Jiayin Group Inc. — FY2019 Form 20-F
Reporting period: Fiscal year ended December 31, 2019; filed April 30, 2020. This is an annual report, not a standalone fourth-quarter filing, so Q4-only financial results are not provided. Financial statements are prepared under U.S. GAAP. Jiayin operates a China-focused online consumer-finance marketplace connecting borrowers with individual and institutional investors.
Key financial and operating metrics
| Metric | FY2019 | FY2018 |
|---|---|---|
| Net revenue | RMB2,230.2 million (US$320.3 million) | RMB2,881.9 million |
| Operating income / margin | RMB534.7 million / 24.0% | RMB685.2 million / 23.9% |
| Net income | RMB527.2 million (US$75.7 million) | RMB611.8 million |
| Net margin | 23.6% | 21.3% |
| Operating cash flow | RMB26.3 million | Use of RMB228.4 million |
| Investing cash flow | Use of RMB234.2 million | Use of RMB16.4 million |
| Financing cash flow | RMB244.7 million provided | Use of RMB433.6 million |
| Cash and cash equivalents at year-end | RMB122.1 million (US$17.5 million) | RMB41.4 million |
| Total assets / liabilities | RMB701.1 million / RMB1,442.7 million | RMB801.9 million / RMB2,453.9 million |
| Shareholders’ deficit | RMB741.6 million | RMB1,652.0 million |
Margins and credit costs: Operating costs were 76.0% of revenue. The company recorded RMB232.2 million of allowance for uncollectible receivables and contract assets; share-based compensation was RMB147.6 million. Sales and marketing expense was RMB606.0 million, while general and administrative expense rose to RMB230.2 million.
Debt and liquidity: The filing does not present a conventional consolidated debt total. Year-end lease liabilities were RMB35.2 million. Related-party amounts due included RMB130.7 million, primarily a loan to China Smartpay; the company also held a RMB69.6 million short-term convertible-note investment. Management reported a RMB148.4 million shortfall between specified current assets and current liabilities and shareholders’ deficit of RMB741.6 million. It nevertheless expected available cash and operating cash flows to cover needs for at least 12 months from the report date.
Changes versus FY2018
- Revenue fell 22.6% and net income fell 13.8%. Loan originations declined to RMB19.1 billion from RMB23.7 billion, amid regulatory limits and unfavorable market conditions.
- Operating income declined, but operating margin was broadly stable. Total operating expenses fell to RMB1,695.5 million, mainly because there was no 2019 provision for the company-managed investor assurance program and marketing costs declined. General and administrative costs increased.
- Operating cash flow returned to a small positive amount after the 2018 outflow. The 2019 result reflected net income and noncash expenses, offset in part by payouts and other working-capital movements.
- Individual investors decreased to 194,918 from 331,713; their investment volume fell to RMB22.2 billion from RMB26.8 billion. Seven institutional funding partners contributed RMB0.8 billion in 2019.
- At December 31, delinquency rates by balance were lower than in 2018 in each disclosed aging band; loans more than 180 days delinquent were 8.39% versus 9.45%. The filing cautions that vintage performance varies and older offline loans have higher delinquency.
Outlook, risks, contingencies and unusual items
- Regulation: China’s online-lending rules are evolving and may restrict marketplace scale or require business changes. Niwodai Internet had not completed required local financial-regulator registration, obtained the related telecom license, or updated its registered business scope. The company’s assessment that it was a compliant, large-scale “Normal Marketplace” was its own interpretation; certain cited circulars had not been officially published.
- Business transition: Jiayin disposed of Shanghai Caiyin in 2019 and deconsolidated it, ending its own responsibility for the legacy investor-assurance liabilities. The disposal generated an RMB839.8 million payable at year-end, comprising RMB467.7 million fixed and RMB372.1 million contingent consideration. The company also reported RMB487.2 million of loans for which it provided secondary guarantee support to institutional partners.
- Investor assurance: Newly facilitated individual-investor loans were covered by third-party programs, subject to available program funds and provider performance. The filing warns that coverage may be insufficient and providers may face regulatory or financial difficulties.
- Other exposures: The company reported RMB130.7 million due from related parties, including the China Smartpay loan bearing 8% annual interest. It entered a proposed agreement to acquire a 35% interest in Keen Best for HK$105 million, with consideration planned to be offset against receivables from China Smartpay; closing remained subject to conditions.
- Controls and audit: Management concluded disclosure controls were ineffective at year-end. Two material weaknesses concerned insufficient U.S. GAAP/SEC-reporting expertise and a lack of formal risk assessment, internal audit and compliance infrastructure. The auditor issued an unqualified opinion on the financial statements but did not audit internal controls. The filing also states the PRC-based auditor was not subject to PCAOB inspection.
- COVID-19 and guidance: The filing describes disruption to operations and institutional-loan facilitation in early 2020, with activity recovering in March; the future financial effect was not reasonably estimable. Management discussed expanding institutional funding and overseas activities but gave no quantified earnings or revenue guidance.
- Accounting and unusual items: Share-based compensation rose to RMB147.6 million, including accelerated recognition of RMB39.4 million of unrecognized expense on cancelled options. The company also reported a historical charge-off-policy correction and a 2019 acquisition of Geerong Yun under common control. No material legal or administrative proceedings were reported.
Important facts for investors to verify
- Whether loan origination, revenue and collections stabilize under current regulatory limits, and whether institutional funding can replace individual-investor volume.
- The status and expected payment timing of the RMB839.8 million Shanghai Caiyin disposal payable, including the RMB372.1 million contingent portion.
- The adequacy and enforceability of third-party investor assurance programs and the company’s RMB487.2 million secondary-guarantee exposure.
- Recoverability of receivables and related-party balances, including the China Smartpay loan, and the basis for the RMB232.2 million receivables/contract-assets allowance.
- Progress in completing required online-lending registration and licenses, remediating material weaknesses, and managing liquidity despite negative working capital and shareholders’ deficit.