UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of August 2018

 

 

Commission File Number: 001-37657

 

 

YIRENDAI LTD.

 

10/F, Building 9, 91 Jianguo Road

Chaoyang District, Beijing 100022

The People’s Republic of China

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F  x                   Form 40-F  o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	YIRENDAI LTD.
	By	/s/ Yu Cong
	Name:	Yu Cong
	Title:	Chief Financial Officer

 

Date:  August 29, 2018

 

2

 

Exhibit Index

 

Exhibit 99.1—Press Release

 

3

Exhibit 99.1

 

Yirendai Reports Second Quarter 2018 Financial Results

 

BEIJING, Aug. 28, 2018 /PRNewswire/ — Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a leading fintech company in China, today announced its unaudited financial results for the quarter ended June 30, 2018.

 

		For the Three Months Ended
in RMB million		30-Jun-18		30-Jun-17		YoY Change
Amount of Loans Facilitated		11,736.2		8,536.1		38	%
Total Net Revenue		1,519.6		1,183.1		28	%
Net Income		204.7		269.1		-24	%
Adjusted EBITDA (non-GAAP)*		563.7		378.4		49	%
Adjusted Net Income (non-GAAP)*		440.5		269.1		64	%

 

* For the second quarter of 2018, adjusted EBITDA and adjusted net income includes RMB 235.9 million adjustment on income earned from loans facilitated prior to 2018, if ASC 606 was not adopted.

 

In the second quarter of 2018, Yirendai facilitated RMB 11,736.2 million (US$1,773.6 million) of loans to 177,754 qualified individual borrowers through its online marketplace, representing a year-over-year growth of 38%; 23.4% of loan volume were generated by repeat borrowers who have successfully borrowed on Yirendai’s platform before; 76.3% of the borrowers were acquired from online channels; 100% of the loan volume originated from online channels was facilitated through mobile.

 

In the second quarter of 2018, Yirendai facilitated 202,380 investors with total investment amount of RMB 12,175.4 million (US$1,840.0 million), 100% of which was facilitated through its online platform and 96% of which was facilitated through its mobile application.

 

In the second quarter of 2018, total net revenue was RMB 1,519.6 million (US$229.6 million), an increase of 28% from prior year; net income was RMB 204.7 million (US$30.9 million), a decrease of 24% from prior year; and adjusted net income in the second quarter of 2018 was RMB 440.5 million (US$66.6 million), an increase of 64% from prior year.

 

“Our operating results in the second quarter continued to be solid with loan origination volume increased by 38% from the previous quarter,” commented Ms. Yihan Fang, Chief Executive Officer of Yirendai. “We have also continued to make progress in growing our online wealth management business — Yiren Wealth. Furthermore, we have seen continued efforts from the government to promote the healthy development of our industry. We will continue to execute our strategies to build Yirendai into the exceedingly compliant online platform in China to offer the safe and professional financial products and services to consumers.”

 

1

 

“We are pleased to report another solid quarter despite a challenging market environment with business uncertainties,” commented Mr. Dennis Cong, Chief Financial Officer of Yirendai. “Funding remains the key for our growth and we are proud to announce our new partnership with Xinwang Bank to further diversify and optimize our funding structure. As a top industry player with strong risk management capabilities, we believe that we are well-positioned for the upcoming P2P registration process as well as capturing the long-term growth potential thereafter.”

 

Accounting Policy Change

 

The Company previously identified the investor as the only customer under ASC 606. Subsequent to the earning release for the quarter ended March 31, 2018, the Company has revised the accounting policy to recognize both the investor and borrower as customers. Accordingly, borrower’s credit risk is no longer treated as variable consideration, but reflected as a provision of contract assets. The comparable unaudited consolidated financial information for the first quarter of 2018 was adjusted for such change, resulting in the recognition of provision of contract assets of RMB116.6 million, and the net revenue has been grossed up by the same amount. In addition, the Company has revised to recognize service fees charged from investor over the term of the investment period. The net impact of such changes to the net income of the quarter ended March 31, 2018 was not material.

