REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Title of each class |
Trading Symbol |
Name of each exchange on which registered | ||
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* |
Not for trading, but only in connection with the listing on the New York Stock Exchange of American depositary shares. |
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☒ |
Accelerated filer |
☐ |
Non-accelerated filer |
☐ | |||||
Emerging growth company |
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† |
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
☒ |
International Financial Reporting Standards as issued |
Other ☐ | ||||||
by the International Accounting Standards Board |
☐ |
1 |
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3 |
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4 |
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ITEM 1. |
4 |
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ITEM 2. |
4 |
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ITEM 3. |
4 |
|||||
ITEM 4. |
60 |
|||||
ITEM 4A. |
104 |
|||||
ITEM 5. |
104 |
|||||
ITEM 6. |
125 |
|||||
ITEM 7. |
136 |
|||||
ITEM 8. |
137 |
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ITEM 9. |
138 |
|||||
ITEM 10. |
138 |
|||||
ITEM 11. |
150 |
|||||
ITEM 12. |
150 |
|||||
153 |
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ITEM 13. |
153 |
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ITEM 14. |
153 |
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ITEM 15. |
153 |
|||||
ITEM 16A. |
155 |
|||||
ITEM 16B. |
155 |
|||||
ITEM 16C. |
155 |
|||||
ITEM 16D. |
156 |
|||||
ITEM 16E. |
156 |
|||||
ITEM 16F. |
156 |
|||||
ITEM 16G. |
156 |
|||||
ITEM 16H. |
157 |
|||||
158 |
||||||
ITEM 17. |
158 |
|||||
ITEM 18. |
158 |
|||||
ITEM 19. |
158 |
|||||
163 |
• | “ADSs” refers to our American depositary shares, each of which represents five Class A ordinary shares; |
• | “average rate of transaction service fees” for a given period is computed by dividing the total amount of transaction service fees we received during the period by the total volume of loans originated on our platform during the same period. For loans funded by individual investors, the transaction service fee is collected from borrowers for our services in matching them with investors and for other services we provide over the loans’ lifecycle. For loans funded by institutional funding partners, the transaction service fee is collected from institutional funding partners and, if applicable, from third-party guarantee companies for our services in borrower introduction and preliminary credit assessment, as well as other services we provide over the loans’ lifecycle; |
• | “China” or the “PRC” refers to the People’s Republic of China, excluding, for the purposes of this annual report only, Hong Kong, Macau and Taiwan; |
• | “delinquency rate” refers to the balance of the outstanding principal for loans that were 15 to 29, 30 to 59, 60 to 89, 90 to 119, 120 to 149 and 150 to 179 calendar days past due as of a date as a percentage of the total outstanding balance of principal for the loans on our platform as of such date. Loans that are delinquent for 180 days or more are typically considered charged-off and are not included in the delinquency rate calculation; |
• | “investment transactions” for a given period refers to the total number of investments executed by investors on our platform whether using self-discretionary investing tool or automated investing tools or deployed through our investment programs during such period. An investor’s investment in a loan is counted as one investment transaction; |
• | number of “unique borrowers” at a certain point in time refers to the cumulative number of borrowers whose loans on our platform had been funded before such point in time; |
• | number of “unique borrowers” in a given period refers to the total number of borrowers whose loans on our platform were funded during such period; |
• | “ordinary shares” refers to our Class A and Class B ordinary shares, par value US$0.00001 per share; |
• | “RMB” and “Renminbi” refer to the legal currency of China; |
• | “US$,” “U.S. dollars,” “$,” and “dollars” refer to the legal currency of the United States; |
