Yiren Digital(US:YRD)2025-04-28 11:43Part I Item 1. Identity of Directors, Senior Management and Advisers This section is not applicable as per the report - The report states that this item is not applicable27 Item 2. Offer Statistics and Expected Timetable This section is not applicable as per the report - The report states that this item is not applicable28 Item 3. Key Information This section provides crucial information regarding the company's holding structure, the risks associated with its Variable Interest Entity (VIE) model, and doing business in China Holding Company Structure and Contractual Arrangements Yiren Digital Ltd. operates through PRC subsidiaries and consolidated Variable Interest Entities (VIEs) due to foreign investment restrictions, with VIEs contributing 33.7% of total revenues in 2024 - VIE Revenue Contribution | Year | VIE Revenue Contribution (%) | | :--- | :--- | | 2022 | 53.0% | | 2023 | 33.2% | | 2024 | 33.7% | - The company relies on contractual arrangements with its VIEs, which may not be as effective as direct ownership and are subject to interpretation by PRC authorities2935 Cash and Asset Flows and Financial Information of VIEs This subsection details the movement of funds within the company's structure, including cash transfers and service fees, and provides condensed consolidating financial statements for transparency - Cash Transfers to Holding Company and VIE Service Fees | Description | 2022 (RMB Million) | 2023 (RMB Million) | 2024 (RMB Million) | | :--- | :--- | :--- | :--- | | Cash from PRC subsidiaries to Cayman holding co. | 9.8 | 49.7 | 64.2 | | Service fees from VIEs to PRC subsidiaries | 378.1 | 93.3 | 104.9 | - The company has a semi-annual dividend policy approved on August 14, 2024, with US$17.3 million in cash dividends paid to shareholders in 202446 - Funds in PRC subsidiaries and VIEs may not be readily available for use outside mainland China due to currency conversion controls and withholding taxes on dividends464853 - Condensed Consolidating Schedule of Net Revenue (2024) | Entity | Net Revenue (RMB Million) | | :--- | :--- | | Company Subsidiaries | 5,065 | | Consolidated Variable Interest Entities | 1,956 | | Eliminations | (1,215) | | Consolidated Total | 5,806 | - Condensed Consolidating Schedule of Total Assets (as of Dec 31, 2024) | Entity | Total Assets (RMB Million) | | :--- | :--- | | The Company | 9,618 | | Company Subsidiaries | 12,785 | | Consolidated Variable Interest Entities | 5,351 | | Consolidated Assets Backed Financing Entities | 507 | | Eliminations | (15,278) | | Consolidated Total | 12,983 | Risk Factors This section provides an exhaustive list of risks facing the company, including business, funding, regulatory, corporate structure, and China-specific operational challenges - Business Risks: The company operates in emerging industries and has expanded into new areas like insurance brokerage, consumption and lifestyle, and international financial services, with success not guaranteed61 - Funding Risk: In 2024, 99.5% of loans were funded by third parties, primarily institutional partners, making insufficient funding a significant operational risk66 - Regulatory Risk: The company faces significant regulatory uncertainty in China, particularly regarding whether its data analysis activities could be deemed a personal credit reporting business, which requires an unheld license737476 - Relationship with CreditEase: The company relies on its parent, CreditEase, which remains the controlling shareholder with 83.0% of voting power as of March 31, 2025, creating potential conflicts of interest and classifying Yiren Digital as a "controlled company"191198204 - VIE Structure Risk: The contractual arrangements controlling the company's VIEs have not been tested in Chinese courts and could be deemed non-compliant by PRC authorities, potentially leading to severe penalties205211 - China Regulatory Oversight: The PRC government has significant oversight over the business and has increased scrutiny of overseas-listed companies, with new regulations requiring filings for future offerings248285 - PFIC Status: The company believes it was a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes for the taxable year ended December 31, 2024, which could result in adverse tax consequences for U.S. holders of its ADSs322 Item 4. Information on the Company This section details the company's history, business operations, organizational structure, and property, including its three core segments and complex regulatory landscape History and Development of the Company The company evolved from a CreditEase business unit, completed its NYSE IPO in 2015, changed its name in 2019, and restructured in 2020 to focus on institutional funding - The company completed its IPO on the NYSE under the symbol "YRD" on December 18, 2015330 - In September 2019, the company's name was changed from "Yirendai Ltd." to "Yiren Digital Ltd."334 - A significant business restructuring occurred on December 31, 2020, shifting its funding model entirely to institutional partners by disposing of its online consumer lending platform336 Business Overview Yiren Digital operates an AI-powered platform across financial services, insurance brokerage, and consumption & lifestyle segments, emphasizing advanced risk management