Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Jiayin Group's third quarter 2024 earnings conference call. Currently, 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. 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 proceed.
Thank you, Operator. Hello everyone. Thank you all for joining us on today's conference call to discuss Jiayin Group's financial results for the third quarter of 2024. We released our earnings results earlier today. The press release is available on the company's website as well as from NewsWare 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 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. Mr. Yan will deliver his remarks in Chinese, and I will follow up with corresponding English translations. Please go ahead, Mr. Yan.
[Foreign language]
Hello everyone, thank you for joining Jiayin Group's third quarter 2024 earnings conference call.
[Foreign language]
In the third quarter, China's economic fundamentals were at a critical stage of adjustment, with several macroeconomic indicators showing positive changes. From the demand perspective, total retail sales of consumer goods increased 3.2% year-over-year in September, an improvement of 1.1% compared with August, reflecting marginal improvement. In the third quarter, we took a more proactive approach to driving growth, increasing investment in operations and borrower acquisition. We successfully achieved our established goals with a loan facilitation volume of approximately RMB 26.7 billion, setting a new record. Correspondingly, revenue from loan facilitation services reached around RMB 1.1 billion, representing a year-over-year growth of 18.1%, with our core business continuing to maintain steady growth.
[Foreign language]
In terms of technology empowerment, we have continued to refine our technologies and optimize our services. In the third quarter, we further deepened the application of large language models and focused on strengthening the construction of our central data platform. This endeavor aims to fully enable intelligent operations while continuously improving work efficiencies and customer services experience. We successfully upgraded the Wenquxing knowledge base, launching a knowledge-driven operational model. We also introduced our self-developed [Min Yi] automated machine learning platform, which significantly enhanced modeling efficiency in credit risk management and marketing scenarios. It has been nearly a year since Jiayin Group's rebranding, and the technology aspect has now become the company's most distinctive attribute. Looking ahead, we will continue to leverage technological innovation as the driving force for our growth, deepening and expanding the application of technology to fully advance the company's digital and intelligent transformation.
[Foreign language]
Regarding institutional partnerships, the company has been expanding its cooperation boundaries and actively exploring diverse and innovative collaboration models. By leveraging a high-quality and sustainable network of financial institutions, we are achieving more stable growth. As of September 30th, we had established partnerships with 70 diverse financial institutions. Building on the successful implementation of joint operation projects in the second quarter, we have collaborated with leading internet platforms to successfully launch borrower acquisition channels for multiple niche products. In the third quarter, we also actively advanced the implementation of joint projects with two financial institution partners, and two more are currently in discussion. By actively exploring and collaboratively developing innovative services, we look forward to achieving win-win outcomes and growing together with high-quality partners in the future.
[Foreign language]
In response to the diverse credit demands arising from various consumption scenarios, we have adopted a more proactive approach in our business deployment and operational strategies. As part of that effort, we have significantly increased investment in acquiring new borrowers. On the one hand, we have focused on several things and extensive operating borrower acquisition models in vertical domains, enhancing in-house acquisition capabilities and prioritizing user retention and long-term operational outcomes. On the other hand, we have collaborated with leading platforms in online streaming, e-commerce, and lifestyle services to explore different types of acquisition channels, uncover potential needs, and obtain differentiated supplements to our existing borrower base. In the third quarter, we obtained 826,000 new borrowers, representing a year-over-year growth of approximately 71.3%. These sustained efforts in borrower acquisition have yielded notable results.
[Foreign language]
Thanks to our precise and flexible risk management strategies, as well as the continuous iteration of our risk control models, our asset quality improved steadily in the third quarter. The 61-90 days delinquency rate was 0.55%, representing a downward trend for two consecutive quarters. Facing a large number of new borrowers, our strategies and models have been playing an active role across all stages, from the pre-screening of borrower acquisition channels and the RTA model to risk management in credit application and approval limits. We remain committed to a prudent operational approach, balancing growth in both quantity and quality. In addition, we fully upgraded our intelligent model architecture and continuously introduced richer data samples for model training. Through our self-developed Lin gxi AI engine and Fu xi model platform, we significantly improved modeling and deployment efficiency.