• | “vintage delinquency rate” refers to (i) the total amount of principal for all the loans in a vintage that become delinquent, less (ii) the total amount of recovered past due principal for all loans in the same vintage, and then divided by (iii) the total amount of initial principal for all loans in such vintage. For purpose of this annual report, loans facilitated during a specified time period are referred to as a vintage. Loans that are delinquent for 180 days or more are included in the calculation of vintage delinquency rate; and |
• | “We,” “us,” “our company,” “our” and “FinVolution” refer to FinVolution Group, its subsidiaries, variable interest entities and their respective subsidiaries, if any. |
• | our mission and strategies; |
• | our future business development, financial condition and results of operations; |
• | the expected growth of the online consumer finance platform market in China; |
• | our expectations regarding demand for and market acceptance of our products and services; |
• | our expectations regarding our relationships with investors and borrowers; |
• | competition in our industry; |
• | general economic and business condition in China and elsewhere; and |
• | relevant government policies and regulations relating to our industry. |
ITEM 1. |
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
ITEM 2. |
OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. |
KEY INFORMATION |
A. |
Selected Financial Data |
Year Ended December 31, |
||||||||||||||||||||||||
2015 |
2016 |
2017 |
2018 (1) |
2019 |
||||||||||||||||||||
RMB |
RMB |
RMB |
RMB |
RMB |
US$ |
|||||||||||||||||||
(in thousands, except for share, per share and per ADS data) |
||||||||||||||||||||||||
Selected Consolidated Statements of Comprehensive Income/(Loss) Data: |
||||||||||||||||||||||||
Operating revenues: |
||||||||||||||||||||||||
Loan facilitation service fees |
164,279 |
911,448 |
2,843,287 |
2,919,234 |
3,310,875 |
475,577 |
||||||||||||||||||
Post-facilitation service fees |
8,011 |
126,823 |
668,819 |
922,797 |
1,200,373 |
172,423 |
||||||||||||||||||
Net interest income (2) |
4,249 |
41,789 |
31,377 |
256,108 |
1,106,669 |
158,963 |
||||||||||||||||||
Other revenue |
25,062 |
170,403 |
491,400 |
376,915 |
344,840 |
49,533 |
||||||||||||||||||
Changes in expected discretionary payment to IRF investors |
— |
— |
(107,660 |
) | 68,619 |
— |
— |
|||||||||||||||||
Net revenues |
201,601 |
1,250,463 |
3,927,223 |
4,543,673 |
5,962,757 |
856,496 |
||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Origination and servicing expenses |
(99,383 |
) | (349,852 |
) | (890,160 |
) | (875,905 |
) | (1,164,716 |
) | (167,301 |
) | ||||||||||||
Origination and servicing expenses-related party |
— |
(38,297 |
) | (84,362 |
) | (109,666 |
) | (43,494 |
) | (6,248 |
) | |||||||||||||
Sales and marketing expenses |
(125,439 |
) | (352,952 |
) | (788,291 |
) | (710,754 |
) | (720,333 |
) | (103,469 |
) | ||||||||||||
General and administrative expenses |
(101,805 |
) | (123,160 |
) | (423,795 |
) | (383,388 |
) | (435,816 |
) | (62,601 |
) | ||||||||||||
Research and development expenses |
(14,137 |
) | (114,648 |
) | (164,869 |
) | (317,965 |
) | (390,585 |
) | (56,104 |
) | ||||||||||||
Provision for loan receivable (2) |
(5,912 |
) | (34,705 |
) | (46,586 |
) | (192,749 |
) | (299,504 |
) | (43,021 |
) | ||||||||||||
Provision for accounts receivable |
— |
— |
— |
(106,652 |
) | (261,882 |
) | (37,617 |
) | |||||||||||||||
Total operating expenses |
(346,676 |
) | (1,013,614 |
) | (2,398,063 |
) | (2,697,079 |
) | (3,316,330 |
) | (476,361 |
) | ||||||||||||
Other income/(expenses) (3) |
77,299 |
312,908 |
(171,542 |
) | 774,063 |
210,053 |
30,173 |
|||||||||||||||||
Profit before income tax expenses |
(67,776 |
) | 549,757 |
1,357,618 |
2,620,657 |
2,856,480 |
410,308 |
|||||||||||||||||
Income tax expense |
(4,364 |
) | (48,267 |
) | (274,711 |
) | (151,206 |
) | (481,962 |
) | (69,230 |
) | ||||||||||||
Net profit/(loss) |
(72,140 |
) | 501,490 |
1,082,907 |
2,469,451 |
2,374,518 |
341,078 |
|||||||||||||||||
Less: Net profit/(loss) attributable to non-controlling interest shareholders |
— |
— |
(76 |
) | 377 |
1,668 |
240 |
|||||||||||||||||
Accretion on Series A, B and C convertible redeemable preferred shares to redemption value |
(108,792 |
) | (562,022 |
) | (3,073,471 |
) | — |
— |
— |
|||||||||||||||
Net profit/(loss) attributable to FinVolution Group’s ordinary shareholders |
(180,932 |
) | (60,532 |
) | (1,990,488 |
) | 2,469,074 |
2,372,850 |
340,838 |
|||||||||||||||
Total comprehensive income/(loss) attributable to FinVolution Group |
(97,137 |
) | 440,992 |
1,182,917 |
2,512,367 |
2,384,960 |
342,577 |
|||||||||||||||||
Weighted average number of ordinary shares used in computing net income/(loss) per share (4) |
