PPDAI Group Inc. Reports Third Quarter 2018 Unaudited Financial Results

SHANGHAI, Nov. 20, 2018 /PRNewswire/ -- PPDAI Group Inc. ("PPDAI," "Paipaidai," or the "Company") (NYSE: PPDF), a leading online consumer finance marketplace in China, today announced its unaudited financial results for the third quarter ended September 30, 2018.

Third Quarter 2018 Financial Highlights

• Net profit increased by 20.0% to RMB649.5 million (US$94.6 million) in the third quarter of 2018 from RMB541.4 million in the same period of 2017.
• Operating revenues decreased by 11.7% to RMB1,104.3 million (US$160.8 million) in the third quarter of 2018 from RMB1,250.3 million in the same period of 2017.
• Loan facilitation service fees decreased by 22.0% to RMB707.7 million (US$103.0 million) in the third quarter of 2018 from RMB906.9 million in the same period of 2017.
• Post-facilitation service fees increased by 19.9% to RMB239.9 million (US$34.9 million) in the third quarter of 2018 from RMB200.1 million in the same period of 2017.
• Strong liquidity position of RMB3,489.2 million (US$508.0 million) including cash, cash equivalents and short-term investments.
• High quality assurance fund coverage ratio of 18.8% for outstanding loan balances that are  protected by the fund.

Third Quarter 2018 Operational Highlights

• Cumulative registered users[1] reached 83.9 million as of September 30, 2018.
• Cumulative number of borrowers[2] reached 13.4 million as of September 30, 2018.
• Cumulative number of individual investors[3] reached 644,376 as of September 30, 2018.
• Number of unique borrowers[4] was 2.75 million for the third quarter of 2018, representing a  decrease of 39.2% from the same period of 2017.
• Loan origination volume[5] was approximately RMB14.8 billion for the third quarter of 2018, representing a decrease of  29.5% from the same period of 2017.
• Average loan tenure[8] was 9.0 months for the third quarter of 2018.
• Continued progress in providing our range of  "technologies as a service" to other third party financial service providers.

Mr. Jun Zhang, the Chairman and a Co-Chief Executive Officer of PPDAI, commented, "We are pleased to report solid financial results for the third quarter of 2018 despite the headwinds faced by the market. While the industry continues to experience significant change and consolidation, our core business remains resilient and we continue to benefit from market share gains."

Mr. Feng Zhang, a Co-Chief Executive Officer of PPDAI, stated, "With our strategic focus on investing in technology and our brand, we are encouraged with the progress we've seen in our "technologies as a service" offering being deployed across a wide range of financial service providers. We are on track to complete the necessary compliance checks and are working closely with regulators. A strengthened regulatory framework, as well as healthy industry consolidation will fuel long-term growth and sustainability. As a leader in our market, PPDAI is well positioned to capture the enormous opportunities in China's consumer finance market."

Mr. Simon Ho, the Chief Financial Officer of PPDAI, added, "During the quarter, we maintained healthy profitability with non-GAAP operating margin of 41.9% benefiting from continuous disciplined cost management. We maintained a strong balance sheet with approximately RMB3.5 billion of cash and short-term liquidity. Notably, our quality assurance fund remains sufficiently funded with a total balance of approximately RMB4.1 billion, equivalent to 18.8% of the total outstanding loans protected by the fund. We're confident in our ability to navigate this dynamic market and capture opportunities to grow our business."

Third Quarter 2018 Financial Results

Operating revenues for the third quarter of 2018 decreased by 11.7% to RMB1,104.3 million (US$ 160.8 million) from RMB1,250.3 million in the same period of 2017, primarily due to lower loan origination volume for the quarter. As a result of the adoption of the ASC 606 effective January 1, 2018, revenue is generally recognized earlier in the life of the contract as there is no contingency revenue cap under the new standard. For the three months ended September 30, 2018, the impact of applying the new revenue standard resulted in an increase of approximately RMB136.3 million (US$19.9 million) in revenues.

