Good day, ladies and gentlemen. Thank you for standing by and welcome to the Jiayin Group Third Quarter 2020 Earnings Conference Call. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objection, you may disconnect at this time. I will now turn the call over to Ms. Julia Qian, Managing Director of The Blueshirt Group Asia. Ms. Qian, please go ahead.

Hello, everyone. Thank you all for joining us on today's conference call to discuss Jiayin Group's financial results for the third quarter of 2020. We released the results early today. The press release is available on the company's website as well as on newswire services. On the call with me today are Mr. Yan Dinggui, Chief Executive Officer; Mr. Charlie Fan, Chief Financial Officer; and Ms. Xu Yifang, Chief Risk Officer. Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provision of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Also, please note that, unless otherwise stated, all figures mentioned during the conference call are in Chinese RMB. With that, let me now turn the call over to our CEO, Yan Dinggui. Mr. Yan will speak in Chinese, then our IR Director, Shelley Bai, will translate his comments to English. Go ahead, Mr. Yan.

[Foreign Language] Hello, everyone. Thank you for joining our third quarter 2020 earnings conference call. We are pleased to report aznother solid quarter. We made significant progress in driving our business transformation, shifting funding sources to institutions and optimizing our cost structure. Most notably, we are excited to have reached an important milestone. As of November 10 2020, the outstanding loan balance of our legacy P2P lending business was reduced to zero. This signifies that we have successfully completed this transition to being a fintech company, with a platform fully funded by institutions. We do this by leveraging our technology, our advanced data algorithms and our risk systems. We facilitate and enable financial institutions to offer products and services to our large database of borrowers. [Foreign Language] The magnitude of this transition is remarkable. Just one year ago, our platform was over 90% funded by individuals. Being able to shift to complete institutional funding in just one year demonstrates our agility and our authentic execution capability. By transforming our business process, we were able to enable the functionality of our platform such that institutions can onboard and integrate easily. We've built the team and capabilities to scale and transform to a fintech service company with a technology platform optimized to serve financial institutions. With the new solid foundation under our business, combined with strong brand recognition, we are confident that we can achieve robust growth for years to come. [Foreign Language] Despite market uncertainty and the incredible speed of our business transformation, we sustained attractive profitability throughout the process. We achieved healthy margins through vigilant cost control and better operating efficiency. Net income reached RMB88.4 million in the quarter, up 8.1% year-over-year and 115.1% sequentially, a remarkable improvement. [Foreign Language] With our successful business transition, we were able to accelerate…

Thank you, Mr. Yan and Shelley. And thank you everyone for joining our call today. As Mr. Yang just mentioned, we ended Q3 on a strong note. Notably, as of November 10, Jiayin is no longer a P2P lending company as we close out our last individually funded loan. This quarter, we continued to operate conservatively while achieving attractive profitability. We have stayed our focus on serving high quality borrowers, which led to our repeat borrowing rate reaching 74.5%. Loans performed well and investor confidence remained strong. This creates an outstanding foundation for future growth. Now, let me briefly go over the financial results for the third quarter. Please know that, unless otherwise specified, all financial figures are in RMB. In the interest of time, I will not walk through each item by line on this call. Please refer to our earnings release for more details. I will just highlight some of the key points here. Loan origination volume was RMB3.3 billion, down 29.4% year-over-year, but up 48.8% sequentially. This was impressive, considering the state of our business transition and the current market conditions. Net revenue was RMB401.3 million, down 21.4% year-over-year, but up 63.8% sequentially. The big sequential jump was due to the other revenue of RMB77 million. The increase was primarily due to the variable consideration related to automated investment program recognized from loans previously facilitated on the P2P business. Since we have now exited the P2P lending, our P2P related revenues will continue to shrink and there will be no further P2P related revenue starting from 2021. Moving on to costs, this year's cost cutting efforts are bearing fruit. As you can see in our greatly reduced operating expenses this quarter, total operating expenses were RMB251.3 million, down 41.2% year-over-year. Origination and servicing expenses were RMB59.5 million,…

[Operator Instructions]. First question is from the line of Andrew Scutt of ROTH Capital.