||||||||||||||||||||||||
Basic |
665,000,000 |
665,000,000 |
779,804,270 |
1,498,780,165 |
1,525,814,189 |
1,525,814,189 |
||||||||||||||||||
Diluted |
665,000,000 |
665,000,000 |
779,804,270 |
1,599,592,231 |
1,552,423,060 |
1,552,423,060 |
||||||||||||||||||
Net income/(loss) per share attributable to ordinary shareholders |
||||||||||||||||||||||||
Net income/(loss) per share – Basic |
(0.2721 |
) | (0.091 |
) | (2.5525 |
) | 1.6474 |
1.5551 |
0.2234 |
|||||||||||||||
Net income/(loss) per share – Diluted |
(0.2721 |
) | (0.091 |
) | (2.5525 |
) | 1.5436 |
1.5285 |
0.2196 |
|||||||||||||||
Net income/(loss) per ADS (5) |
||||||||||||||||||||||||
Net income/(loss) per ADS – Basic |
(1.3605 |
) | (0.4551 |
) | (12.7627 |
) | 8.2369 |
7.7757 |
1.1169 |
|||||||||||||||
Net income/(loss) per ADS – Diluted |
(1.3605 |
) | (0.4551 |
) | (12.7627 |
) | 7.7178 |
7.6424 |
1.0978 |
(1) | On January 1, 2018, we adopted new revenue guidance ASC Topic 606, “Revenue from Contracts with Customers,” using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting method under Topic 605. |
(2) | We historically presented interest income, interest expenses and provision for loan receivables within the financial statement line item “net interest income (expense) and loan provision losses.” In 2019, we reclassified provision for loan receivables amounting RMB299.5 million from “net interest income (expense) and loan provision losses” in operating revenue to “provision for loan receivables” in operating expenses. The amount of provision for loan receivables that have been reclassified to conform to the current period financial statement presentation were RMB5.9 million, RMB34.7 million, RMB46.6 million and RMB192.7 million for the year ended December 31, 2015, 2016, 2017 and 2018, respectively. |
(3) | The following table sets forth the breakdown of our other income/(expenses): |
Year Ended December 31, |
||||||||||||||||||||||||
2015 |
2016 |
2017 |
2018 |
2019 |
||||||||||||||||||||
RMB |
RMB |
RMB |
RMB |
RMB |
US$ |
|||||||||||||||||||
(in thousands) |
||||||||||||||||||||||||
Other income/(expenses) |
||||||||||||||||||||||||
Gain from quality assurance |
42,358 |
99,961 |
5,885 |
510,894 |
98,405 |
14,135 |
||||||||||||||||||
Realized gain/(loss) from financial guarantee derivatives |
19,549 |
31,999 |
169,103 |
(157,244 |
) | 31,444 |
4,517 |
|||||||||||||||||
Fair value change of financial guarantee derivatives |
15,757 |
146,653 |
(383,061 |
) | 272,057 |
(56,287 |
) | (8,085 |
) | |||||||||||||||
Gain from disposal of subsidiary |
— |
20,611 |
— |
— |
— |
— |
||||||||||||||||||
Other income/(expenses), net |
(365 |
) | 13,684 |
36,531 |
148,356 |
136,491 |
19,606 |
|||||||||||||||||
Total other income/(expenses) |
77,299 |
312,908 |
(171,542 |
) | 774,063 |
210,053 |
30,173 |
|||||||||||||||||
(4) | On October 20, 2017, we effected a 100-for-1 share split, such that our authorized share capital of US$50,000 was divided into 5,000,000,000 shares with a par value of US$0.00001 each. For the purpose of calculating net loss per share, such share split has been retroactively reflected for all periods presented herein. |
(5) | Each ADS represents five Class A ordinary shares. On October 20, 2017, we effected a 100-for-1 share split, such that our authorized share capital of US$50,000 was divided into 5,000,000,000 shares with a par value of US$0.00001 each. For the purpose of calculating loss per ADS, such share split has been retroactively reflected for all periods presented herein. |
As of December 31, |
||||||||||||||||||||||||
2015 |
2016 |
2017 |
2018 |
2019 |
||||||||||||||||||||
RMB |
RMB |
RMB |
RMB |
RMB |
US$ |
|||||||||||||||||||
(in thousands) |
||||||||||||||||||||||||
Selected Consolidated Balance Sheets Data: |
||||||||||||||||||||||||
Cash and cash equivalents |
92,495 |
404,678 |
1,891,131 |
1,616,164 |
2,324,542 |
333,900 |
||||||||||||||||||
Restricted cash (1) |
269,761 |
802,887 |
2,392,573 |
3,677,557 |
3,686,203 |
529,490 |
||||||||||||||||||
Short-term investments |
34,468 |
260,000 |
1,958,910 |
1,694,660 |
114,560 |
16,456 |
||||||||||||||||||
Quality assurance receivable |
115,484 |
286,812 |
1,152,769 |
2,064,366 |
3,649,642 |
524,238 |
||||||||||||||||||
Investments |
— |
2,428 |
12,234 |
167,501 |
952,833 |
136,866 |
||||||||||||||||||
Contract assets |
— |
— |
— |
112,103 |
20,555 |
2,952 |
||||||||||||||||||
Financial guarantee derivative assets |
20,638 |
167,291 |