Loan facilitation service fees decreased by 22.0% to RMB707.7 million (US$103.0 million) for the third quarter of 2018 from RMB906.9 million in the same period of 2017, primarily due to lower loan origination volume in the third quarter of 2018. The average rate of transaction fees charged to borrowers was 7.07% in the period, compared to 6.31% in the second quarter of 2018 and 6.31% in the third quarter of 2017. Loan collection fees of RMB87.1 million (US$12.7 million) have been allocated from other revenue to loan facilitation service fees related to the adoption of ASC 606 effective January 1, 2018.

Post-facilitation service fees increased by 19.9% to RMB239.9 million (US$34.9 million) for the third quarter of 2018 from RMB200.1 million in the same period of 2017, mainly due to the adoption of ASC 606 effective January 1, 2018. Loan collection fees of RMB33.4 million (US$4.9 million) have been allocated from other revenue to post facilitation service fees related to the adoption of ASC 606.

Other revenue decreased by 21.8% to RMB112.1 million (US$16.3 million) for the third quarter of 2018 from RMB143.3 million in the same period of 2017, primarily due to the adoption of ASC 606, effective January 1, 2018, offset by an increase in management fees from investment programs that invest in loans protected by the quality assurance fund.

Net interest income and loan provision losses for the third quarter of 2018 were an expense of RMB20.3 million (US$3.0 million), compared to an expense of RMB3.4 million in the same period of 2017, mainly due to provisions for expected loan losses related to the increased number of investment trusts established during the period for serving institutional investors.

Origination and servicing expenses decreased by 24.0% to RMB226.2 million (US$32.9 million) for the third quarter of 2018 from RMB297.8 million in the same period of 2017, primarily due to the discontinuation in consumption loan products since late 2017.

Sales and marketing expenses decreased by 18.1% to RMB184.5 million (US$26.9 million) for the third quarter of 2018 from RMB225.3 million in the same period of 2017, primarily due to the decline in online customer acquisition expenses and lower loan origination volume in the third quarter.

General and administrative expenses increased by 26.2% to RMB182.7 million (US$26.6 million) for the third quarter of 2018 from RMB144.7 million in the same period of 2017, primarily due to the increase in research and development costs. General and administrative expenses for the period included share-based compensation of RMB8.3 million (US$1.2 million).

Operating income decreased by 15.3% to RMB490.6 million (US$71.4 million) for the third quarter of 2018 from RMB579.0 million in the same period of 2017.

Non-GAAP adjusted operating income, which excludes share-based compensation expenses before tax and a write-back of provision for expected discretionary payments to investors in investment programs protected by the investor reserve funds, was RMB454.4 million (US$66.2 million) for the third quarter of 2018, representing a decrease of 21.5% from RMB579.0 million in the same period of 2017.

Other income was RMB251.1 million (US$36.6 million) for the third quarter of 2018, compared with RMB120.9 million in the same period of 2017. Other income primarily consisted of (1) a gain of RMB276.6 million (US$40.3 million) from the quality assurance fund which stemmed from the increase in loans facilitated on the Company's platform that are protected by the quality assurance fund, (2) a loss of RMB6.8 million (US$0.99 million) from the fair value change of financial guarantee derivatives, and (3) a realized loss of RMB28.1 million (US$4.1 million) from financial guarantee derivatives due to the amount of investment programs maturing during the period. The Company re-evaluates the fair value of outstanding financial guarantee derivatives at each balance sheet date to reflect the views of market participants on the expected default rate based on the latest market changes. For the third quarter of 2018, RMB11.5 billion of loans facilitated on the Company's platform were protected by the quality assurance fund.

Income tax expenses were RMB 92.2 million (US$13.4 million) for the third quarter of 2018, compared with RMB158.5 million in the same period of 2017, primarily due to tax benefits from increased research and development expenses.                                        

Net profit increased by 20.0% to RMB649.5 million (US$94.6 million) for the third quarter of 2018 from RMB541.4 million in the same period of 2017.

Net profit attributable to ordinary shareholders of the Company was RMB649.3 million (US$94.5 million) for the third quarter of 2018, compared with net loss attributable to ordinary shareholders of RMB278.7 million in the same period of 2017 due to accretion of the Company's Series A, B and C preferred shares in the third quarter of 2017.