 

Second Quarter 2018 Financial Results

 

Total amount of loans facilitated in the second quarter of 2018, was RMB 11,736.2 million (US$1,773.6 million), increased by 38% from RMB 8,536.1 million in the same period last year, reflecting strong demand for our products and services, especially from customers acquired from online channels. As of June 30, 2018, Yirendai had facilitated approximately RMB 97.6 billion (US$14.8 billion) in loan principal since its inception.

 

Total net revenue in the second quarter of 2018 was RMB 1,519.6 million (US$229.6 million), increased by 28% from RMB 1,183.1 million in the same period last year. The increase of total net revenue was mainly attributable to the growth of loan origination volume as well as the increase in the total asset under management.

 

Sales and marketing expenses in the second quarter of 2018 were RMB 793.8 million (US$120.0 million), compared to RMB617.9 million in the same period last year. Sales and marketing expenses in the second quarter of 2018 accounted for 6.8% of amount of loans facilitated, decreased from 7.2% in the same period last year due to increased marketing efficiencies.

 

Origination and servicing costs in the second quarter of 2018 were RMB 147.0 million (US$22.2 million), compared to RMB 93.1 million in the same period last year. Origination and servicing costs in the second quarter of 2018 accounted for 1.3% of amount of loans facilitated, increased from 1.1% in the same period last year mainly due to increased collection efforts this quarter.

 

2

 

General and administrative expenses in the second quarter of 2018 were RMB 336.1 million (US$50.8 million), compared to RMB 98.6 million in the same period last year. General and administrative expenses in the second quarter of 2018 accounted for 22.1% of total net revenue, compared to 8.3% in the same period last year. The increase in general and administrative expenses was mainly due to an expense of RMB 200.0 million (US$30.2 million) related to the quality assurance program; prior to the remaining balance of performing loans facilitated under the Company’s quality assurance program being transferred to a third-party guarantee company.

 

Income tax expense in the second quarter of 2018 was RMB 41.1 million (US$6.2 million). Since the first quarter of 2017, Yi Ren Heng Ye Technology Development (Beijing) Co., Ltd., a subsidiary of the Company, enjoyed a favorable enterprise income tax rate of 12.5% as a software enterprise which qualification was confirmed by local tax bureau in the third quarter of 2016. This makes it eligible for an exemption of enterprise income tax for 2015 and 2016 and a favorable enterprise income tax rate of 12.5% for 2017, 2018 and 2019.

 

Net income in the second quarter of 2018 was RMB 204.7 million (US$30.9 million), decreased by 24% from RMB269.1 million in the same period last year.

 

Adjusted net income (non-GAAP) in the second quarter of 2018 was RMB 440.5 million (US$66.6 million), increased by 64% from RMB 269.1 million in the same period last year. For the second quarter of 2018, net income would by positively impacted by RMB 235.9 million if ASC 606 was not adopted, generated from loans facilitated prior to 2018.

 

Adjusted EBITDA (non-GAAP) in the second quarter of 2018 was RMB 563.7 million (US$85.2 million), increased by 49% from RMB 378.4 million in the same period last year. Adjusted EBITDA margin[1] (non-GAAP) in the second quarter of 2018 was 37.1%, compared to 32.0% in the same period last year. For the second quarter of 2018, adjusted EBITDA includes RMB 314.5 million adjustment on pre-tax income earned from loans facilitated prior to 2018, if ASC 606 was not adopted.

 

Basic income per ADS in the second quarter of 2018 was RMB 3.37 (US$0.51), decreased from RMB 4.50 in the same period last year.

 

Adjusted basic income per ADS in the second quarter of 2018 was RMB 7.26 (US$1.10). Adjusted basic income per ADS includes RMB 235.9 adjustment on income earned from loans facilitated prior to 2018, if ASC 606 was not adopted.

 

Diluted income per ADS in the second quarter of 2018 was RMB 3.31 (US$0.50), decreased from RMB 4.45 in the same period last year.

 

Adjusted diluted income per ADS in the second quarter of 2018 was RMB 7.13 (US$1.08). Adjusted diluted income per ADS includes RMB 235.9 adjustment on income earned from loans facilitated prior to 2018, if ASC 606 was not adopted.