— |
56,287 |
— |
— |
||||||||||||||||||
Total assets |
736,920 |
2,147,291 |
8,603,663 |
13,142,467 |
18,304,456 |
2,629,268 |
||||||||||||||||||
Payable to platform customers |
176,165 |
421,659 |
1,113,966 |
905,034 |
684,630 |
98,341 |
||||||||||||||||||
Quality assurance payable |
125,651 |
473,704 |
2,062,844 |
3,819,379 |
4,776,153 |
686,051 |
||||||||||||||||||
Deferred revenue |
13,680 |
162,896 |
265,094 |
— |
— |
— |
||||||||||||||||||
Provision for payment to investor reserve fund investor |
— |
— |
107,660 |
— |
— |
— |
||||||||||||||||||
Contract liabilities |
— |
— |
— |
165,469 |
55,728 |
8,005 |
||||||||||||||||||
Financial guarantee derivative liabilities |
— |
— |
215,770 |
— |
— |
— |
||||||||||||||||||
Total liabilities |
468,543 |
1,375,069 |
4,921,475 |
7,156,729 |
10,292,976 |
1,478,494 |
||||||||||||||||||
Total mezzanine equity |
585,770 |
1,210,645 |
— |
— |
— |
— |
||||||||||||||||||
Total shareholders’ equity/(deficit) |
(317,393 |
) | (438,423 |
) | 3,682,188 |
5,985,738 |
8,011,480 |
1,150,774 |
||||||||||||||||
(1) | The following table sets forth the breakdown of restricted cash: |
As of December 31, |
||||||||||||||||||||||||
2015 |
2016 |
2017 |
2018 |
2019 |
||||||||||||||||||||
RMB |
RMB |
RMB |
RMB |
RMB |
US$ |
|||||||||||||||||||
(in thousands) |
||||||||||||||||||||||||
Restricted cash: |
||||||||||||||||||||||||
Quality assurance commitment and quality assurance fund |
52,863 |
329,549 |
1,058,617 |
2,414,449 |
1,473,749 |
211,691 |
||||||||||||||||||
Investor reserve funds |
19,680 |
51,679 |
175,215 |
17,971 |
41,958 |
6,027 |
||||||||||||||||||
Cash received from investors and borrowers |
176,165 |
421,659 |
1,113,966 |
905,034 |
684,630 |
98,341 |
||||||||||||||||||
Designated accounts for security deposits |
— |
— |
— |
— |
390,000 |
56,020 |
||||||||||||||||||
Cash received via consolidated trust that has not yet been distributed |
— |
— |
44,775 |
303,667 |
799,646 |
114,862 |
||||||||||||||||||
Collateral for short-term borrowings |
21,053 |
— |
— |
26,000 |
251,853 |
36,176 |
||||||||||||||||||
Escrow accounts |
— |
— |
— |
10,436 |
44,367 |
6,373 |
||||||||||||||||||
Total restricted cash |
269,761 |
802,887 |
2,392,573 |
3,677,557 |
3,686,203 |
529,490 |
||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||||||
2015 |
2016 |
2017 |
2018 |
2019 |
||||||||||||||||||||
RMB |
RMB |
RMB |
RMB |
RMB |
US$ |
|||||||||||||||||||
(in thousands) |
||||||||||||||||||||||||
Summary Consolidated Cash Flows Data: |
||||||||||||||||||||||||
Net cash provided by/(used in) operating activities |
79,163 |
1,088,227 |
3,409,451 |
1,884,956 |
(215,522 |
) | (30,958 |
) | ||||||||||||||||
Net cash used in investing activities |
(132,242 |
) | (684,112 |
) | (2,450,800 |
) | (1,447,013 |
) | (828,219 |
) | (118,966 |
) | ||||||||||||
Net cash provided by financing activities |
338,045 |
438,701 |
2,132,933 |
530,097 |
1,749,512 |
251,301 |
||||||||||||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
— |
2,493 |
(15,445 |
) | 41,977 |
11,253 |
1,618 |
|||||||||||||||||
Net increase in cash, cash equivalents and restricted cash |
284,966 |
845,309 |
3,076,139 |
1,010,017 |
717,024 |
102,995 |
||||||||||||||||||
Cash, cash equivalents and restricted cash at beginning of year |
77,290 |
362,256 |
1,207,565 |
4,283,704 |
5,293,721 |
760,395 |
||||||||||||||||||
Cash, cash equivalents and restricted cash at end of year |
362,256 |
1,207,565 |
4,283,704 |
5,293,721 |
6,010,745 |
863,390 |
B. |
Capitalization and Indebtedness |
C. |
Reasons for the Offer and Use of Proceeds |
D. |
Risk Factors |
• | navigate an evolving regulatory environment; |
• | expand the base of borrowers, investors and institutional funding partners served on our platform; |
• | maintain our credit standards; |
• | enhance our risk management capabilities; |
• | improve our operational efficiency; |
• | continue to scale our technology infrastructure to support the growth of our platform and higher transaction volume; |
• | broaden our loan product offerings; |
• | operate without being adversely affected by the negative publicity about the industry in general and our company in particular; |
• | maintain the security of our platform and the confidentiality of the information provided and utilized across our platform; |
• | cultivate a vibrant consumer finance ecosystem; |
• | attract, retain and motivate talented employees; and |
• | defend ourselves in litigation, and against regulatory, intellectual property, privacy or other claims. |
