Yiren Digital Reports Third Quarter 2022 Financial Results

BEIJING,Nov. 22,2022 --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 quarter ended September 30,2022.

Third Quarter 2022 Operational Highlights

Holistic Wealth Business

Cumulative number of clients served reached 3,080,757 as of September 30,2022,representing an increase of 17.9% from 2,612,279 as of September 30,2021.

Number of active clients[1] was 621,137 as of September 30,representing an increase of 45.2% from 427,873 as of September 30,2021. The increase was driven by our expanding insurance brokerage business and Yiren Select initiatives.

Total client assets[2] reached RMB22,795.8 million (US$3,204.6 million) as of September 30,representing an increase of 30.9% from RMB17,415.3 million as of September 30,2021.

Sales volume of investment products amounted to RMB4,476.4 million (US$629.3 million) in the third quarter of 2022,representing a decrease of 11.0% from RMB5,030.2 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 RMB6.3 billion (US$0.9 billion),representing a decrease of 7.9% from RMB6.8 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 6,960,095 as of September 30,representing an increase of 19.2% compared to 5,840,424 as of September 30,2021.

Number of borrowers served in the third quarter of 2022 was 737,320 representing an increase of 34.4% from 548,495 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 RMB10,630.4 million (US$1,494.4 million) as of September 30,representing a decrease of 22.9% from RMB13,793.9 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 RMB249.6 million (US$35.1 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 sixtimes. 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 RMB6.3 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 32.2%,up 6.2 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 RMB4.7 billion as of September 30,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 RMB840.7 million (US$118.2 million),representing a decrease of 31.8% from RMB1,232.0 million in the third quarter of 2021. Particularly,in the third quarter of 2022,revenue from credit-tech business was RMB493.4 million (US$69.4 million),representing a decrease of 44.8% from RMB894.4 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 RMB294.3 million ($41.4 million),representing a decrease of 12.8%from RMB337.6 million in the third quarter of 2021. The decrease was due to the declined sales volume of investment products.

Sales and marketing expensesin the third quarter of 2022 were RMB136.4 million (US$19.2 million),compared to RMB407.2 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 third quarter of 2022 were RMB223.6 million (US$31.4 million),compared to RMB186.9 million in the same period of 2021. The increase was due to the expanding insurance brokerage business.

General and administrative expensesin the third quarter of 2022 were RMB109.9 million (US$15.5 million),compared to RMB139.3 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 RMB35.1 million (US$4.9 million),compared to RMB83.6million 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 RMB70.0 million (US$9.8 million).

Net incomein the third quarter of 2022 was RMB270.3 million (US$38.0 million),as compared to RMB320.9 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 32.2% in the third quarter of 2022 from 26.0% in the same period of 2021 due to the improved cost efficiency.

Adjusted EBITDA[3](non-GAAP) in the third quarter of 2022 was RMB365.0 million (US$51.3 million),compared to RMB438.6 million in the same period of 2021.

Basic and diluted income per ADSin the third quarter of 2022 was RMB3.0(US$0.4) and RMB3.0 (US$0.4),compared to a basic per ADS of RMB3.8 and a diluted per ADS of RMB3.7 in the same period of 2021.

Net cash generated from operating activities in the third quarter of 2022 was RMB342.9 million (US$48.2 million),compared to RMB323.8 million in the same period of 2021.

Net cash used in investing activities in the third quarter of 2022 was RMB835.1 million (US$117.4 million),compared to RMB233.8 million in the same period of 2021.

[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 assets 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 on our platforms.

[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.

As of September 30,cash and cash equivalents were RMB3,613.0 million (US$507.9 million),compared to RMB4,354.5 million as of June 30,2022 and RMB2,864.5 million as of December 31,2021. As of September 30,the balance of held-to-maturity investments was RMB1.8 million (US$0.3 million),compared to RMB102.2 million as of June 30,2022 and RMB2.2 million as of December 31,the balance of available-for-sale investments was RMB1,109.4 million (US$156.0 million),compared to RMB136.4million as of June 30,2022 and RMB177.4 million as of December 31,2021.

Delinquency rates. As of September 30,the delinquency rates for loans that are past due for 15-29 days,30-59 days and 60-89 days were 0.7%,1.1% and 1.0% respectively,compared to 0.6%,1.4% and 1.5% respectively as of June 30,2022.

Cumulative M3+ net charge-off rates. As of September 30,the cumulative M3+ net charge-off rates for loans originated in 2019,2020 and 2021 were 11.7%,8.0% and 6.1% respectively,as compared to11.7%,7.8% and 5.3% 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 RMB0.9 billion to RMB1.1 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,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 ("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 RMB7.1135 to US$1.00,the effective noon buying rate on September 30,as set forth in the H.10 statistical release of the Federal Reserve Board.