 

Net cash used in operating activities in the second quarter of 2018 was RMB 1,370.1 million (US$207.1 million), compared to net cash generated from operating activities of RMB 530.4 million in the same period last year. The decrease in net cash generated from operating activities is mainly due to an increase in loans with a monthly fee collection schedule as well as increased payouts of principal and accrued interest on default loans from the quality assurance program this quarter.

 

3

 

As of June 30, 2018, cash and cash equivalents was RMB 567.5 million (US$85.8 million), compared to RMB 1,666.9 million as of March 31, 2018. As of June 30, 2018, balance of held-to-maturity investments was RMB 312.1 million (US$47.2 million), compared to RMB 9.7 million as of March 31, 2018. As of June 30, 2018, balance of available-for-sale investments was RMB 530.1 million (US$80.1 million), compared to RMB 990.9 million as of March 31, 2018.

 

Delinquency rates. As of June 30, 2018, the delinquency rates for loans that are past due for 15-29 days, 30-59 days and 60-89 days were 0.8%, 1.2% and 1.3%, compared to 0.8%, 1.6% and 1.3%, as of March 31, 2018.

 

Cumulative M3+ net charge-off rates. As of June 30, 2018, the cumulative M3+ net charge-off rate for loans originated in 2015 was 10.1%, compared to 9.7% as of March 31, 2018. As of June 30, 2018, the cumulative M3+ net charge-off rate for loans originated in 2016 was 8.7%, compared to 7.4% as of March 31, 2018. As of June 30, 2018, the cumulative M3+ net charge-off rate for loans originated in 2017 was 6.0%, compared to 3.0% as of March 31, 2018. As the 2015 and 2016 vintage loans continue to mature, the charge off level is broadly consistent with our risk performance expectation.

 

Other Operating Metrics and Business Results

 

·                  As of June 30, 2018, remaining principal of performing loans totaled RMB 45.8 billion (US$6.9 billion), increased by 5% from RMB 43.8 billion as of March 31, 2018 and 65% from RMB 27.9 billion as of June 30, 2017.

 

·                  In the second quarter of 2018, Grade I, II, III, IV and V loans represented 9.0%, 26.9%, 27.2%, 20.7% and 16.2% of the Company’s product portfolio, respectively.

 

Other Developments

 

Credit Assurance Program

 

To ensure compliance with regulatory requirements, starting from May 2018, the Company has discontinued its quality assurance program. Effective May 2018, loans facilitated on the Company’s platform will be covered by a new credit assurance program operated by a third-party guarantee company. Under the new credit assurance program, the guarantee company will operate a reserve fund collected from borrowers and will compensate investors for losses from borrower’s default up to the cash available in the fund. Additionally, as of May 2018, the Company has transferred the guarantee liability related to the quality assurance program to the guarantee company at the estimated fair value on the date of transfer; therefore the Company derecognized the guarantee liability upon the transfer. The Company’s existing liability from quality assurance program has been fully transferred to a credit assurance program set up and managed by a third-party guarantee company. The Company recorded the consideration payable as payable to the guarantee company as of June 30, 2018. The restricted cash was still reported on the Company’s balance sheet as of June 30, 2018. As a result of the above, as of June 30, 2018, substantially all outstanding loans facilitated through Yirendai’s platform are either covered through a credit enhancement program operated by a third-party guarantee company or PICC’s surety insurance program.

 

4

 

Institutional Funding Update

 

As of August 2018, the Company has entered into new funding arrangements with Goldman Sachs, a leading global investment firm as well as XinWang Bank, one of the three Internet banks in China.

 

Dividend Policy Update

 

In August 2018, the Company’s board of directors have approved to temporarily suspend the semi-annual dividend policy due to a challenging market environment with business uncertainties.

 

Non-GAAP Financial Measures

 

In evaluating the business, the Company considers and uses several non-GAAP financial measures, such as adjusted net income, adjusted EBITDA, adjusted EBITDA margin, adjusted basic income per ADS and adjusted diluted income per ADS 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 RMB 6.6171 to US$1.00, the effective noon buying rate on June 29, 2018 as set forth in the H.10 statistical release of the Federal Reserve Board.

 

Conference Call

 

Yirendai’s management will host an earnings conference call at 8:00 p.m. U.S. Eastern Time on August 28, 2018 (or 8:00 a.m. Beijing/Hong Kong Time on August 29, 2018.)