(i) | to ensure that its “business scale” (which we understand, based on our communication with the authorities, refers to the outstanding balance of loans invested by individual investors facilitated by our Shanghai operations) does not exceed the total outstanding balance of loans invested through our platform as of June 30, 2017 (which amounted to RMB20.6 billion (US$3.0 billion)) until March 31, 2018 or as otherwise specified by relevant regulatory authorities in the future. As of March 31, 2020, the total outstanding balance of loans invested by individual investors facilitated by our Shanghai operations did not exceed the upper limit imposed by the authorities; and |
(ii) | to change the Chinese name of our investor reserve funds by January 2018, in order to avoid giving the false impression that we were providing guarantees to investors of the investment programs protected by investor reserve funds. On January 1, 2018, we discontinued our investor reserve funds. Investors investing in our investment programs were no longer required to set aside a certain percentage of their investment amount into the investor reserve funds. The remaining balance of the investor reserve funds collected before January 1, 2018 was used to protect investors who invested in the corresponding investment programs covered by the fund. |
• | Requirements relating to risk reserve funds. |
• | Requirements to qualify for record-filing. |
• | Requirements relating to the timing of record-filing. the Notice on Launching Compliance Inspection on Online Lending Information Intermediaries |
• | we entered into a custody account arrangement with China Merchants Bank, whereby funds of borrowers and individual investors were deposited into and settled by custody accounts under its management. The custody account arrangement expired in March 2020. We will not pursue new custody account arrangements with other commercial banks since we have ceased to accept new investments from individual investors from October 2019 and are winding down investments from individual investors on our platform. The funds in the custody accounts of China Merchants Bank have been migrated to a third-party payment system managed by a third-party payment company. This third-party payment company, as opposed to a custodian bank, is currently helping us handle repayment and settlement between borrowers and individual investors for loans historically facilitated by our online lending information intermediary, which may be deemed to be a violation of the requirement that online lending information intermediaries shall set up custody accounts with a qualified bank for the funds of investors and borrowers under the Interim Measures and subject us to administrative sanctions, including without limitation, fines, warning letter, rectification order, public notice of criticism, filing the non-compliance conducts with the public credit record system, and other penalties according to the laws and regulations. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Consumer Finance Services”; |
• | the PRC Contract Law prohibits the deduction of interest from a loan principal in advance. Furthermore, Circular 141 also provides that online lending information intermediaries are prohibited from deducting interest, handling fee, management fee or deposit from the loan extended to borrowers in advance. With respect to our online lending information intermediary business, we previously charged transaction service fees and quality assurance fund contributions upfront but ceased this practice in early December 2017. Instead, all interests paid to investors and fees from borrowers have been collected by installments since then along with borrowers’ loan repayment. After we completely phase out the upfront transaction service fee collection model, the principal amount of each successfully matched loan will be released to the borrower in full; |
• | in response to the new requirements set forth in the Circular 57, we stopped setting aside additional funds as our investor reserve funds on January 1, 2018. The remaining balance of the investor reserve funds collected before January 1, 2018 was used to protect investors who invested in the corresponding investment programs covered by the fund. As of December 31, 2019, the outstanding balance of investments covered by the investor reserve funds was nil; |
