Yiren Digital Reports First Half 2022 Financial Results

BEIJING,Nov. 3,2022 --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 six months ended June 30,2022.

First Half 2022 Operational Highlights

Holistic Wealth Business

Cumulative number of clients served reached 2,970,548 as of June 30,2022,representing an increase of 17.0% from 2,538,656 as of June 30,2021.

Number of active clients[1] was 578,562 as of June 30,representing an increase of 50.1% from 385,536 as of June 30,2021. The increase was driven by our expanding insurance brokerage business and Yiren Select initiatives.

Total client assets[2] reached RMB23,379.7 million (US$3,490.5 million) as of June 30,representing an increase of 59.5% from RMB14,660.4 million as of June 30,2021.

Sales volume of investment products amounted to RMB10,918.6 million (US$1,630.1 million) in the first half of 2022,which remained stable compared to RMB11,166.7 million in the first half of 2021.

Credit-tech Business

Total loans facilitated in the first half of 2022 reached RMB9.5 billion (US$1.4 billion),representing a decrease of 6.3% from RMB10.2 billion in the first half of 2021. The decrease was mainly due to the strategic optimization of our product structure and the pandemic resurgence in the first half of 2022.

Cumulative number of borrowers served reached 6,514,111 as of June 30,representing an increase of 17.2% compared to 5,558,085 as of June 30,2021.

Number of borrowers served in the first half of 2022 was 827,767 representing an increase of 28.0% from 646,486 in the first half 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 RMB10,613.1 million (US$1,584.5 million) as of June 30,representing a decrease of 15.4% from RMB12,543.7 million as of June 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.

[1] Active clients refer to those who have made at least one investment through our holistic wealth ecosystem or have client assets with us above zero in the past twelve months.

[2]Client assets refer to the outstanding balance of client asset generated through our platforms,where an asset is counted towards the outstanding balance for so long as it continues to be held by the clients who acquired it through our platform.

Consumption-Driven Services

Total gross merchandise volume generated through our e-commerce platform and 'Yiren Select' channel reached RMB146.1 million (US$21.8 million) in the first half of 2022.

"We are pleased to deliver a resilient half-year result with continued improvement in profitability amid the pandemic resurgence and lockdowns. As the industry continues to evolve,we are in full-swing to optimize our product and revenue structure while improving bottom-line margins,reinforcing our positioning as a comprehensive personal financial management platform." said Mr. Ning Tang,Chairman and Chief Executive Officer of Yiren Digital.

"On our wealth business,Hexiang Insurance is growing into an essential revenue contributor with its revenue reaching RMB344 million in the first half of 2022,accounting for 23% of total revenue,compared to only 14% in the same period last year. In the first half of this year,Hexiang achieved total premiums of RMB1.6 billion,representing a 96% increase year-on-year,marking a sharp contrast to the industry's single digit growth rate. We delivered these results by focusing on efforts to increase agent productivity as well as by leveraging our advantages in product exclusiveness and customization. Akey focus for Hexiang this year has been on building an elite agent team,which consists of senior professionals from different sectors,including former lawyers,IT engineers and college lecturers. These agents bring with them powerful networks of high-net-worth individuals of whom they can tap into and up-sell and cross-sell different insurance products based on each individual's comprehensive asset-allocation needs."

"On our credit-tech business,we have restructured our loan portfolio over the past few quarters,with small revolving and SME loans accounting for 100% of total loans originated in the first half of 2022,compared to 55% in the same period last year. Moreover,for our offline secured loan business that bore higher operating cost and was more vulnerable during the pandemic,we strategically scaled back our offline secured loans starting back in the third quarter last year and have officially terminated this product as of February this year. Given that our new product structure is more operationally efficient and better aligns with regulatory direction on lowering borrowing costs,we are confident that it will allow us to better scale and sustain under an evolving environment. Meanwhile,we tightened risk policies amid a challenging macro backdrop. For example,for our SME loans business,we proactively decreased approval rates through raising application requirements for business owners,such as increasing the minimum threshold for revenue levels as well as requiring our channel partners to do initial screening and filtering of potential borrowers. Specifically,in the second quarter of 2022,our overall FPD30+ rate was 0.46%,representing a historical low and compared to 0.66% from last quarter,reflecting the improved asset quality of our new loans."