Congrats on the quarter. Very strong results and great to see the progress you guys are making. First question here with regards to revenue and margin. So, great quarter on the top line. Can you provide some extra information on the other revenue? I believe it was RMB77 million. It was a big gain there quarter-over-quarter and year-over-year. So, some extra details on the other revenue. And very strong margins this quarter. Looks like you guys are doing well with the cost controls. Is that something that we'll be able to stay steady over the next few quarters, these strong margins? Any color you can provide there would be great as well.

Other revenue was related to a decrease of the P2P related outstanding loan balance, with a combination of reversal of the overestimate of the funded liability item and other factors, the revenue was generated, it’s around like RMB77 million for this quarter. And actually, it's a non-recurring revenue. With the P2P running down to zero in November, we should have very little P2P-related revenue in Q4. And going forward, because our P2P outstanding loan balance have decreased to zero, so we will not see that item anymore, I mean P2P related revenue. That's the answer to your first question. Now second one, you asked about our margin. And the margin driver, actually, for our business is very dynamic, which is the final outcome based on the scale of the business, the funding costs, the revenue take rate, and the credit cost and also the operational efficiency level. You can see some ups and downs of our profit margin historically, affected by our compliance efforts, the regulation, the business transition, et cetera, Since now we have fully exited the P2P business and 100% shifted to the institutional loan facilitation model. Jiayin is now in a much better position than before to further lower the pricing to meet the requirements of the strictest funding partner. We can lower the funding costs by partnering with more financial institutions, lower the credit cost by acquiring better quality assets and improving our risk management capability. And we can also get a better margin by improving our operational efficiency by overall cost control and integration of the advanced technology. All in all, I think the management team is very confident that, from a long-term perspective, our net profit margin will be maintained in a very stable and healthy double-digit level.

A good segue into my next question. So, can you just provide an update on your client take rate right now and the cost of acquisition, especially now that you guys have transitioned away from the P2P lending? And if you guys have a kind of target marks there that you're working towards?

Our Q3 take rate actually is very similar to our Q2 because, in Q3, 100% of our loan origination volume comes from the institutional funding and it's around 7%. Actually, it's much lower if you compare that with our take rate last year. Last year, our take rate is above 10%. And we are seeing the revenue take rate will keep at that level and probably will get lower once we lower our pricing and lower our funding cost and lower our credit cost. That's the trend, trajectory we are reserving.

And then, last question for me for now. Congrats on the acquisition or the investment into Keen Best Investment. Can you just kind of provide some more color around the strategy there and if you guys have plans to make some more investments in the future?

Are you talking about our short-term investment where we made a provision of RMB34 million this quarter?

Yeah, the acquisition of Keen Best investments – the 35% stake you guys….

We acquired 35% of the shares of the company, namely Keen Best, right, and with a consideration of HK$105 million. And actually, the decision was made in the first quarter of this year. And we consider this will be very beneficial to our overall business when the decision was made. And the share transfer agreement actually was signed in Q1 this year, and the deal was officially closed by the end of Q3. So, if you look at our balance sheet as of the end of Q3, the balance of the long-term investment line item increased and due from related party balance decreased. So, the rational way to make the decision, when we made a decision in Q1, we think the micro lending business license will be very helpful and beneficial to our long-term business. So, we made this decision. And then, now, we all know that the regulation is kind of getting tightened because of the -- for the microlending business, but we are still assessing the value of this investment. And we will see what we can do about this investment going forward. I think everything is open. We are open minded to this kind of investment. And we'll see what we can do about that.

[Operator Instructions]. Thank you. I’m seeing no more questions in the queue, let me turn the call back to CFO, Mr. Charlie Fan, for closing remarks.

Thank you all again. This concludes the call. You may now disconnect. Thank you very much.

Thank you, ladies and gentlemen. This concludes the conference call for today. And thank you for participating. You can all disconnect.