[Foreign language]
From the perspective of overseas markets, the demand for loan facilitation services continues to increase, with the number of new users for Jiayin's overseas business growing rapidly. In Indonesia, the quarterly loan origination volume and new registered users for our local business partners further increased compared with the second quarter. Despite intense competition in the Indonesian market, leading participants dominate significant market share through their financial strength, technical support, and brand influence. However, overall market demand remains strong, especially among underserved populations, presenting vast opportunities for business growth. In Mexico, we have observed the local regulations regarding the listing of financial apps are becoming increasingly strict. We believe that a normalized and mature regulatory environment will benefit the industry by promoting greater compliance and sustainable development.
Additionally, to better optimize our overseas business layout and focus resources on deepening and developing core markets, we strategically adjusted our business in the Nigerian market during the third quarter. Looking ahead, we are committed to providing even more exceptional services to our overseas clients.
[Foreign language]
In late September, a series of proactive monetary policies and innovative tools introduced by the Chinese government boosted market confidence and expectations. Compared with previous quarters, we are more optimistic about future development. We anticipate that the loan facilitation volume in the fourth quarter will be no less than RMB 25 billion, and we are confident in achieving our annual target. Additionally, to better coordinate company operations and manage cash flow, the board of directors approved a revision to the dividend policy, adjusting the distribution frequency. Under the revised policy, starting in the year of 2025, the company plans to declare and distribute cash dividends once per fiscal year, with the total amount no less than 15% of the previous fiscal year's net profit after tax. Further details regarding the dividend distribution will be provided in upcoming disclosures.
[Foreign language]
With that, I will now turn the call over to Mr. Fan Chunlin for financial remarks of the quarter. Please go ahead.
Thank you, Mr. Yan, and hello everyone for joining our call today. I will now review our financial highlights for the quarter. Please note that all numbers will be in RMB, and all percentage changes refer to year-over-year comparisons unless otherwise noted. Echoing Mr. Yan's remarks, despite the significant impact of ongoing macroeconomic shifts, we have consistently met the performance benchmarks we aimed for. Notably, our loan facilitation volume reached RMB 26.7 billion in the third quarter, a 10.3% increase compared with the same period last year. Our net revenue was RMB 1,434.9 million, representing a decrease of 1.5% from the same period of 2023. Moving on to costs, facilitation and servicing expense was RMB 419.1 million compared with RMB 544.3 million for the same period of 2023. This was primarily due to decreased expenses related to financial guarantee services, which were partially offset by the effect of increased loan facilitation volume.
Allowance for uncollectible receivables, contract assets, loan receivables, and others was RMB 11.6 million, representing an increase of 36.5% from the same period of 2023, primarily due to increased balance of receivables arising from loan facilitation. Sales and marketing expense was RMB 550.3 million, representing an increase of 34.9% from the same period of 2023, primarily due to an increase in borrower acquisition expenses. G&A expense was RMB 56.1 million, representing an increase of 5.5% from the same period of 2023, primarily driven by an increase in expenditures for employee compensation and related benefits. R&D expense was RMB 95.9 million, representing an increase of 36% from the same period of 2023, primarily driven by an increase in expenditures for employee compensation and related benefits. Consequently, our net income for the third quarter was RMB 269.6 million, representing a decrease of 16.8% from RMB 323.9 million in the same period of 2023.
Our basic and diluted net income per share were both RMB 1.27 compared with RMB 1.51 in the third quarter of 2023. Basic and diluted net income per ADS were both RMB 5.08 compared with RMB 6.04 in the third quarter of 2023. As of September 30, 2024, our cash and cash equivalents were RMB 741.2 million compared with RMB 880.2 million as of June 30, 2024. With that, we can open the call for questions. Ms. Xu, our Chief Risk Officer, and I will answer your questions. Operator, please proceed.