"We delivered a strong profit of RMB439 million in the first half of this year,representing a 15% increase year over year despite the temporary impacts on business scale from our product restructuring and pandemic resurgence. This reflects a net income margin of 29.2% for the first half of 2022,up 12.0 percentage points from the same period last year as we continue to enhance our cost efficiencies." said Ms. Na Mei,Chief Financial Officer of Yiren Digital. "Turning to our balance sheet,we maintained a substantial balance sheet with RMB5.3 billion in total shareholders' equity as of June 30,2022. Earlier this year,our board approved a US$20 million share repurchase program,demonstrating our strong commitment to providing greater support for our shareholders as well as our unwavering confidence in the company's long-term potential."

First Half 2022 Financial Results

Total net revenue in the first half of 2022 was RMB1,505.9 million (US$224.8 million),representing a decrease of 32.3% from RMB2,225.0 million in the first half of 2021. Particularly,in the first half of 2022,revenue from credit-tech business was RMB827.2 million (US$123.5 million),representing a decrease of 50.6% from RMB1,674.4 million in the same period of 2021. The decrease was due to the strategic shift of our product structure and pricing as well as the impact of the pandemic resurgence in the first half of 2022.

Revenue from holistic wealth business was RMB557.9 million ($83.3 million),presenting an increase of 1.3% from RMB550.6 million in the first half of 2021.

Sales and marketing expensesin the first half of 2022 were RMB334.1 million (US$49.9 million),compared to RMB842.1 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 costsin the first half of 2022 were RMB341.6 million (US$51.0 million),which remained stable compared to RMB357.2 million in the same period of 2021.

General and administrative expensesin the first half of 2022 were RMB228.5 million (US$34.1 million),compared to RMB247.6 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 first halfof 2022 was RMB97.4 million (US$14.5 million),compared to RMB234.7million 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 first half of 2022 was RMB71.2 million (US$10.6 million).

Net incomein the first half of 2022 was RMB439.3 million (US$65.6 million),as compared to RMB381.3 million in the same period in 2021. The increase was primarily due to the improvement of cost efficiency.

Adjusted EBITDA[3](non-GAAP) in the first half of 2022 was RMB560.1 million (US$83.6 million),compared to RMB546.9 million in the same period of 2021.

Basic and diluted income per ADSin the first half of 2022 was RMB5.2(US$0.8) and RMB5.1 (US$0.8),compared to a basic per ADS of RMB4.5 and a diluted per ADS of RMB4.5 in the same period of 2021.

Net cash generated from operating activities in the first halfof 2022 was RMB1,034.7 million (US$154.5 million),compared to net cash used in operating activities of RMB355.0 million in the same period of 2021.

Net cash provided by investing activitiesin the first halfof 2022 was RMB604.5 million (US$90.2 million),compared to net cash used in investing activities of RMB494.6 million in the same period of 2021.

As of June 30,cash and cash equivalents were RMB4,354.5 million (US$650.1 million),compared to RMB2,864.5 million as of December 31,2021. As of June 30,the balance of held-to-maturity investments was RMB102.2 million (US$15.3 million),compared to RMB2.2million as of December 31,the balance of available-for-sale investments was RMB136.4 million (US$20.4 million),compared to RMB177.4million as of December 31,2021.

Delinquency rates. As of June 30,the delinquency rates for loans that are past due for 15-29 days,30-59 days and 60-89 days were 0.6%,1.4% and 1.5% respectively,compared to 0.9%,1.5% and 1.2% respectively as of December 31,2021.

Cumulative M3+ net charge-off rates. As June 30,the cumulative M3+ net charge-off rate for loans originated in 2019,2020 and 2021 was 11.7%,7.8% and 5.3% respectively,as compared to11.4%,5.8% and 2.2% respectively as of December 31,2021.

[3]"Adjusted EBITDA" is a non-GAAP financial measure. For more information on this non-GAAP financial measure,please see the section of "Operating Highlights and Reconciliations of GAAP to Non-GAAP Measures" and the table captioned "Reconciliations of Adjusted EBITDA" set forth at the end of this press release.

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 ("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 RMB6.6981 to US$1.00,the effective noon buying rate on June 30,as set forth in the H.10 statistical release of the Federal Reserve Board.

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 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 U.S. 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.