and scalable technology - The company operates three primary business segments: Financial services, Insurance brokerage, and Consumption and lifestyle343 - Total Loans Facilitated (Financial Services) | Year | Amount (RMB Million) | | :--- | :--- | | 2022 | 22,623.1 | | 2023 | 36,036.3 | | 2024 | 53,591.6 | - Loan Funding Sources Breakdown (2024) | Funding Source | % of Total Loan Volume | | :--- | :--- | | Consumer finance companies | 49.9% | | Banks | 37.7% | | Others | 9.0% | | Trusts | 2.3% | | Microloan companies | 0.6% | | Own capital | 0.5% | - The company utilizes a proprietary, AI-driven credit scoring model to assess borrower creditworthiness, segmenting potential borrowers365 - The company has developed an AI-Generated Content (AIGC) platform for marketing and initiated an AI Lab project to enhance operations across various functions398 Organizational Structure This section reiterates Yiren Digital's Cayman Islands holding company structure, operating through PRC subsidiaries and VIEs, and details the contractual arrangements enabling control and consolidation - The company consolidates its VIEs (Yiren Financial Information and CreditEase Puhui) because contractual arrangements grant it power to direct activities and receive economic benefits534544 - Key contractual agreements enabling control include: Powers of Attorney, where VIE shareholders appoint the company's subsidiary to exercise shareholder rights, and Equity Interest Pledge Agreements, securing obligations550556558 - Economic benefits are transferred through an Exclusive Business Cooperation Agreement, granting the company's subsidiary exclusive rights to provide services to the VIE in exchange for service fees551559 Item 5. Operating and Financial Review and Prospects This section provides management's discussion and analysis of the company's financial condition and results of operations, including key operational factors, loan performance, and segment-wise financial results - Consolidated Results of Operations Summary | Metric (RMB in thousands) | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Net Revenue | 3,434,620 | 4,895,633 | 5,805,901 | | Income from Operations | 1,471,864 | 2,594,782 | 1,647,064 | | Net Income | 1,194,871 | 2,080,197 | 1,582,299 | - Net Revenue by Segment (2024) | Segment | Net Revenue (RMB Million) | % of Total | | :--- | :--- | :--- | | Financial services business | 3,473.1 | 59.9% | | Consumption & lifestyle business and others | 1,924.4 | 33.1% | | Insurance brokerage business | 408.4 | 7.0% | | Total | 5,805.9 | 100.0% | - Net revenue increased by 18.6% in 2024, driven by growth in loan facilitation and guarantee services, while net income decreased from RMB 2,080.2 million in 2023 to RMB 1,582.3 million in 2024 due to increased operating costs and contingent liability provisions636637646 - Provision for contingent liabilities surged from RMB 27.0 million in 2023 to RMB 869.3 million (US$119.1 million) in 2024, attributed to the growing volume of loans facilitated under the company's risk-taking model642 - Delinquency Rates for Loans (as of Dec 31) | Year | 1-30 days | 31-60 days | 61-90 days | | :--- | :--- | :--- | :--- | | 2022 | 1.7% | 1.2% | 1.1% | | 2023 | 2.0% | 1.4% | 1.2% | | 2024 | 1.6% | 1.2% | 1.1% | Item 6. Directors, Senior Management and Employees This section details the company's leadership, workforce, and compensation, including share incentive plans and the principal shareholder, CreditEase - Mr. Ning Tang is the founder, Executive Chairman, and Chief Executive Officer of the company, also serving as founder, chairman, and CEO of the parent company, CreditEase726 - In 2024, the aggregate cash compensation paid to directors and executive officers was approximately RMB 10.1 million (US$1.4 million)737 - Employee Breakdown by Function (as of Dec 31, 2024) | Function | Number of Employees | % of Total | | :--- | :--- | :--- | | Sales and Marketing | 404 | 42.6% | | Technology | 234 | 24.7% | | General and Administrative | 130 | 13.7% | | Operations | 117 | 12.3% | | Risk Management | 38 | 4.0% | | Product Development | 26 | 2.7% | | Total | 949 | 100.0% | - As of March 31, 2025, CreditEase Holdings (Cayman) Limited beneficially owned 143,421,412 ordinary shares, representing 83.0% of the total outstanding shares772 Item 7. Major Shareholders and Related Party Transactions This section details the company's relationship with its major shareholder, CreditEase, summarizing key agreements and quantifying transactions with CreditEase affiliates - The company has a Second Amended and Restated Non-competition Agreement with CreditEase, effective until at least 2035, defining non-competing business areas796797 - Transactions with CreditEase Affiliates (RMB in thousands) | Transaction Type | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Costs/Expenses from CreditEase | 450,985 | 396,913 | 565,051 | | Revenue from CreditEase | 411,010 | 141,595 | 32,192 | - The company provided loans to CreditEase affiliates amounting to RMB 1,100.0 million in 2024801 Item 8. Financial Information This section refers to the consolidated financial statements and details the company's amended semi-annual dividend policy, which commenced from the first half of 2024 - On August 14, 2024, the board approved an amended dividend policy to pay