• | to further comply with evolving online lending regulatory requirements, we launched a new quality assurance program in partnership with China United SME Guarantee Corporation, or Sino Guarantee, a Chinese financial services company that provides credit-enhancement services for financial products and risk-sharing services to small and medium enterprises, on February 9, 2018. The quality assurance fund for eligible loans facilitated before February 9, 2018 will continue to be managed by us to protect investors who have invested in the loans covered by the quality assurance fund. As of December 31, 2019, the outstanding balance of investments covered by Sino Guarantee was RMB4.7 billion (US$0.7 billion). We have ceased facilitating new loans with funding from the individual investors on our platform since October 2019; |
• | to fully comply with the aggregated borrowing cost cap requirement specified by the Circular 141, we have made certain adjustments to some of our loan products to meet this cap requirement. We ceased to offer new handy cash loan products upon the promulgation of Circular 141 and adjusted the fee rate of standard loan products. We believe after making the adjustments on December 14, 2017, the annualized aggregated borrowing cost of all of the products on our platform have been fully complied with this aggregated borrowing cost cap requirement of 36%; |
• | in the past, our investment programs allocated committed funds from multiple investors among multiple approved borrowers, which went beyond the simple one-to-one matching between investors and borrowers and could be viewed as creating mismatch between an investor’s expected timing of exit and the maturity date, selling wealth management products, holding investors’ funds or forming a capital pool inadvertently. The PRC regulatory authorities have yet to clarify what activity is considered to form capital pools prohibited by the Interim Measures. Given (a) the customer funds were deposited in the custody accounts we opened at China Merchants Bank pursuant to the Custodian Guidelines to ensure the separation of funds of our users from funds of ours; and (b) the investors of our investment programs are able to trace their investment to each of the underlying loans of such investment programs, we believe our investment programs were not a form of capital pool prohibited by the Interim Measures. However, to further embrace the government regulations, we upgraded the investment programs in March 2018 to strictly ensure the one-to-one matching between investors and borrowers and eliminate the possibility of mismatch and capital pool. |
• | for the loan portfolios funded by our institutional funding partners, such as commercial banks, we discontinued to charge any fees from the borrowers directly. Instead, we started to collect fees mainly from our institutional funding partners and, if applicable, from third-party guarantee companies for our services; and |
• | we require the borrowers to select their loan applications one of the specified permissible uses of loan proceeds, such as consumer finance, travelling, medical expenses, house improvements. |
• | the past practice of our entitlement to the surplus of the quality assurance fund and investor reserve funds might be regarded by the PRC regulatory authorities as self-financing through our platform in a direct or a disguised form; |
• | due to underdevelopment of an industry-wide information sharing arrangement, we cannot assure you that the aggregate amount borrowed by any borrower through our platform and other online consumer finance platforms does not exceed the borrowing limit set out by the Interim Measures; |
• | our calculation of the aggregate borrowing cost of the loans on our platform might be challenged by relevant government authorities and be deemed to be incompliant with relevant rules and regulations; |
• | we display financial products provided by commercial banks and securities fund selling companies on our mobile application and WeChat official account. By one click, individual investors can access the selling webpage of the banks and securities fund selling companies. As we only provide a channel for our users to purchase third-party financial products and we are not directly involved in the sales of those financial products, we do not believe that we are engaged in selling bank wealth management products or fund products on a online lending information platform, which is explicitly prohibited by the Interim Measures, or selling asset management products without license or approval, which is explicitly prohibited by Circular 29 and the New Asset Management Rules. However, we cannot assure you that relevant regulatory authorities will take the same view. If we are regarded as selling bank wealth management products or fund products on our online lending information platform or selling asset management products without license nor approval, we will be subject to relevant administrative penalties. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Consumer Finance Services—Regulations on online lending information services” for more details; and |
