Yiren Digital Reports Third Quarter 2022 Financial Results

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    Jasleen Kour
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Yiren Digital Ltd (NYSE: YRD) (Yiren Digital or the Company) a leading digital personal financial management platform in China today announced its unaudited financial results for the quarter ended September 30 2022

Third Quarter 2022 Operational Highlights

Holistic Wealth Business

  • Cumulative number of clients served reached 3080757 as of September 30 2022 representing an increase of 179% from 2612279 as of September 30 2021
  • Number of active clients[1] was 621137 as of September 30 2022 representing an increase of 452% from 427873 as of September 30 2021 The increase was driven by our expanding insurance brokerage business and Yiren Select initiatives
  • Total client assets[2] reached RMB227958 million (US$32046 million) as of September 30 2022 representing an increase of 309% from RMB174153 million as of September 30 2021
  • Sales volume of investment products amounted to RMB44764 million (US$6293 million) in the third quarter of 2022 representing a decrease of 110% from RMB50302 million in the third quarter of 2021 The decrease was due to the changes of product mix

Credit-tech Business

  • Total loans facilitated in the third quarter of 2022 reached RMB63 billion (US$09 billion) representing a decrease of 79% from RMB68 billion in the third quarter of 2021 The decrease was mainly due to the strategic optimization of our product structure
  • Cumulative number of borrowers served reached 6960095 as of September 30 2022 representing an increase of 192% compared to 5840424 as of September 30 2021
  • Number of borrowers served in the third quarter of 2022 was 737320 representing an increase of 344% from 548495 in the third quarter of 2021 The increase was due to our improved services enriched membership benefits as well as enhanced customer engagement
  • Outstanding balance of performing loans facilitated reached RMB106304 million (US$14944 million) as of September 30 2022 representing a decrease of 229% from RMB137939 million as of September 30 2021 The decrease was due to the scale back of our offline business as part of our business optimization process coupled with impacts from the pandemic resurgence

Consumption-Driven Services

  • Total gross merchandise volume generated through our e-commerce platform and Yiren Select channel reached RMB2496 million (US$351 million) in the third quarter of 2022

We are pleased to deliver a resilient quarter with solid business recovery and continued improvement in profitability post our product restructuring and pandemic resurgence in the first half this year said Mr Ning Tang Chairman and Chief Executive Officer of Yiren Digital

Regarding our holistic wealth business our insurance brokerage business continues its strong momentum this quarter becoming an essential revenue pillar In the third quarter of 2022 our total premiums reached RMB1 billion representing a 36% increase year on year surpassing the industry average growth rate by over six times Revenue generated from Hexiang Insurance brokerage services reached RMB189 million accounting for more than 22% of total revenue in the third quarter this year and we expect to see an accelerated double-digit growth in the fourth quarter driven by our outstanding capabilities in product customization and innovation

On our credit-tech business new loan portfolios post the product optimization enjoy higher operating efficiencies and lower borrowing costs translating into healthier unit economics that allows us to better scale In the third quarter this year our total loan volume reached RMB63 billion accounting for 66% of total loans facilitated in the first half this year and reaching close to pre-restructuring level Given the current strong demand for our loan-facilitation services especially for our small revolving loans we project a further two-digit growth quarter over quarter in total loan volume in the fourth quarter this year

We delivered a solid profit of RMB270 million this quarter reflecting a net income margin of 322% up 62 percentage points from the same period of last year as we enjoy better unit economics post the product-restructuring and continue to improve our cost control said Ms Na Mei Chief Financial Officer of Yiren Digital Turning to our balance sheet we remained at a strong cash position with usable cash reaching RMB47 billion as of September 30 2022 reserving sufficient buffer for the further execution of our share repurchase plan announced earlier this year as well as providing enough fuels for any new business opportunities going ahead

Third Quarter 2022 Financial Results

Total net revenue in the third quarter of 2022 was RMB8407 million (US$1182 million) representing a decrease of 318% from RMB12320 million in the third quarter of 2021 Particularly in the third quarter of 2022 revenue from credit-tech business was RMB4934 million (US$694 million) representing a decrease of 448% from RMB8944 million in the same period of 2021 The decrease was due to the strategic shift of our product structure and pricing Revenue from holistic wealth business was RMB2943 million ($414 million) representing a decrease of 128% from RMB3376 million in the third quarter of 2021 The decrease was due to the declined sales volume of investment products

Sales and marketing expenses in the third quarter of 2022 were RMB1364 million (US$192 million) compared to RMB4072 million in the same period of 2021 The decrease was primarily due to the optimization of cost structure for our offline business

Origination servicing and other operating costs in the third quarter of 2022 were RMB2236 million (US$314 million) compared to RMB1869 million in the same period of 2021 The increase was due to the expanding insurance brokerage business

General and administrative expenses in the third quarter of 2022 were RMB1099 million (US$155 million) compared to RMB1393 million in the same period of 2021 The decrease was mainly due to the optimization of the Company's offline business

Allowance for contract assets receivables and others in the third quarter of 2022 was RMB351 million (US$49 million) compared to RMB836 million in the same period of 2021 The decrease was primarily due to the impact of the optimization of product mix

Income tax expense in the third quarter of 2022 was RMB700 million (US$98 million)