Unaudited Condensed Consolidated Statements of Operations

(in thousands,except for share,per share and per ADS data,and percentages)

For the Six Months Ended

June 30,

2021

June 30,

2022

June 30,

2022

RMB

RMB

USD

Net revenue:

Loan facilitation services

1,093,505

503,386

75,154

Post-origination services

85,370

92,287

13,778

Insurance brokerage services

311,505

343,751

51,321

Financing services

240,199

188,141

28,089

Electronic commerce services

-

120,788

18,033

Others

494,419

257,536

38,448

Total net revenue

2,224,998

1,505,889

224,823

Operating costs and expenses:

Sales and marketing

842,058

334,141

49,886

Origination,servicing and other

perating costs

357,192

341,628

51,004

General and administrative

247,555

228,512

34,116

Allowance for contract assets,

receivables and others

234,665

97,402

14,541

Total operating costs and expenses

1,681,470

1,001,683

149,547

Other (expenses)/income:

Interest expense,net

(33,762)

(29,363)

(4,384)

Fair value adjustments related to

Consolidated ABFE

(48,636)

19,785

2,954

Others,net

19,796

15,895

2,373

Total other expenses

(62,602)

6,317

943

Income before provision for income taxes

480,926

510,523

76,219

Income tax expense

99,632

71,207

10,631

Net income

381,294

439,316

65,588

Weighted average number of ordinary

shares outstanding,basic

167,515

170,005,103

170,103

Basic income per share

2.2700

2.5841

0.3858

Basic income per ADS

4.5400

5.1682

0.7716

Weighted average number of ordinary

shares outstanding,diluted

169,160,565

170,932,908

170,908

Diluted income per share

2.2540

2.5701

0.3837

Diluted income per ADS

4.5080

5.1402

0.7674

Unaudited Condensed Consolidated Cash

Flow Data

Net cash (used in)/generated from

operating activities

(355,004)

1,034,652

154,471

Net cash (used in)/provided by investing

activities

(494,595)

604,478

90,246

Net cash provided by/(used in) financing

activities

423,507

(158,374)

(23,645)

Effect of foreign exchange rate changes

(396)

1,308

195

Net (decrease)/increase in cash,cash

equivalents and restricted cash

(426,488)

1,482,064

221,267

Cash,cash equivalents and restricted

cash,beginning of period

2,707,148

2,945,344

439,728

Cash,end of period

2,280,660

4,427,408

660,995

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

As of

December

31,2021

June 30,

2022

RMB

RMB

USD

Cash and cash equivalents

2,864,543

4,354,487

650,108

Restricted cash

80,800

72,921

10,887

Accounts receivable

305,018

297,939

44,481

Contract assets,net

1,105,905

634,079

94,665

Contract cost

9,959

2,545

380

Prepaid expenses and other assets

352,015

266,636

39,808

Loans at fair value

73,734

19,812

2,958

Financing receivables

1,697,962

960,238

143,360

Amounts due from related parties

879,256

935,714

139,698

Held-to-maturity investments

2,200

102,200

15,258

Available-for-sale investments

177,360

136,362

20,358

Property,equipment and software,net

102,548

92,714

13,842

Deferred tax assets

7,388

75,555

11,280

Right-of-use assets

80,752

48,151

7,189

Total assets

7,739,440

7,999,353

1,194,272

Accounts payable

19,065

30,903

4,613

Amounts due to related parties

434,127

411,530

61,440

Deferred revenue

12,379

1,713

256

Payable to investors at fair value

50,686

49,605

7,406

Accrued expenses and other liabilities

1,182,783

1,242,139

185,446

Secured borrowings

1,028,600

869,300

129,783

Refund liability

5,732

5,390

805

Deferred tax liabilities

112,535

80,200

11,974

Lease liabilities

72,101

49,724

7,424

Total liabilities

2,918,008

2,740,504

409,147

Ordinary shares

123

123

18

Additional paid-in capital

5,100,486

5,107,095

762,469

Treasury stock

(42,897)

(42,897)

(6,404)

Accumulated other comprehensive

income

11,553

4,772

712

Accumulated deficit

(247,833)

189,756

28,330

Total equity

4,821,432

5,258,849

785,125

Total liabilities and equity

7,272

Operating Highlights and Reconciliation of GAAP to Non-GAAP Measures

(in thousands,except for number of borrowers,number of investors and percentages)