 

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

 

5

 

International:	+65 6713-5090
U.S. Toll Free:	+1 866-519-4004
Hong Kong Toll Free:	800-906-601
Mainland China:	400-620-8038
Conference ID:	9685367

 

A replay of the conference call may be accessed by phone at the following numbers until September 5, 2018:

 

International:	+61 2-8199-0299
U.S. Toll Free:	+1 855-452-5696

 

Conference ID: 9685367

 

A live and archived webcast of the conference call will be available on Yirendai’s website at ir.yirendai.com.

 

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 Yirendai’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 Yirendai’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 Yirendai’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 Yirendai’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 Yirendai 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.

 

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About Yirendai

 

Yirendai Ltd. (NYSE: YRD) is a leading fintech company in China connecting investors and individual borrowers. The Company provides an effective solution to address largely underserved investor and individual borrower demand in China through an online platform that automates key aspects of its operations to efficiently match borrowers with investors and execute loan transactions. Yirendai deploys a proprietary risk management system, which enables the Company to effectively assess the creditworthiness of borrowers, appropriately price the risks associated with borrowers, and offer quality loan investment opportunities to investors. Yirendai’s online marketplace provides borrowers with quick and convenient access to consumer credit at competitive prices and investors with easy and quick access to an alternative asset class with attractive returns. For more information, please visit ir.yirendai.com.

 

For investor and media inquiries, please contact:

 

Yirendai
Hui (Matthew) Li
Director of Investor Relations
Email: ir@yirendai.com

 

[1] Adjusted EBITDA margin is a non-GAAP financial measure calculated as adjusted EBITDA divided by total net revenue.

 

7

 

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 Six Months Ended
		June 30, 2017		March 31, 2018		June 30, 2018		June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2018
		RMB		RMB		RMB		USD		RMB		RMB		USD
				(Revised*)
Net revenue:
Loan facilitation services		1,121,200		1,247,616		997,450		150,736		2,097,598		2,245,066		339,283
Post-origination services		41,389		53,405		61,673		9,320		74,701		115,078		17,391
Account management services		—		361,121		401,960		60,746		—		763,081		115,320
Others		20,468		47,173		58,489		8,839		32,357		105,662		15,968
Total net revenue *		1,183,057		1,709,315		1,519,572		229,641		2,204,656		3,228,887		487,962
Operating costs and expenses:
Sales and marketing		617,880		781,726		793,750		119,954		1,087,260		1,575,476		238,092
Origination and servicing		93,147		142,740		147,031		22,220		151,931		289,771		43,791
General and administrative		98,614		338,030		336,062		50,787		199,112		674,092		101,871
Total operating costs and expenses		809,641		1,262,496		1,276,843		192,961		1,438,303		2,539,339		383,754
Interest income		27,398		28,276		23,409		3,538		51,547		51,685		7,811
Fair value adjustments related to Consolidated ABFE		(1,915	)	4,463		142,603		21,551		(560	)	147,066		22,225
Provision expenses *		—		(116,624	)	(163,029	)	(24,637	)	—		(279,653	)	(42,262	)
Non-operating income, net		555		(452	)	5		1		762		(447	)	(68	)
Income before provision for income taxes		399,454		362,482		245,717		37,133		818,102		608,199		91,914
Income tax expense/(benefit)		130,358		83,578		41,054		6,204		198,105		124,632		18,836
Net income		269,096		278,904		204,663		30,929		619,997		483,567		73,078
Weighted average number of ordinary shares outstanding, basic		119,603,286		121,368,093		121,429,290		121,429,290		119,582,176		121,397,446		121,397,446
Basic income per share		2.2499		2.2980		1.6855		0.2547		5.1847		3.9833		0.6020
Basic income per ADS		4.4998		4.5960		3.3710		0.5094		10.3694		7.9666		1.2040
Weighted average number of ordinary shares outstanding, diluted		120,833,406		123,773,063		123,656,710		123,656,710		120,837,995		123,713,641		123,713,641
Diluted income per share		2.2270		2.2533		1.6551		0.2501		5.1308		3.9088		0.5907
Diluted income per ADS		4.4540		4.5066		3.3102		0.5002		10.2616		7.8176		1.1814
Unaudited Condensed Consolidated Cash Flow Data
Net cash generated from/(used in) operating activities		530,371		(337,727	)	(1,370,147	)	(207,062	)	1,094,875		(1,707,874	)	(258,101	)
Net cash used in investing activities		(95,702	)	(382,191	)	(491,870	)	(74,333	)	(523,388	)	(874,061	)	(132,091	)
Net cash (used in)/ provided by financing activities		(94,993	)	(45,176	)	197,184		29,799		(139,834	)	152,008		22,972
Effect of foreign exchange rate changes		(6,463	)	(10,976	)	8,117		1,227		(10,242	)	(2,859	)	(432	)
Net increase/(decrease) in cash, cash equivalents and restricted cash		333,213		(776,070	)	(1,656,716	)	(250,369	)	421,411		(2,432,786	)	(367,652	)
Cash, cash equivalents and restricted cash, beginning of period		2,274,709		3,662,868		2,886,798		436,263		2,186,511		3,662,868		553,546
Cash, cash equivalents and restricted cash, end of period		2,607,922		2,886,798		1,230,082		185,894		2,607,922		1,230,082		185,894