Thank you. If you would like to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by while we compile the Q&A queue. Thank you. We'll now take our first question. Your question is from the line of Yuxuan Chen from Huat ai Securities. Please go ahead.
[Foreign language] Okay, let me do the translation. I got two questions. The first one is noticing that the net revenue for this quarter decreased by 1.5% and the net profit dropped by 16.8% year -over -year. Could the management please explain the underlying reasons from both the company's revenue structure and the cost compensation? Also, could you provide a forecast for the future trend of the company's profit margin? And the second question is we also noticed that the company's loan facilitation volume for the third quarter was RMB 26.7 billion, showing growth both quarter- over -quarter and year -over -year. Looking ahead to the next few quarters, does the management expect this level of growth rate to continue or is there potential for it to accelerate further? Thanks.
[Foreign language]
Okay, Yuxuan, I will answer your first question. So in this quarter, the facilitation volume reached RMB 26.7 billion with a year-over-year increase of 10.3% and also a quarter-over-quarter increase of 11.25%.
[Foreign language]
So just as Mr. Yan remarks, our loan facilitation service revenue also reached RMB 1.105 billion in the third quarter, which also set a new quarterly record with an increase of 18.1% year -over -year and more than 16% quarter- over -quarter.
[Foreign language]
So for the guarantee service -related revenue, which has a lower profit margin, and from the company's perspective of overall business development and strategy, we have been gradually reducing the proportion of this kind of revenue in the recent quarters.
The guarantee-related revenue for this quarter was RMB 252 million, with a decrease of RMB 146 million compared to the RMB 398 million in the same period last year. In the fourth quarter, we are seeing a further decrease for this proportion of revenue as well.
[Foreign language]
Okay, so from the perspective of the proportion of different kinds of service revenues, the proportion of loan facilitation services revenue in the total revenue increased from 56.3% in the first quarter to around 76% in the third quarter. Well, the guarantee service-related revenue share of total revenue decreased from around 35% in the first quarter to around 17% in the third quarter. The company's revenue structure aligns with our strategic expectations for high-quality growth.
[Foreign language]
Yuxuan, you also mentioned the decline of our net profit year -over -year.
So as you said, our net profit decreased from RMB 324 million in the same period last year to RMB 270 million in the third quarter, which is a drop of RMB 54 million. And so the Q3 net profit margin was 18.7%, which is also decreased from the same period last year. But if you compare quarter -over -quarter, there is an increase of 13.2%. And I think the main reason for this is our strategy of pursuing high-quality growth and also mainly because of our costs. So talking about our borrower acquisition and equity costs, this increased significantly compared to the same period last year. The borrower acquisition costs alone increased by more than RMB 100 million compared to the last year. And also the proportion of the new borrowers in the Q3 also reached 32.2%.
The company will continue to focus on improving the conversion and retention rates of high-quality borrowers and exploring the value of users. The investment will strengthen the company's future performance growth and will contribute to long-term healthy and sustainable development of business. Also talking about our strategic investment in the R&D space, our R&D space increased by more than 36% year -over -year. The company is continuously launching new systems and applications to implement AI technology in business scenarios and improving efficiency through intelligent operations.
[Foreign language]
Okay, so for the last point of your question about our expectations of the net profit margin, in the first three quarters of the year of 2024, the net profit margin were 18.5%, 16.1%, and 18.7% for the most recent quarter, respectively. Going forward, as the guarantee-related service revenue, which decreased, the profit margins continues to decrease.
As the earlier investment in the new borrower acquisition continues to improve the borrower retention and conversion, contributing to the meet and long-term growth, we believe that the company's economies of scale and operational efficiency will further reflect in leading to an improvement in our profit margins.
[Foreign language]
Okay, Yuxuan, I will talk about your second question. Generally, we are highly confident in the market's growth potential and also the development of our platform business.