As of September 30, 2018, the Company had cash and cash equivalents of RMB1,654.6 million (US$240.9 million) and short-term investments mainly in wealth management products of RMB 1,834.6 million (US$267.1 million).

The total balance of the quality assurance fund, which included restricted cash of RMB2,064.8 million (US$300.6 million) and the quality assurance fund receivable of RMB2,002.5 million (US$291.6 million), was equivalent to 18.8% of the total outstanding loans protected by the quality assurance fund.

The following table provides the delinquency rates for all outstanding loans on the Company's platform as of the respective dates indicated.

The following chart and table display the historical cumulative 30-day plus past due delinquency rates by loan origination vintage for all continuing loan products facilitated through the Company's online marketplace.

Click here to view the chart.

Conference Call

The Company's management will host an earnings conference call at 8:00 AM U.S. Eastern Time on November 20, 2018 (9:00 PM Beijing/Hong Kong time on November 20, 2018).

Dial-in details for the earnings conference call are as follows:

Participants should dial-in at least 5 minutes before the scheduled start time and ask to be connected to the call for "PPDAI Group."

Additionally, a live and archived webcast of the conference call will be available on the Company's investor relations website at http://ir.ppdai.com.

A replay of the conference call will be accessible approximately one hour after the conclusion of the live call until December 20, 2018, by dialing the following telephone numbers:

About PPDAI Group Inc.

PPDAI is a leading online consumer finance marketplace in China with strong brand recognition. Launched in 2007, the Company is the first online consumer finance marketplace in China connecting borrowers and investors. As a pioneer in China's online consumer finance marketplace, the Company benefits from both its early-mover advantages and the invaluable data and experience accumulated throughout multiple complete loan lifecycles. The Company's platform, empowered by its proprietary, cutting-edge technologies, features a highly automated loan transaction process, which enables a superior user experience, as evidenced by the rapid growth of the Company's user base and loan origination volume. As of September 30, 2018, the Company had over 83 million cumulative registered users.

For more information, please visit http://ir.ppdai.com.

Use of Non-GAAP Financial Measures

We use Non-GAAP operating income, a Non-GAAP financial measure, in evaluating our operating results and for financial and operational decision-making purposes. We believe that adjusted operating income help identify underlying trends in our business by excluding the impact of share-based compensation expenses and expected discretionary measures. We believe that adjusted operating income provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.

Non-GAAP adjusted operating income is not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. This Non-GAAP financial measure has limitations as analytical tools, and when assessing our operating performance, cash flows or our liquidity, investors should not consider them in isolation, or as a substitute for net (loss)/income, cash flows provided by operating activities or other consolidated statements of operation and cash flow data prepared in accordance with U.S. GAAP. The Company encourages investors and others to review our financial information in its entirety and not rely on a single financial measure.

For more information on this Non-GAAP financial measure, please see the table captioned "Reconciliations of GAAP and Non-GAAP results" set forth at the end of this press release.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.8680 to US$1.00, the rate in effect as of September 28, 2018 as certified for customs purposes by the Federal Reserve Bank of New York.

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 the Company'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 the Company's ability to attract and retain borrowers and investors on its marketplace, its ability to increase volume of loans facilitated through the Company's marketplace, its ability to introduce new loan products and platform enhancements, its ability to compete effectively, laws, regulations and governmental policies relating to the online consumer finance industry in China, general economic conditions in China, and the Company's ability to meet the standards necessary to maintain listing of its ADSs on the NYSE, 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 the Company'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 PPDAI 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.

For investor and media inquiries, please contact:

In China:PPDAI Group Inc.Jimmy Tan / Sally HuoTel: +86 (21) 8030 3200-8601E-mail: [email protected]

The Piacente Group, Inc.Ross WarnerTel: +86 (10) 5730-6200E-mail: [email protected]

In the United States:The Piacente Group, Inc.   Brandi PiacenteTel: +1-212-481-2050E-mail: [email protected]

 

 

 

 

 

 

 

 

 

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SOURCE PPDAI Group Inc.