 

8

 

Unaudited Consolidated Balance Sheet

(in thousands)

 

		As of
		June 30, 2017		March 31, 2018		June 30, 2018		June 30, 2018
		RMB		RMB		RMB		USD
				(Revised*)
Cash and cash equivalents		891,154		1,666,866		567,502		85,762
Restricted cash		1,716,768		1,219,932		662,580		100,132
Accounts receivable		18,109		10,956		6,856		1,036
Prepaid expenses and other assets		619,504		1,191,191		1,228,150		185,603
Loans at fair value		269,952		888,786		1,659,310		250,761
Amounts due from related parties		2,824		129,229		119,616		18,077
Held-to-maturity investments		589,329		9,679		312,101		47,166
Available-for-sale investments		1,262,260		990,873		530,057		80,104
Property, equipment and software, net		59,838		83,279		96,769		14,624
Deferred tax assets *		559,794		806,798		429,964		64,978
Contract assets, net *		—		2,410,688		2,552,900		385,803
Total assets		5,989,532		9,408,277		8,165,805		1,234,046
Accounts payable		15,153		35,747		36,657		5,540
Amounts due to related parties		45,425		70,875		54,954		8,305
Liabilities from quality assurance program and guarantee		1,961,315		2,745,530		12,152		1,836
Deferred revenue		173,386		—		—		—
Payable to third-party credit assurance program		—		—		1,241,859		187,674
Payable to investors at fair value		200,947		75,983		51,988		7,857
Accrued expenses and other liabilities *		780,555		1,170,206		1,234,407		186,548
Deferred tax liabilities *		60,000		627,321		658,156		99,463
Contract liabilities *		—		334,658		294,680		44,533
Total liabilities		3,236,781		5,060,320		3,584,853		541,756
Ordinary shares		75		76		76		11
Additional paid-in capital		950,151		1,149,698		1,174,158		177,443
Accumulated other comprehensive income/ (loss)		19,216		(1,502	)	9,005		1,361
Retained earnings*		1,783,309		3,199,685		3,397,713		513,475
Total equity		2,752,751		4,347,957		4,580,952		692,290
Total liabilities and equity		5,989,532		9,408,277		8,165,805		1,234,046

 

9

 

