Yirendai Reports Second Quarter 2018 Financial Results

BEIJING, Aug. 29, 2018 /PRNewswire/ -- Yirendai Ltd. (NYSE: YRD) ("Yirendai" or the "Company"), a leading fintech company in China, today announced its unaudited financial results for the quarter ended June 30, 2018.

* For the second quarter of 2018, adjusted EBITDA and adjusted net income includes RMB 235.9 million adjustment on income earned from loans facilitated prior to 2018, if ASC 606 was not adopted.

In the second quarter of 2018, Yirendai facilitated RMB 11,736.2 million (US$1,773.6 million) of loans to 177,754 qualified individual borrowers through its online marketplace, representing a year-over-year growth of 38%; 23.4% of loan volume were generated by repeat borrowers who have successfully borrowed on Yirendai's platform before; 76.3% of the borrowers were acquired from online channels; 100% of the loan volume originated from online channels was facilitated through mobile.

In the second quarter of 2018, Yirendai facilitated 202,380 investors with total investment amount of RMB 12,175.4 million (US$1,840.0 million), 100% of which was facilitated through its online platform and 96% of which was facilitated through its mobile application.

In the second quarter of 2018, total net revenue was RMB 1,519.6 million (US$229.6 million), an increase of 28% from prior year; net income was RMB 204.7 million (US$30.9 million), a decrease of 24% from prior year; and adjusted net income in the second quarter of 2018 was RMB 440.5 million (US$66.6 million), an increase of 64% from prior year.

"Our operating results in the second quarter continued to be solid with loan origination volume increased by 38% from the previous quarter," commented Ms. Yihan Fang, Chief Executive Officer of Yirendai. "We have also continued to make progress in growing our online wealth management business – Yiren Wealth. Furthermore, we have seen continued efforts from the government to promote the healthy development of our industry. We will continue to execute our strategies to build Yirendai into the exceedingly compliant online platform in China to offer the safe and professional financial products and services to consumers."

"We are pleased to report another solid quarter despite a challenging market environment with business uncertainties," commented Mr. Dennis Cong, Chief Financial Officer of Yirendai. "Funding remains the key for our growth and we are proud to announce our new partnership with Xinwang Bank to further diversify and optimize our funding structure. As a top industry player with strong risk management capabilities, we believe that we are well-positioned for the upcoming P2P registration process as well as capturing the long-term growth potential thereafter."

Accounting Policy Change

The Company previously identified the investor as the only customer under ASC 606. Subsequent to the earning release for the quarter ended March 31, 2018, the Company has revised the accounting policy to recognize both the investor and borrower as customers. Accordingly, borrower's credit risk is no longer treated as variable consideration, but reflected as a provision of contract assets. The comparable unaudited consolidated financial information for the first quarter of 2018 was adjusted for such change, resulting in the recognition of provision of contract assets of RMB116.6 million, and the net revenue has been grossed up by the same amount. In addition, the Company has revised to recognize service fees charged from investor over the term of the investment period. The net impact of such changes to the net income of the quarter ended March 31, 2018 was not material.

Second Quarter 2018 Financial Results

Total amount of loans facilitated in the second quarter of 2018, was RMB 11,736.2 million (US$1,773.6 million), increased by 38% from RMB 8,536.1 million in the same period last year, reflecting strong demand for our products and services, especially from customers acquired from online channels. As of June 30, 2018, Yirendai had facilitated approximately RMB 97.6 billion (US$14.8 billion) in loan principal since its inception.

Total net revenue in the second quarter of 2018 was RMB 1,519.6 million (US$229.6 million), increased by 28% from RMB 1,183.1 million in the same period last year. The increase of total net revenue was mainly attributable to the growth of loan origination volume as well as the increase in the total asset under management.

Sales and marketing expenses in the second quarter of 2018 were RMB 793.8 million (US$120.0 million), compared to RMB617.9 million in the same period last year. Sales and marketing expenses in the second quarter of 2018 accounted for 6.8% of amount of loans facilitated, decreased from 7.2% in the same period last year due to increased marketing efficiencies.

Origination and servicing costs in the second quarter of 2018 were RMB 147.0 million (US$22.2 million), compared to RMB 93.1 million in the same period last year. Origination and servicing costs in the second quarter of 2018 accounted for 1.3% of amount of loans facilitated, increased from 1.1% in the same period last year mainly due to increased collection efforts this quarter.

General and administrative expenses in the second quarter of 2018 were RMB 336.1 million (US$50.8 million), compared to RMB 98.6 million in the same period last year. General and administrative expenses in the second quarter of 2018 accounted for 22.1% of total net revenue, compared to 8.3% in the same period last year. The increase in general and administrative expenses was mainly due to an expense of RMB 200.0 million (US$30.2 million) related to the quality assurance program; prior to the remaining balance of performing loans facilitated under the Company's quality assurance program being transferred to a third-party guarantee company.