[Foreign language]
When discussing whether our growth will accelerate, it's well understood that the credit business is subject to both economic and seasonal cycles. Looking ahead, the pace of our operations will be carefully evaluated in the consideration of the broader macroeconomic trends and the development of borrowers' credit demand and also our outlook on the risks.
[Foreign language]
Internally speaking, given our team's demonstrated capabilities in the business and risk management, their sensitivity to the market dynamics and the overall market outlooks shared earlier by Mr. Yan, we are confident that in the coming quarters and also into the year of 2025, we can sustain strong growth trend. This position is to deliver even better long-term returns for our investors and exceed expectations in the journeys ahead.
[Foreign language]
Yes, that will be my answers to your second question.
Okay, operator, I think we can take the next question.
Thank you. Your next question is from the line of Hua Rong from Jin yu Asset. Please go ahead.
[Foreign language] Hello management, I have two questions. The first one is noticing that the accounts receivable balance at the end of Q3 exceeded RMB 2.8 billion, an increase of nearly RMB 400 million compared to the end of Q2.
Could the management provide more information regarding the significant increase in accounts receivable for Q3 and the status of its recovery? And my second question is, at the same time, we also noticed that the revenue from loan facilitation service increased by 10.3% year -on -year in the period, but the average borrowing amount per borrowing decreased by 30.5% year -on -year. What's the main reason for this? Does this suggest that the users are currently showing a preference for smaller loan amount? Thank you.
[Foreign language]
Okay, Hua Rong, I will answer your first question. So regarding our accounts receivable, the increase in the balance at the end of third quarter compared to the previous quarter is primarily due to the growth in our facilitation volume and corresponding revenue in this quarter. As we previously mentioned, our loan facilitation service revenue reached RMB 1.105 billion, setting a new quarterly record.
This revenue increased by more than 16% if you compare with the last quarter, which is in line with the growth of our accounts receivable balance and the company's accounts receivable collection. Yeah, so that's the condition of our accounts receivable position.
[Foreign language]
We also recognize that for a company with an asset-light business model just like us, the proportion of accounts receivable to our total asset has already exceeded 50%. And we will continue to closely monitor the recovery of our accounts receivable. So in the history, our accounts receivable collection is in very good condition. And so in the future, we will improve our control processes and further enhance the company's cash flow. [Foreign language]
[Foreign language]
Yeah, so Hua Rong, I will take your second question. So your second question is about the average borrowing amount per borrowing in this quarter.
And talking about the decrease year-over-year compared with our condition in the same quarter last year. So if you focus on our average borrowing amount per borrower every quarter, you could see that there is a decrease in every consecutive quarter.
[Foreign language]
And the changes in the average borrowing amount per borrower are mainly due to our business strategy optimization and also the structural shifts driven by the recent growth.
[Foreign language]
So firstly, I want to talk about our existing borrowers. So for them, we have consistently emphasized retaining high-quality borrowers and enhancing their experience. So in terms of the credit line withdrawal, we have further improved convenience to elevate their borrower experience, ensuring responsiveness to their needs. This approach supports the retention of our premium borrower, and for them, their credit requirements vary from maybe large amounts to relatively smaller ones.
[Foreign language]
So for the new borrowers, we have expanded the access for them who have potential growth already in the future, but for this part of new borrowers, their initial credit levels are often relatively lower.
[Foreign language]
So if we talk about the structural strategy about our borrower base, so due to our sustained focus on acquiring new borrowers, the average borrower base has been refreshed, indicating a better long-term growth potential.
[Foreign language]
So if you combine the two perspectives, this effort has led to an increase in the overall borrower base utilizing credit and a decline in the average borrowing amount per borrowing.
[Foreign language]
So that will be our answer to the question about the average borrowing amount per borrowing. Thank you.
[Foreign language]
Okay, thank you.
Thank you, operator.
Thank you. There are no further questions on the line, so I will hand back to the speakers.
Okay, 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.
Thank you all again. This concludes the call. You may now disconnect.