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 Six Months Ended
		June 30, 2017		March 31, 2018		June 30, 2018		June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2018
		RMB		RMB		RMB		USD		RMB		RMB		USD
				(Revised*)
Operating Highlights
Amount of loans facilitated		8,536,087		11,956,720		11,736,216		1,773,620		15,782,171		23,692,936		3,580,562
Loans generated from online channels		4,271,610		6,940,343		7,608,411		1,149,811		7,861,739		14,548,754		2,198,660
Loans generated from offline channels		4,264,477		5,016,377		4,127,805		623,809		7,920,432		9,144,182		1,381,902
Number of borrowers		138,529		174,128		177,754		177,754		263,319		351,725		351,725
Borrowers from online channels		98,245		126,276		135,686		135,686		184,190		261,814		261,814
Borrowers from offline channels		40,284		47,852		42,068		42,068		79,129		89,911		89,911
Number of investors		199,591		214,231		202,380		202,380		324,672		349,526		349,526
Investors from online channels		199,591		214,231		202,380		202,380		324,672		349,526		349,526
Reconciliation of Net Income
Net income		269,096		278,904		204,663		30,929		619,997		483,567		73,078
Adjustments on net income generated from loans pre-2018 (before adopting ASC606) *		—		249,422		235,877		35,647		—		485,299		73,340
Adjusted net income		269,096		528,326		440,540		66,576		619,997		968,866		146,418
Reconciliation of EBITDA
Net income		269,096		278,904		204,663		30,929		619,997		483,567		73,078
Adjustments on income before income taxes, generated from loans pre-2018 (before adopting ASC606) *		—		332,563		314,503		47,529		—		647,066		97,787
Interest income		(27,398	)	(28,276	)	(23,409	)	(3,538	)	(51,547	)	(51,685	)	(7,811	)
Income tax expense		130,358		83,578		41,054		6,204		198,105		124,632		18,836
Depreciation and amortization		4,923		8,500		9,119		1,378		9,099		17,619		2,663
Share-based compensation		1,455		17,574		17,791		2,689		3,077		35,365		5,344
Adjusted EBITDA *		378,434		692,843		563,721		85,191		778,731		1,256,564		189,897
Adjusted EBITDA margin *		32.0	%	40.5	%	37.1	%	37.1	%	35.3	%	38.9	%	38.9	%

 

* Please refer to accounting policy change disclosed above.

 

10

 

Operating Highlights

(in thousands)

 

		As of
		June 30, 2017		March 31, 2018		June 30, 2018		June 30, 2018
		RMB		RMB		RMB		USD
Operating Highlights
Remaining principal of performing loans		27,871,922		43,843,775		45,849,674		6,928,968
Remaining principal of performing loans covered by quality assurance program and guarantee		27,502,314		40,855,141		148,523		22,445
Remaining principal of performing loans covered by third-party credit assurance program		—		—		42,149,174		6,369,735

 

11

 

Delinquency Rates

 

		Delinquent for
		15-29 days		30-59 days		60-89 days
All Loans
December 31, 2013		0.2	%	0.4	%	0.3	%
December 31, 2014		0.3	%	0.2	%	0.2	%
December 31, 2015		0.4	%	0.5	%	0.4	%
December 31, 2016		0.4	%	0.7	%	0.6	%
December 31, 2017		0.8	%	0.9	%	0.7	%
March 31, 2018		0.8	%	1.6	%	1.3	%
June 30, 2018		0.8	%	1.2	%	1.3	%
Online Channels
December 31, 2013		0.1	%	0.9	%	0.3	%
December 31, 2014		0.4	%	0.3	%	0.2	%
December 31, 2015		0.6	%	0.8	%	0.6	%
December 31, 2016		0.6	%	1.0	%	0.8	%
December 31, 2017		1.2	%	1.2	%	0.9	%
March 31, 2018		1.0	%	2.2	%	1.8	%
June 30, 2018		0.9	%	1.5	%	1.6	%
Offline Channels
December 31, 2013		0.3	%	0.2	%	0.2	%
December 31, 2014		0.3	%	0.2	%	0.2	%
December 31, 2015		0.3	%	0.4	%	0.3	%
December 31, 2016		0.4	%	0.6	%	0.4	%
December 31, 2017		0.5	%	0.7	%	0.5	%
March 31, 2018		0.6	%	1.1	%	0.8	%
June 30, 2018		0.7	%	1.0	%	1.0	%

 

12

 