semi-annual dividends equivalent to no less than 10% of anticipated net income after tax, starting from H1 2024808 - A cash dividend of US$0.1 per ordinary share (US$0.2 per ADS) was paid on October 15, 2024, to shareholders of record as of September 30, 2024808 Item 9. The Offer and Listing This section confirms the company's American Depositary Shares (ADSs) have been listed and traded on the New York Stock Exchange (NYSE) under the ticker symbol "YRD" since December 18, 2015 - The company's ADSs are listed on the NYSE under the symbol "YRD" since December 18, 2015811813 Item 10. Additional Information This section provides supplementary details, including the company's corporate governance under Cayman Islands law and an extensive analysis of tax implications for investors - The company is an exempted company with limited liability incorporated under the laws of the Cayman Islands, governed by its memorandum and articles of association and the Companies Act817 - Under PRC tax law, dividends paid by the company's PRC subsidiaries to its Hong Kong subsidiary are subject to a 10% withholding tax, potentially reduced to 5% under the China-HK tax arrangement518 - The company believes it was a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes for its taxable year ended December 31, 2024, which could result in adverse tax consequences for U.S. holders870 Item 11. Quantitative and Qualitative Disclosures about Market Risk This section discusses the company's exposure to various market risks, primarily foreign exchange risk due to RMB-denominated operations and U.S. dollar-traded ADSs - The company's primary market risk is foreign exchange risk, stemming from RMB-denominated revenues and expenses versus U.S. dollar-reported financial results899 - The company has not entered into any hedging transactions to mitigate its exposure to foreign currency exchange risk902 Item 12. Description of Securities Other than Equity Securities This section focuses on the company's American Depositary Shares (ADSs), detailing fees payable by holders and depositary reimbursements to the company - Selected Fees Payable by ADS Holders | Service | Fee | | :--- | :--- | | Issuance of ADSs | Up to US$0.05 per ADS | | Cancellation of ADSs | Up to US$0.05 per ADS | | Distribution of cash dividends | Up to US$0.05 per ADS held | - For the year ended December 31, 2024, the company received US$107 thousand in reimbursement from the depositary for ADR program-related expenses912 Part II Item 15. Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2024 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2024921 - Based on an evaluation against the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2024922 Item 16. Other Information This section covers governance, principal accountant fees, share repurchase program details, and the company's comprehensive cybersecurity risk management strategy - Principal Accountant Fees (RMB in thousands) | Year | Audit Fees | | :--- | :--- | | 2023 | 11,613 | | 2024 | 11,513 | - Under its 2022 Share Repurchase Program, the company repurchased a total of 2,165,090 ADSs in 2024 at an average price of US$4.85 per ADS934 - The company has implemented a comprehensive cybersecurity risk management strategy, overseen by the board's cybersecurity risk management committee and managed by an internal incident management team941942947 Part III Item 18. Financial Statements This section contains the full audited consolidated financial statements for Yiren Digital Ltd. for 2022-2024, prepared under U.S. GAAP, including the auditor's report and key financial statements - The independent auditor's report identifies the 'Allowance for current expected credit loss (CECL) on accounts receivable, financing receivable, other receivable, contract assets, guarantee receivable and guarantee liabilities - contingent' as a Critical Audit Matter due to subjective judgment and estimates967969 - Consolidated Balance Sheet Highlights (As of Dec 31) | (RMB in thousands) | 2023 | 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | 5,791,333 | 3,841,284 | | Total Assets | 10,276,916 | 12,982,696 | | Total Liabilities | 2,191,367 | 3,440,266 | | Total Equity | 8,085,549 | 9,542,430 | - Consolidated Statement of Operations Highlights (Year Ended Dec 31) | (RMB in thousands) | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Net Revenue | 3,434,620 | 4,895,633 | 5,805,901 | | Total operating costs and expenses | (1,962,756) | (2,300,851) | (4,158,837) | | Net Income | 1,194,871 | 2,080,197 | 1,582,299 | - Consolidated Statement of Cash Flows Highlights (Year Ended Dec 31) | (RMB in thousands) | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | 1,849,430 | 2,171,013 | 1,424,082 | | Net cash provided by/(used in) investing activities | 52,559 | 100,045 | (3,113,115) | | Net cash used in financing activities | (489,123) | (569,278) | (277,226) | Item 19. Exhibits This section lists all exhibits filed as part of the annual report, including corporate documents, share incentive plans, material contracts, VIE agreements, and CEO/CFO certifications - The exhibits include key governance documents, such as the 2020 Share Incentive Plan, the Second Amended and Restated Non-competition Agreement with CreditEase, and various contractual agreements governing the VIEs953954