For the Six Months Ended

June 30,

2022

RMB

RMB

USD

Operating Highlights

Amount of investment in current investment

products

11,166,657

10,580

1,630,101

Number of investors in current investment

products

203,472

305,975

305,975

Amount of loans facilitated under loan

facilitation model

10,183,146

9,541,056

1,424,442

Number of borrowers

646,486

827,767

827,767

Remaining principal of performing loans

facilitated under loan facilitation model

12,543,745

10,613,125

1,584,498

Gross merchandise volume

-

146,138

21,818

Segment Information

Holistic Wealth:

Revenue

550,582

557,905

83,293

Sales and marketing expenses

68,031

95,782

14,300

Origination,servicing and other operating

costs

283,015

238,133

35,552

Consumer credit:

Revenue

1,674,416

827,196

123,497

Sales and marketing expenses

774,027

237,220

35,416

Origination,servicing and other operating

costs

74,177

73,503

10,974

Others:

Revenue

-

120,033

Sales and marketing expenses

-

1,139

170

Origination,servicing and other operating

costs

-

29,992

4,478

Reconciliation of Adjusted EBITDA

Net income

381,588

Interest expense,net

33,762

29,363

4,384

Income tax expense

99,631

Depreciation and amortization

27,321

15,379

2,296

Share-based compensation

4,850

4,882

729

Adjusted EBITDA

546,859

560,147

83,628

Adjusted EBITDA margin

24.6%

37.2%

37.2%

Delinquency Rates (Loan Facilitation Model)

15-29 days

30-59 days

60-89 days

All Loans

December 31,2019

0.8%

1.3%

1.0%

December 31,2020

0.5%

0.7%

0.6%

December 31,2021

0.9%

1.5%

1.2%

March 31,2022

0.9%

2.0%

1.9%

June 30,2022

0.6%

1.4%

1.5%

Online Channels

December 31,2019

1.0%

2.1%

1.6%

December 31,2020

0.6%

1.0%

1.1%

December 31,2021

0.8%

1.3%

1.1%

March 31,2022

0.7%

1.5%

1.3%

June 30,2022

0.6%

1.1%

1.2%

Offline Channels

December 31,2019

0.7%

0.9%

0.7%

December 31,2020

0.4%

0.6%

0.4%

December 31,2021

1.0%

1.8%

1.4%

March 31,2022

1.1%

2.7%

2.9%

June 30,2022

0.8%

2.0%

2.3%

Net Charge-Off Rate (Loan Facilitation Model)

Loan

Issued

Period

Amount of Loans

Facilitated

During the Period

Accumulated M3+ Net

Charge-Off

as of June 30,2022

Total Net Charge-Off

Rate

as of June 30,2022

2019

3,431,443

402,684

11.7%

2020

9,614,819

746,922

7.8%

2021

23,195,224

1,222,254

5.3%

2022Q1

4,606,889

30,001

0.7%

M3+ Net Charge-Off Rate (Loan Facilitation Model)

Loan

Issued

Period

Month on Book

4

7

10

13

16

19

22

25

28

31

34

2019Q1

0.0%

0.8%

2.0%

3.4%

5.3%

5.9%

6.3%

6.3%

6.3%

6.3%

6.3%

2019Q2

0.1%

1.5%

4.5%

7.5%

8.8%

9.2%

9.9%

10.3%

10.6%

10.6%

10.6%

2019Q3

0.2%

2.9%

6.8%

9.0%

10.4%

12.0%

13.2%

13.8%

14.4%

14.6%

2019Q4

0.4%

3.1%

4.9%

6.3%

7.2%

7.9%

8.4%

8.9%

9.5%

2020Q1

0.6%

2.3%

4.1%

5.2%

6.0%

6.2%

6.6%

7.2%

2020Q2

0.5%

2.5%

4.2%

5.3%

6.1%

6.7%

7.5%

2020Q3

1.1%

3.3%

5.1%

6.3%

7.1%

8.1%

2020Q4

0.3%

1.8%

3.2%

4.6%

6.0%

2021Q1

0.4%

2.3%

3.9%

5.5%

2021Q2

0.4%

2.4%

4.5%

2021Q3

0.5%

3.1%

2021Q4

0.6%

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