Yiren Digital Ltd. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Services: Notable improvements in asset quality due to strong risk management and borrower optimization; total loan volume grew 36% YOY; lending platform Yixianghua had monthly active users around 4.5 million, up 52% YOY; added nearly 20 new funding partners, and funding cost reduced by 64 basis points quarter-over-quarter.
• AI Strategy: Six proprietary AI systems support daily operations in domestic and overseas markets. In domestic operations, AI enhanced collection and quality assurance processes, with 77% of day one overdue cases covered by AI Robots, saving labor costs. In overseas operations, an AI-powered ID verification model in the Philippines achieved nearly 95% accuracy. Over 50 AI professionals were hired to strengthen the AI talent pool.
• Insurance Brokerage: Despite industry challenges, total premiums recovered, with progress in online business models and customer acquisition through social media and dedicated private traffic operations. Synergies with lending platform are being explored through customized insurance products.

Segment Performance

• Financial Services: Third quarter 2024 total loan volume reached RMB13.4 billion, a 36% year-over-year increase. Revenue from the Financial Service segment was RMB836 million, up 25% year-over-year. Asset quality improved due to strong risk management and borrower optimization.
• International Business: In the Philippines, loan volumes and revenues posted double-digit quarter-over-quarter increases, with ongoing efforts to optimize the customer base and iterate product offerings.
• Insurance Brokerage: Total premiums recovered to RMB1.35 billion, a 27% quarter-over-quarter increase, driven by online business initiatives and progress in customer acquisition through social media with AI-generated content. New policy premiums from social media channels contributed RMB7.1 million.
• Consumption and Lifestyle Services: Total GMV was RMB508 million, a 10% year-over-year decline, with plans to refine the product range to better serve evolving demographics.

Guidance

• Expected revenue for the fourth quarter of 2024 to stand between RMB1.3 billion to RMB1.5 billion, with a healthy net profit margin.

Risks

• Regulatory changes impacting the insurance industry, including lower interest rates and unified commissions/fees policies, affecting profitability.
• Market uncertainties and competitive pressures that may impact credit demand and customer acquisition costs.

Q: Kris Wu asked about the slowdown in loan volume and Q4 credit demand, as well as new customer acquisition strategy.

A: Ning Tang and Yuning Feng discussed the quality over quantity strategy, focus on risk management, and ongoing cooperation with TikTok, Douyin, and WeChat to build an AI-driven real-time analysis model for efficient borrower screening.

Q: Kris Wu inquired about AI competitiveness and commercialization of AI systems.

A: Ning Tang explained Yiren Digital's AI as application-focused with unique use cases in credit and insurance, and Yuning Feng elaborated on six proprietary AI systems supporting business operations, with plans for commercialization of these systems in the near future