Net income in the third quarter of 2022 was RMB2703 million (US$380 million) as compared to RMB3209 million in the same period in 2021 The decrease was due to the declined revenue amid product structure transitions yet net income margin increased to 322% in the third quarter of 2022 from 260% in the same period of 2021 due to the improved cost efficiency

Adjusted EBITDA[3] (non-GAAP) in the third quarter of 2022 was RMB3650 million (US$513 million) compared to RMB4386 million in the same period of 2021

Basic and diluted income per ADS in the third quarter of 2022 was RMB30 (US$04) and RMB30 (US$04) compared to a basic per ADS of RMB38 and a diluted per ADS of RMB37 in the same period of 2021

Net cash generated from operating activities in the third quarter of 2022 was RMB3429 million (US$482 million) compared to RMB3238 million in the same period of 2021

Net cash used in investing activities in the third quarter of 2022 was RMB8351 million (US$1174 million) compared to RMB2338 million in the same period of 2021

As of September 30 2022 cash and cash equivalents were RMB36130 million (US$5079 million) compared to RMB43545 million as of June 30 2022 and RMB28645 million as of December 31 2021 As of September 30 2022 the balance of held-to-maturity investments was RMB18 million (US$03 million) compared to RMB1022 million as of June 30 2022 and RMB22 million as of December 31 2021 As of September 30 2022 the balance of available-for-sale investments was RMB11094 million (US$1560 million) compared to RMB1364 million as of June 30 2022 and RMB1774 million as of December 31 2021

Delinquency rates As of September 30 2022 the delinquency rates for loans that are past due for 15-29 days 30-59 days and 60-89 days were 07% 11% and 10% respectively compared to 06% 14% and 15% respectively as of June 30 2022

Cumulative M3+ net charge-off rates As of September 30 2022 the cumulative M3+ net charge-off rates for loans originated in 2019 2020 and 2021 were 117% 80% and 61% respectively as compared to 117% 78% and 53% respectively as of June 30 2022

Business Outlook

Based on the Company's preliminary assessment of business and market conditions the Company projects the total revenue in the fourth quarter of 2022 to be between RMB09 billion to RMB11 billion with net profit margin expected to remain stable

This is the Company's current and preliminary view which is subject to changes and uncertainties

Recent Development

The board of directors of the Company (the Board) has appointed Mr Hiu Fung Vincent Pang as (i) a director of the Company (ii) the chairman of the Nominating and Corporate Governance Committee (iii) a member of the Audit Committee and (iv) a member of the Compensation Committee to succeed Ms Chaomei Chen who has resigned from the foregoing positions due to personal reasons The director change became effective on November 22 2022

Mr Hiu Fung Vincent Pang has over 30 years of experience in auditing consulting and taxation He served as a Partner at KPMG Consulting (China) Co Ltd for over 15 years until his retirement in December 2021 during which he served as the Partner in Charge of Northern China Tax department of KPMG Consulting (China) Co Ltd from 2017 to 2020 Previously Mr Pang held various positions at Deloitte Beijing Beijing Zhonggongxin Certified Public Accountants Co Ltd PricewaterhouseCoopers Beijing KPMG Vancouver and Dyke & Howard Vancouver from 1991 to 2006 Mr Pang received a degree of Bachelor of Commerce from McGill University in Canada in 1991 Mr Pang is also a Canadian Chartered Accountant

The Board has determined that Mr Hiu Fung Vincent Pang satisfies the independence requirements of Section 303A of the Corporate Governance Rules of the NYSE and Rule 10A-3 under the Securities Exchange Act of 1934 as amended

We are grateful for all the contributions that Ms Chaomei Chen has made to the Company during the past six years and sincerely wish her all the best in her future endeavors said Mr Ning Tang Chairman and Chief Executive Officer of Yiren Digital We would like to welcome Mr Pang to Yiren Digital Mr Pang's extensive background in accounting consulting and taxation will provide valuable insight and guidance to the Company continued Mr Ning Tang

Non-GAAP Financial Measures

In evaluating the business the Company considers and uses several non-GAAP financial measures such as adjusted EBITDA and adjusted EBITDA margin 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 (US 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 US 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 RMB71135 to US$100 the effective noon buying rate on September 30 2022 as set forth in the H10 statistical release of the Federal Reserve Board

Conference Call

Yiren Digital's management will host an earnings conference call at 8:00 am US Eastern Time on November 22 2022 (or 9:00 pm Beijing/Hong Kong Time on November 22 2022)

Participants who wish to join the call should register online in advance of the conference at:

https://s1c-confcom/diamondpass/10027037-fkc8rqhtml

Once registration is completed participants will receive the dial-in details for the conference call

Additionally a live and archived webcast of the conference call will be available at https://edgemedia-servercom/mmc/p/tjzaznsw

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 US 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 Yiren Digital'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 Yiren Digital'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 Yiren Digital'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 Yiren Digital's filings with the US Securities and Exchange Commission All information provided in this press release is as of the date of this press release and Yiren Digital 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 Yiren Digital

Yiren Digital Ltd is a leading digital personal financial management platform in China The Company provides customized asset allocation-based holistic wealth solutions to China's mass affluent population as well as provides retail credit facilitation services to individual borrowers and small business owners

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