the loan volume in Q1 2020 compared to Q4 2019. In addition to that, we are also making a deliberate choice to stick to shifting our loan portfolios towards our repeated borrowers, just to be more conservative in terms of risk perspective. Secondly, we are seeing some of our customers are truly impacted by the pandemic outbreak. We are rolling out some credit relief solutions and which is granted on a case-by-case basis. We are seeing the penetration rate is relatively low due to our geographic diversity. Most of our customers are residing outside of the pandemic center. As a result, we are likely going to see very limited impact in terms of that -- the loss rates. Thirdly is that in the month of February, just as our peers, we are facing some impact due to the lockdown period and the impact on our customers on the repayment as well as some disruptions to our collection operations. As a result, we are seeing some uptick in our delinquency rate and some impact in terms of our collection rate. But good news to report to now is, we are seeing early signs of improvement in recent weeks and working steadily. The numbers are rolling back toward the levels seen before the outbreak and relatively that we are back to the -- in terms of both delinquency rates and collection rates, we’re back to the levels before the virus outbreak period -- time.

My second question is about the first quarter. So, the first quarter is done. Today is the 1st of April. Can you share with us your cash balance today on April 1st, and can you comment whether or not you expect the first quarter to be profitable without the benefit of something like a tax rebate or something like this?

Thank you Craig for the question and I will take this one. The cash and cash equivalents as of the end of 2019 is RMB120 million, which is RMB50 million bigger than the number of the end of 2018. And the good thing about our cash position is the net operating cash -- or the net cash provided by the operating activities is positive in 2019. And for quarter one, due to the loan origination volume, we are in line with the number of Q4 because it is already April the 1st, and I can’t -- I’ve disclosed this number to you already. The loan origination volume for Q1 is RMB1.2 billion as well. It's exactly the same as Q4. And recall, the management team has taken measures to manage the overall cost structure and we are going to see a decrease of operational cost and the net profit margin will come back to our normal double-digit. That's what I'm expecting.

So normal double-digit in the first quarter or in the second quarter?

It's hard to tell, but I would say our net profit margin in fourth quarter last year was not a normal margin. And we're expecting to see it to be normalized in the first quarter or second quarter this year. But it’s still largely subject to the containment of the pandemic outbreak.

Okay. And I just -- I want to understand this very clearly, so I guess I'm asking the question again. So, in the fourth quarter of 2019, the cash position declined by RMB115 million to RMB122 million. I believe in your answer just now you confirmed that we should be flat or similar on the cash balance to that RMB120 million, RMB122 million exiting the March quarter. Can you just confirm that I understand that correctly?

Yes, I think the understanding is basically correct. As I've said, the loan origination volume for Q1 this year was same as Q4 last year. And if you do a simple calculation, basically the take rate for the Q1 probably will be a little bit lower than Q4 because in Q1 we increased the portion of the institutional funding to like 27%. That's why the take rate was a little bit lower. But the key thing here is our operating cost will also be lower because we did some actions to manage our overall cost structure in Q1 this year. And this benefit will also be reflected throughout the full year in 2020. So that's the positive side. As the CEO just mentioned, this year our strategy is to grow the business. So the overall loan origination volume for the whole year we’re still trying to grow our business. So that's the bottom-line, yes.

Yes. So then turning to originations using funding from institutional investors, you made huge progress in 2019 despite the challenges as we finished the year. Can you maybe frame out for us what your priorities are in working with institutional investors over the next couple of quarters? Where would you like to be with institutional investors by the end of the year? How many institutions do you think is a reasonable number for us to expect to be participating on your platform? Any other color you can provide would be helpful.

Thanks, Craig. This is Yifang again. I'm going to take question. Yes, as you noted early that since we -- since mid of 2019, we have made significant improvement in terms of shifting our strategy towards having the funding source -- our funding source, funded by institutional -- institution partners. And the numbers pointed out in the Q1 ‘20 -- in Q4 2019, we are reporting a 16% our funding -- our loan origination will be funded by our institution investors compared to 10% in the prior quarter, which is Q3 2019. And we have seen steady improvement even during the time period of what we've seen at the beginning of the 2020. Chunlin actually mentioned that number that is pretty exciting earlier, which is in the Q1 we are seeing a rate of 27% for loans, will be coming from institution investors. And in March we are seeing 45% fund from institution investors. And we are -- in the meantime, we are keeping our total origination flat compared to -- in Q1 2020 compared to Q4 2019. So, so far we have 10 financial institution partners, we're working with, fully on-board. And again we are reporting a healthy pipeline. So, we have 20 financial institution partners, which are -- who are under discussions with us and prepared to be on-boarded over the next several months. And yes, as said, this has turned back to normal. Our business development teams for our institution investors are continuing to working hardly towards that goal. We are expecting going to have our full transition to institution investors sometime soon in 2020. In the meantime, while Mr. Yan was discussing our overall strategies, we are actively exploring opportunities to acquire [indiscernible] lending license. So we are having several conversations, as we are seeing some progresses and hopefully we're going to report some good stories sometime soon. In addition to that, we are -- while we’re deepening our relationship with our institution -- institutional funding sources, we are also seeking -- building -- seeking to build strategic partnerships with our financial institutions with the possibilities to choose those strategic investments. So with all these efforts in place, we are hoping in 2020 that we -- our loan origination volume and our loan portfolio will grow.

Last question, if I may. In your prepared remarks, you mentioned multiple international geographies, including countries like the Philippines and South America. Can you maybe frame out for us what the status is of those markets for Jiayin Group? Do you expect a material contribution from any of those markets in 2020? How rapidly do you see them growing for you over the next couple of years?

Now, one of our initiatives to drive our international strategy is to expanding to the Southeast Asia and Latin America, especially in the Latin America market. But as of now -- and we are taking a close watch on how this pandemic situation is spanning worldwide. And specifically even in China that impact has been -- that even in China that impact has -- somewhat is contained, which is -- kind of still having a strong growth for our overall business in terms of international strategy, in terms of how soon things will be under control. And what is the impact -- economic impact from mid to long-term perspective on the international markets, we are still waiting to see. But on the material side that we can report is that in Indonesia we have -- in the trial period of obtaining our license, peer-to-peer license, that's our milestone that we like to report on this call that how -- in terms of how soon we can grow the business and have significant expansion on the business, we are still waiting to see.

Thank you. [Operator Instructions]. And seeing no more questions in the queue, let me turn the call back to Mr. Fan for closing remarks. Please go ahead.

Alright. 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.

Thank you. Ladies and gentlemen, that concludes our conference for today and thank you for participating. You may now all disconnect.