Conference Call

Yiren Digital's management will host an earnings conference call at 8:00 a.m. U.S. Eastern Time on November 22,2022 (or 9:00 p.m. 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://s1.c-conf.com/diamondpass/10027037-fkc8rq.html

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://edge.media-server.com/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 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 Three Months Ended

For the Nine Months Ended

September 30,

2021

September 30,

2022

September 30,

2022

RMB

RMB

USD

RMB

RMB

USD

Net revenue:

Loan facilitation services

601,283

334,162

46,976

1,694,788

837,548

117,741

Post-origination services

39,024

74,433

10,464

124,394

166,720

23,437

Insurance brokerage services

199,406

189,019

26,572

510,911

532,770

74,896

Financing services

144,614

54,702

7,690

384,813

242,843

34,138

Electronic commerce services

-

52,954

7,444

-

173,742

24,424

Others

247,664

135,385

19,031

742,083

392,921

55,236

Total net revenue

1,231,991

840,655

118,177

3,456,989

2,346,544

329,872

Operating costs and expenses:

Sales and marketing

407,172

136,406

19,176

1,249,230

470,547

66,149

Origination,servicing and other operating

costs

186,915

223,622

31,436

544,107

565,250

79,462

General and administrative

139,321

109,947

15,456

386,876

338,459

47,580

Allowance for contract assets,receivables

and others

83,578

35,074

4,931

318,243

132,476

18,622

Total operating costs and expenses

816,986

505,049

70,999

2,498,456

1,506,732

211,813

Other (expenses)/income:

Interest expense,net

(21,565)

(378)

(53)

(55,327)

(29,741)

(4,181)

Fair value adjustments related to

Consolidated ABFE

(526)

2,077

292

(49,162)

21,862

3,073

Others,net

3,934

3,035

427

23,730

18,930

2,661

Total other (expenses)/income

(18,157)

4,734

666

(80,759)

11,051

1,553

Income before provision for income taxes

396,848

340,340

47,844

877,774

850,863

119,612

Income tax expense

75,923

70,020

9,843

175,555

141,227

19,853

Net income

320,925

270,320

38,001

702,219

709,636

99,759

Weighted average number of ordinary shares

outstanding,basic

170,193,542

179,409,525

179,525

168,719,693

173,174,370

173,370

Basic income per share

1.8856

1.5067

0.2118

4.1620

4.0978

0.5761

Basic income per ADS

3.7712

3.0134

0.4236

8.3240

8.1956

1.1522

Weighted average number of ordinary shares

outstanding,diluted

171,571,392

179,841,065

179,065

169,972,343

173,962,494

173,494

Diluted income per share

1.8705

1.5031

0.2113

4.1314

4.0792

0.5735

Diluted income per ADS

3.7410

3.0062

0.4226

8.2628

8.1584

1.1470

Unaudited Condensed Consolidated Cash Flow Data

Net cash generated from/(used in) operating

activities

323,819

342,888

48,202

(31,185)

1,377,540

193,651

Net cash (used in)/provided by investing

activities

(233,782)

(835,064)

(117,391)

(728,377)

(230,586)

(32,415)

Net cash provided by/(used in) financing

activities

49,770

(276,198)

(38,827)

473,277

(434,572)

(61,091)

Effect of foreign exchange rate changes

(257)

2,284

321

(653)

3,592

505

Net increase/(decrease) in cash,cash

equivalents and restricted cash

139,550

(766,090)

(107,695)

(286,938)

715,974

100,650

Cash,cash equivalents and restricted cash,

beginning of period

2,280,660

4,427,408

622,395

2,707,148

2,945,344

414,050

Cash,

end of period

2,420,210

3,661,318

514,700

2,700

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

As of

December 31,

2021

June 30,

2022

RMB

RMB

RMB

USD

Cash and cash equivalents

2,864,543

4,354,487

3,972

507,904

Restricted cash

80,800

72,921

48,346

6,796

Accounts receivable

305,018

297,939

274,623

38,606

Contract assets,net

1,105,905

634,079

502,936

70,702

Contract cost

9,959

2,545

1,610

226

Prepaid expenses and other assets

352,015

266,636

361,258

50,785

Loans at fair value

73,734

19,812

11,109

1,562

Financing receivables

1,697,962

960,238

713,411

100,290

Amounts due from related parties

879,256

935,714

1,124,738

158,113

Held-to-maturity investments

2,200

102,200

1,800

253

Available-for-sale investments

177,360

136,362

1,109,408

155,958

Property,equipment and software,net

102,548

92,714

82,184

11,553

Deferred tax assets

7,388

75,555

102,934

14,470

Right-of-use assets

80,752

48,151

39,133

5,501

Total assets

7,739,440

7,999,353

7,986,462

1,122,719

Accounts payable

19,065

30,903

31,711

4,458

Amounts due to related parties

434,127

411,530

244,185

34,327

Deferred revenue

12,379

1,713

526

74

Payable to investors at fair value

50,686

49,605

39,598

5,567

Accrued expenses and other liabilities

1,182,783

1,242,139

1,234,738

173,577

Secured borrowings

1,028,600

869,300

767,900

107,950

Refund liability

5,732

5,390

351

49

Deferred tax liabilities

112,535

80,200

78,819

11,079

Lease liabilities

72,101

49,724

40,968

5,759

Total liabilities

2,918,008

2,740,504

2,438,796

342,840

Ordinary shares

123

123

129

18

Additional paid-in capital

5,100,486

5,107,095

5,158,676

725,195

Treasury stock

(42,897)

