Yiren Digital(YRD) - 2020 Q4 - Annual Report

Company Overview - As of December 31, 2020, the company served approximately 5.2 million borrowers and 2.3 million investors, facilitating loans of RMB 11,651.5 million (US$1,785.7 million) in 2020[536]. - The total Assets Under Administration (AUA) on the Yiren Wealth platform was RMB 23,227.4 million (US$3,559.8 million) with an average AUA per investor of RMB 151,575.6 (US$23,230.0) as of December 31, 2020[537]. - The company has restructured its reportable segments into Yiren Wealth and Yiren Credit following the acquisition of businesses under common control[596]. Financial Performance - Total net revenue for the year ended December 31, 2020, was RMB 3,961.96 million (US$607.2 million), with loan facilitation services contributing 33.6% of total revenue[572]. - Total net revenue decreased by 54.1% from RMB 8,616.8 million in 2019 to RMB 3,961.9 million (US$ 607.2 million) in 2020[599]. - Revenue from the consumer credit segment decreased by 60.7% from RMB 6,440.6 million in 2019 to RMB 2,529.6 million (US$ 387.7 million) in 2020, primarily due to a 74.3% decrease in loan facilitation services[601]. - Revenue from the wealth management segment decreased by 34.2% from RMB 2,176.2 million in 2019 to RMB 1,432.4 million (US$ 219.5 million) in 2020, mainly due to a 54.3% decrease in account management services[604]. - Net income for 2020 was RMB 1,579.8 million, a significant increase compared to a net loss of RMB 692.7 million in 2019[598]. - The company reported a gain on the disposal of loan receivables and other beneficial rights amounting to RMB 663.9 million (5.9% of total income) in 2020[598]. Operational Challenges - The impact of COVID-19 led to a significant decrease in loan volumes and revenues in the first half of 2020, with measures taken to support affected customers[561]. - The company experienced an increase in delinquency volatilities due to the COVID-19 outbreak, affecting its operational efficiency[559]. - The competitive landscape in the online consumer finance industry in China is intensifying, with potential new entrants posing challenges to the company's market position[556]. - The company expects borrower credit performance to be volatile in the foreseeable future due to regulatory uncertainties, which may lead to higher default rates[571]. Cost Management - Sales and marketing expenses for 2020 were RMB 1,905,095, accounting for 48.1% of net revenue, down from 51.7% in 2019[590]. - The company reported total operating costs and expenses of RMB 4,667,800 for 2020, which is 100% of net revenue[590]. - Total operating costs and expenses for 2020 were RMB 10,467.97 million, representing 93.1% of total revenue[598]. - The company’s strategy to streamline operations led to a decrease in sales and marketing expenses from 2018 to 2020[584]. Investor Behavior - Approximately 49.4% of investors on the platform only funded loans, while 40.5% invested in products other than loans as of December 31, 2020[537]. - More than 55% of investors utilized the automated investing tool in 2020, highlighting a shift in investor behavior towards technology-enabled services[577]. Risk Management - The company has implemented tighter risk policies to improve the asset quality of new loans facilitated through its marketplace[576]. - The delinquency rates for all loans as of December 31, 2020, were 1.2% for 15-29 days, 1.7% for 30-59 days, and 1.4% for 60-89 days, showing a slight improvement in credit quality compared to previous years[566]. - The M3+ Net Charge-off Rate for loans facilitated in 2020 Q1-Q3 was 0.7%, significantly lower than previous years, indicating improved loan performance[570]. Cash Flow and Liquidity - As of December 31, 2020, the company had cash and cash equivalents of RMB 2,469.9 million (US$378.5 million), indicating sufficient liquidity to navigate economic uncertainty[564]. - Cash and cash equivalents decreased by 22.8% from RMB 3,198.1 million as of December 31, 2019 to RMB 2,469.9 million (US$378.5 million) as of December 31, 2020[626]. - The company believes its cash on hand and anticipated cash flows will be sufficient to meet working capital requirements for the next 12 months[697]. Management and Leadership - Ning Tang has served as the executive chairman and CEO since July 2019, and is the founder of CreditEase, established in 2006[733]. - Mr. Tang was elected chairman of the Beijing P2P Association in December 2014, which is the first officially registered association in the industry in China[733]. - In July 2011, Mr. Tang received the "Leader of the Year" nomination in the Global Microfinance Achievement Awards 2011[733].