Income tax expense in the second quarter of 2018 was RMB 41.1 million (US$6.2 million). Since the first quarter of 2017, Yi Ren Heng Ye Technology Development (Beijing) Co., Ltd., a subsidiary of the Company, enjoyed a favorable enterprise income tax rate of 12.5% as a software enterprise which qualification was confirmed by local tax bureau in the third quarter of 2016. This makes it eligible for an exemption of enterprise income tax for 2015 and 2016 and a favorable enterprise income tax rate of 12.5% for 2017, 2018 and 2019.

Net income in the second quarter of 2018 was RMB 204.7 million (US$30.9 million), decreased by 24% from RMB269.1 million in the same period last year. 

Adjusted net income (non-GAAP) in the second quarter of 2018 was RMB 440.5 million (US$66.6 million), increased by 64% from RMB 269.1 million in the same period last year. For the second quarter of 2018, net income would by positively impacted by RMB 235.9 million if ASC 606 was not adopted, generated from loans facilitated prior to 2018.

Adjusted EBITDA (non-GAAP) in the second quarter of 2018 was RMB 563.7 million (US$85.2 million), increased by 49% from RMB 378.4 million in the same period last year. Adjusted EBITDA margin[1] (non-GAAP) in the second quarter of 2018 was 37.1%, compared to 32.0% in the same period last year. For the second quarter of 2018, adjusted EBITDA includes RMB 314.5 million adjustment on pre-tax income earned from loans facilitated prior to 2018, if ASC 606 was not adopted.

Basic income per ADS in the second quarter of 2018 was RMB 3.37 (US$0.51), decreased from RMB 4.50 in the same period last year.

Adjusted basic income per ADS in the second quarter of 2018 was RMB 7.26 (US$1.10). Adjusted basic income per ADS includes RMB 235.9 adjustment on income earned from loans facilitated prior to 2018, if ASC 606 was not adopted.

Diluted income per ADS in the second quarter of 2018 was RMB 3.31 (US$0.50), decreased from RMB 4.45 in the same period last year.

Adjusted diluted income per ADS in the second quarter of 2018 was RMB 7.13 (US$1.08). Adjusted diluted income per ADS includes RMB 235.9 adjustment on income earned from loans facilitated prior to 2018, if ASC 606 was not adopted.

Net cash used in operating activities in the second quarter of 2018 was RMB 1,370.1 million (US$207.1 million), compared to net cash generated from operating activities of RMB 530.4 million in the same period last year. The decrease in net cash generated from operating activities is mainly due to an increase in loans with a monthly fee collection schedule as well as increased payouts of principal and accrued interest on default loans from the quality assurance program this quarter.

As of June 30, 2018, cash and cash equivalents was RMB 567.5 million (US$85.8 million), compared to RMB 1,666.9 million as of March 31, 2018. As of June 30, 2018, balance of held-to-maturity investments was RMB 312.1 million (US$47.2 million), compared to RMB 9.7 million as of March 31, 2018. As of June 30, 2018, balance of available-for-sale investments was RMB 530.1 million (US$80.1 million), compared to RMB 990.9 million as of March 31, 2018.

Delinquency rates. As of June 30, 2018, the delinquency rates for loans that are past due for 15-29 days, 30-59 days and 60-89 days were 0.8%, 1.2% and 1.3%, compared to 0.8%, 1.6% and 1.3%, as of March 31, 2018.

Cumulative M3+ net charge-off rates. As of June 30, 2018, the cumulative M3+ net charge-off rate for loans originated in 2015 was 10.1%, compared to 9.7% as of March 31, 2018. As of June 30, 2018, the cumulative M3+ net charge-off rate for loans originated in 2016 was 8.7%, compared to 7.4% as of March 31, 2018. As of June 30, 2018, the cumulative M3+ net charge-off rate for loans originated in 2017 was 6.0%, compared to 3.0% as of March 31, 2018. As the 2015 and 2016 vintage loans continue to mature, the charge off level is broadly consistent with our risk performance expectation.

Other Operating Metrics and Business Results

• As of June 30, 2018, remaining principal of performing loans totaled RMB 45.8 billion (US$6.9 billion), increased by 5% from RMB 43.8 billion as of March 31, 2018 and 65% from RMB 27.9 billion as of June 30, 2017.  
• ŸIn the second quarter of 2018, Grade I, II, III, IV and V loans represented 9.0%, 26.9%, 27.2%, 20.7% and 16.2% of the Company's product portfolio, respectively.