(42,897)

(6,030)

Accumulated other comprehensive income

11,553

4,772

7,509

1,056

Accumulated deficit

(247,833)

189,756

424,249

59,640

Total equity

4,821,432

5,258,849

5,547,666

779,879

Total liabilities and equity

7,719

Operating Highlights and Reconciliation of GAAP to Non-GAAP Measures

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

For the Three Months Ended

For the Nine Months Ended

September 30,

2022

RMB

RMB

USD

RMB

RMB

USD

Operating Highlights

Amount of investment in current investment

products

5,030,228

4,476,390

629,281

16,196,885

15,394,970

2,164,191

Number of investors in current investment

products

127,378

176,787

176,787

299,186

437,296

437,296

Amount of loans facilitated under loan facilitation

model

6,921

6,298,522

885,432

17,025,066

15,839,577

2,226,693

Number of borrowers

548,495

737,320

737,320

967,057

1,228,435

1,435

Remaining principal of performing loans facilitated

under loan facilitation model

13,793,925

10,630,352

1,494,391

13,391

Gross merchandise volume

-

249,624

35,092

-

395,762

55,635

Segment Information

Holistic Wealth:

Revenue

337,627

294,332

41,376

888,209

852,237

119,806

Sales and marketing expenses

55,463

46,698

6,565

123,494

142,480

20,030

Origination,servicing and other operating costs

159,348

165,605

23,280

442,363

403,738

56,757

Consumer credit:

Revenue

894,364

493,369

69,357

2,568,780

1,320,565

185,642

Sales and marketing expenses

351,709

88,714

12,471

1,125,736

325,934

45,819

Origination,servicing and other operating costs

27,567

39,951

5,616

101,744

113,454

15,949

Others:

Revenue

-

52,424

Sales and marketing expenses

-

994

140

-

2,133

300

Origination,servicing and other operating costs

-

18,066

2,540

-

48,058

6,756

Reconciliation of Adjusted EBITDA

Net income

320,759

Interest expense,net

21,565

378

53

55,327

29,741

4,181

Income tax expense

75,853

Depreciation and amortization

8,449

8,514

1,197

35,770

23,893

3,359

Share-based compensation

11,742

15,760

2,216

16,592

20,642

2,902

Adjusted EBITDA

438,604

364,992

51,310

985,463

925,139

130,054

Adjusted EBITDA margin

35.6%

43.4%

43.4%

28.5%

39.4%

39.4%

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%

Septempber 30,2022

0.7%

1.1%

1.0%

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%

Septempber 30,2022

0.6%

0.9%

0.8%

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%

Septempber 30,2022

1.3%

1.9%

1.9%

Net Charge-Off Rate (Loan Facilitation Model)

LoanIssued

Period

Amount of Loans

Facilitated

During the Period

Accumulated M3+ Net

Charge-Off

as of Septempber 30,2022

Total Net Charge-Off

Rate

as of Septempber 30,2022

(in RMB thousands)

(in RMB thousands)

2019

3,431,443

401,135

11.7%

2020

9,614,819

768,606

8.0%

2021

23,195,224

1,414,959

6.1%

2022H1

9,541,056

140,742

1.5%

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%

14.6%

2019Q4

0.4%

3.1%

4.9%

6.3%

7.2%

7.9%

8.4%

8.9%

9.5%

9.8%

2020Q1

0.6%

2.3%

4.1%

5.2%

6.0%

6.2%

6.6%

7.2%

7.7%

2020Q2

0.5%

2.5%

4.2%

5.3%

6.1%

6.7%

7.5%

8.1%

2020Q3

1.1%

3.3%

5.1%

6.3%

7.1%

8.1%

8.7%

2020Q4

0.3%

1.8%

3.2%

4.6%

6.0%

7.0%

2021Q1

0.4%

2.3%

3.9%

5.5%

6.6%

2021Q2

0.4%

2.4%

4.5%

5.9%

2021Q3

0.5%

3.1%

5.0%

2021Q4

0.6%

3.2%

2022Q1

0.6%

View original content:https://www.prnewswire.com/news-releases/yiren-digital-reports-third-quarter-2022-financial-results-301685018.html