Net Charge-Off Rate for Upgraded Risk Grid
Loan issued period		Customer grade		Amount of loans facilitated during the period		Accumulated M3+ Net Charge-Off as of June 30, 2018		Total Net Charge-Off Rate as of June 30, 2018
				(in RMB thousands)		(in RMB thousands)
2014		I		—		—		—
		II		1,921,372		85,697		4.5	%
		III		303,276		19,295		6.4	%
		IV		—		—		—
		V		3,913		518		13.2	%
		Total		2,228,561		105,510		4.7	%
2015		I		146,490		4,254		2.9	%
		II		1,614,354		94,718		5.9	%
		III		2,521,705		210,958		8.4	%
		IV		2,506,107		264,606		10.6	%
		V		2,768,957		389,048		14.1	%
		Total		9,557,613		963,584		10.1	%
2016		I		497,220		14,806		3.0	%
		II		3,137,889		127,756		4.1	%
		III		3,763,081		217,374		5.8	%
		IV		5,183,233		394,979		7.6	%
		V		7,799,180		1,025,257		13.1	%
		Total		20,380,603		1,780,172		8.7	%
2017		I		2,701,162		48,174		1.8	%
		II		9,079,647		358,000		3.9	%
		III		10,611,451		633,448		6.0	%
		IV		10,263,135		707,636		6.9	%
		V		8,750,663		745,081		8.5	%
		Total		41,406,058		2,492,339		6.0	%
1H 2018		I		2,118,371		2,080		0.1	%
		II		6,186,170		18,023		0.3	%
		III		6,242,087		20,918		0.3	%
		IV		5,780,058		20,785		0.4	%
		V		3,366,250		14,766		0.4	%
		Total		23,692,936		76,572		0.3	%

 

13

 

M3+ Net Charge-Off Rate

 

Loan issued		Month on Book
period		4		7		10		13		16		19		22		25		28		31		34
2013Q1		1.9	%	3.2	%	3.1	%	2.3	%	2.0	%	0.9	%	0.5	%	0.5	%	0.4	%	0.4	%	0.4	%
2013Q2		1.8	%	3.6	%	4.5	%	5.9	%	6.4	%	7.4	%	6.1	%	7.0	%	7.5	%	7.5	%	7.8	%
2013Q3		0.5	%	2.8	%	4.2	%	5.5	%	6.1	%	6.5	%	7.1	%	7.1	%	7.0	%	6.9	%	6.9	%
2013Q4		0.7	%	3.4	%	4.8	%	6.2	%	6.8	%	7.5	%	8.3	%	8.3	%	8.2	%	8.5	%	8.3	%
2014Q1		1.0	%	4.2	%	6.1	%	7.0	%	8.4	%	9.3	%	9.8	%	9.7	%	9.9	%	9.8	%	9.5	%
2014Q2		0.5	%	1.8	%	2.6	%	3.8	%	4.3	%	4.6	%	4.6	%	4.7	%	4.7	%	4.7	%	4.8	%
2014Q3		0.2	%	0.8	%	2.0	%	2.8	%	3.3	%	3.7	%	4.0	%	4.2	%	4.2	%	4.1	%	4.1	%
2014Q4		0.3	%	1.5	%	2.7	%	3.5	%	4.1	%	4.6	%	5.1	%	5.2	%	5.2	%	5.3	%	5.3	%
2015Q1		0.6	%	2.7	%	4.4	%	5.8	%	7.1	%	8.2	%	9.1	%	9.6	%	9.9	%	10.2	%	10.3	%
2015Q2		0.5	%	2.1	%	3.7	%	5.3	%	6.6	%	7.7	%	8.6	%	9.2	%	9.6	%	9.8	%	10.1	%
2015Q3		0.2	%	1.6	%	3.4	%	4.9	%	6.4	%	7.4	%	8.1	%	8.6	%	9.1	%	9.5	%
2015Q4		0.2	%	1.6	%	3.2	%	4.9	%	6.2	%	7.2	%	8.0	%	8.7	%	9.4	%
2016Q1		0.2	%	1.3	%	2.9	%	4.3	%	5.4	%	6.4	%	7.2	%	8.1	%
2016Q2		0.2	%	1.7	%	3.4	%	4.9	%	6.1	%	7.1	%	8.3	%
2016Q3		0.1	%	1.5	%	3.2	%	4.6	%	6.0	%	7.5	%
2016Q4		0.2	%	1.5	%	3.0	%	4.6	%	6.4	%
2017Q1		0.2	%	1.4	%	3.2	%	5.4	%
2017Q2		0.3	%	2.0	%	4.7	%
2017Q3		0.4	%	3.0	%
2017Q4		0.6	%

 

14