Yiren Digital Ltd. (NYSE: YRD) reported Q2 EPS of ($0.35), $0.52 worse than the analyst estimate of $0.17. Revenue for the quarter came in at $106.82 million versus the consensus estimate of $274.2 million.

Second Quarter 2020 Operational Highlights

Wealth Management—Yiren Wealth

• Cumulative number of investors served reached 2,223,250 as of June 30, 2020, representing an increase of 0.2% from 2,218,181 as of March 31, 2020 and compared to 2,185,513 as of June 30, 2019.
• Number of current investors was 195,211 as of June 30, 2020, representing a decrease of 11.5% from 220,568 as of March 31, 2020.
• Number of current non-P2P investors was 31,530 as of June 30, 2020, representing an increase of 19.7% from 26,346 as of March 31, 2020, and compared to 17,133 as of June 30, 2019.
• Total assets under administration ("AUA") for P2P products on Yiren Wealth was RMB 25,896.8 million (US$3,665.4 million) as of June 30, 2020, representing a decrease of 15.2% from RMB 30,536.4 million as of March 31, 2020, and compared to RMB 43,249.9 million as of June 30, 2019.
• Total AUA for non-P2P products on Yiren Wealth was RMB 2,528.6 million (US$357.9 million) as of June 30, 2020, representing an increase of 47.6% from 1,713.1 million as of March 31, 2020,and compared to RMB 352.7 million as of June 30, 2019.
• Sales volume of non-P2P products amounted to RMB 2,186.2 million (US$309.4 million) in the second quarter of 2020, representing an increase of 1.1% from RMB 2,163.3 million in the first quarter of 2020 and compared to RMB 284.8 million in the same period of 2019.

"With the pandemic still not far behind us and the changing market environment in the second quarter, we are making comprehensive progresses towards our business transition in our credit-tech business and have achieved meaningful scale in our wealth management business growth," said Mr. Ning Tang, Chairman and Chief Executive Officer of Yiren Digital.

"For our credit-tech business, our new online product initiatives are tracking very well. Our new revolving loan product, Yi Xiang Hua, accounted for 13% of our total loan volume this quarter, growing over 500% quarter over quarter. Meanwhile, by leveraging our vast offline service network coverage, we are ramping up auto loans nicely, achieving a 51% growth from last quarter. Moreover, we have made great strides in repositioning our credit business by moving from a P2P funding model to a loan facilitation model. In the second quarter, 63% of loans facilitated were funded by institutional intuitional partners and we expect this proportion to reach close to 100% by the end of this year with a diversified partner base."

"On wealth management business, we are seeing very strong growth momentum particularly for our fund products. As of June 30, 2020, the number of current non-P2P investors increased 20% from last quarter to 31,530, and total AUA for non-P2P products increased by 48% quarterly to RMB 2.5 billion. Moreover, average AUA per investor for non-P2P products also sees steady growth, with average AUA per investor for bank's fixed-income products exceeding RMB 100,000 and for funds over RMB 50,000, which is well above industry average"

"We are delighted to see a notable acceleration in loan originations from prior quarter to RMB 2.4 billion, thanks to our strategic initiatives this year in diversification of our loan products," said Mr. Zhong Bi, Chief Financial Officer of Yiren Digital. "To provide relief to our borrowers who were significantly affected by the pandemic as well as medical workers who fought on the frontlines, we proactively granted a concession totaling RMB 245 million for over 50,000 borrowers in principal, interest and late fees, this represents a one-time hit to our revenue. On the balance sheet side, our cash position remains strong with approximately RMB 3.4 billion of cash and short-term investments as of June 30, 2020. "

"Thanks to our continued efforts in risk management, the delinquency rates have shown a progressive improving trend. 15-90 days delinquency has decreased to 5.5% as of June 30, 2020 from 8.9% as of March 31, 2020. 15-90 days delinquency further decreased to 5.2% as of July 31, 2020 as a result of our strengthened efforts in tightening controls and improving borrower's credit quality." said Mr. Michael Ji, Chief Risk Officer of Yiren Digital. "To mitigate the risk caused by covid-19 and help customers went through the financial hardship, we have launched 7 relating special collection projects in the second quarter, including continued 'pandemic customer care program', which offered payment relief for the customers who were hit by covid-19 and healthcare givers who were fighting the disease. These special collection projects helped us achieve a decline in NCL by over 10% as compared with projection at the beginning of the year, even facing the economic headwind. We will continue to strengthen our risk management and expect delinquency rates to further improve in the second half of the year.

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