Other Developments

Credit Assurance Program

To ensure compliance with regulatory requirements, starting from May 2018, the Company has discontinued its quality assurance program. Effective May 2018, loans facilitated on the Company's platform will be covered by a new credit assurance program operated by a third-party guarantee company. Under the new credit assurance program, the guarantee company will operate a reserve fund collected from borrowers and will compensate investors for losses from borrower's default up to the cash available in the fund. Additionally, as of May 2018, the Company has transferred the guarantee liability related to the quality assurance program to the guarantee company at the estimated fair value on the date of transfer; therefore the Company derecognized the guarantee liability upon the transfer. The Company's existing liability from quality assurance program has been fully transferred to a credit assurance program set up and managed by a third-party guarantee company. The Company recorded the consideration payable as payable to the guarantee company as of June 30, 2018. The restricted cash was still reported on the Company's balance sheet as of June 30, 2018. As a result of the above, as of June 30, 2018, substantially all outstanding loans facilitated through Yirendai's platform are either covered through a credit enhancement program operated by a third-party guarantee company or PICC's surety insurance program.

Institutional Funding Update

As of August 2018, the Company has entered into new funding arrangements with Goldman Sachs, a leading global investment firm as well as XinWang Bank, one of the three Internet banks in China.

Dividend Policy Update

In August 2018, the Company's board of directors have approved to temporarily suspend the semi-annual dividend policy due to a challenging market environment with business uncertainties.

Non-GAAP Financial Measures

In evaluating the business, the Company considers and uses several non-GAAP financial measures, such as adjusted net income, adjusted EBITDA, adjusted EBITDA margin, adjusted basic income per ADS and adjusted diluted income per ADS as supplemental measures to review and assess operating performance. We believe these non-GAAP measures provide useful information about our core operating results, enhance the overall understanding of our past performance and prospects and allow for greater visibility with respect to key metrics used by our management in our financial and operational decision-making. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The non-GAAP financial measures have limitations as analytical tools. Other companies, including peer companies in the industry, may calculate these non-GAAP measures differently, which may reduce their usefulness as a comparative measure. The Company compensates for these limitations by reconciling the non-GAAP financial measures to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating our performance. See "Operating Highlights and Reconciliation of GAAP to Non-GAAP measures" at the end of this press release.

Currency Conversion

This announcement contains currency conversions of certain RMB amounts into US$ at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to US$ are made at a rate of RMB 6.6171 to US$1.00, the effective noon buying rate on June 29, 2018 as set forth in the H.10 statistical release of the Federal Reserve Board.

Conference Call

Yirendai's management will host an earnings conference call at 8:00 p.m. U.S. Eastern Time on August 28, 2018 (or 8:00 a.m. Beijing/Hong Kong Time on August 29, 2018.)

Dial-in details for the earnings conference call are as follows:

A replay of the conference call may be accessed by phone at the following numbers until September 5, 2018:

A live and archived webcast of the conference call will be available on Yirendai's website at ir.yirendai.com.

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "target," "confident" and similar statements. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond Yirendai's control. Forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from those contained in any such statements. Potential risks and uncertainties include, but are not limited to, uncertainties as to Yirendai's ability to attract and retain borrowers and investors on its marketplace, its ability to introduce new loan products and platform enhancements, its ability to compete effectively, PRC regulations and policies relating to the peer-to-peer lending service industry in China, general economic conditions in China, and Yirendai's ability to meet the standards necessary to maintain listing of its ADSs on the NYSE or other stock exchange, including its ability to cure any non-compliance with the NYSE's continued listing criteria. Further information regarding these and other risks, uncertainties or factors is included in Yirendai's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is as of the date of this press release, and Yirendai does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

About Yirendai

Yirendai Ltd. (NYSE: YRD) is a leading fintech company in China connecting investors and individual borrowers. The Company provides an effective solution to address largely underserved investor and individual borrower demand in China through an online platform that automates key aspects of its operations to efficiently match borrowers with investors and execute loan transactions. Yirendai deploys a proprietary risk management system, which enables the Company to effectively assess the creditworthiness of borrowers, appropriately price the risks associated with borrowers, and offer quality loan investment opportunities to investors. Yirendai's online marketplace provides borrowers with quick and convenient access to consumer credit at competitive prices and investors with easy and quick access to an alternative asset class with attractive returns. For more information, please visit ir.yirendai.com.

For investor and media inquiries, please contact:

Yirendai
Hui (Matthew) Li
Director of Investor Relations
Email: ir@yirendai.com

[1] Adjusted EBITDA margin is a non-GAAP financial measure calculated as adjusted EBITDA divided by total net revenue.

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