• | our cooperation with institutional funding partners through one of our variable interest entities and its subsidiaries, Shanghai Zihe and Shanghai Erxu, has exposed us to and may continue to expose us to additional regulatory uncertainties. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Our cooperation with institutional funding partners may expose us to regulatory uncertainties and we may be required to obtain additional government approval or license due to our cooperation with institutional funding partners” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Regulatory restrictions on institutional funding partners’ acceptance of credit enhancement may adversely affect our business and access to funding.” |
• | borrowers may not find terms of our products, such as costs and credit limit, competitive or appealing; |
• | our failure to predict market demand accurately and provide products and services that meet this demand in a timely fashion; |
• | borrowers and investors using our platform may not like, find useful or agree with, any changes; |
• | defects, errors or failures on our platform; |
• | negative publicity about our loan products or our platform’s performance or effectiveness; |
• | views taken by regulatory authorities that the new products, services or platform changes do not comply with PRC laws, regulations or rules applicable to us; and |
• | the introduction or anticipated introduction of competing products by our competitors. |
• | maintain the quality and reliability of our platform; |
• | provide borrowers and investors with a superior experience in our platform; |
• | enhance and improve our credit assessment and risk-pricing models; |
• | effectively manage and resolve borrower and investor complaints; and |
• | effectively protect personal information and privacy of borrowers and investors. |
• | difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, rights, platforms, products and services of the acquired business; |
• | inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits; |
• | difficulties in retaining, training, motivating and integrating key personnel; |
• | diversion of management’s time and resources from our daily operations; |
• | difficulties in maintaining uniform standards, controls, procedures and policies within the combined organizations; |
• | difficulties in retaining relationships with customers, employees and suppliers of the acquired business; |
• | risks of entering markets in which we have limited or no prior experience; |
• | regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business; |
• | assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights or increase our risk for liability; |
• | failure to successfully further develop the acquired technology; |
• | liability for activities of the acquired business before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; |
• | potential disruptions to our ongoing businesses; and |
• | unexpected costs and unknown risks and liabilities associated with strategic investments or acquisitions. |
• | regulatory developments affecting us, our users, or our industry; |
• | conditions in the online consumer finance industries; |
• | announcements of studies and reports relating to the quality of our product and service offerings or those of our competitors; |
• | changes in the economic performance or market valuations of other online consumer finance platforms; |
• | actual or anticipated fluctuations in our quarterly results of operations and changes or revisions of our expected results; |
• | changes in financial estimates by securities research analysts; |
• | announcements by us or our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures or capital commitments; |
• | additions to or departures of our senior management; |
• | detrimental negative publicity about us, our management or our industry; |
• | fluctuations of exchange rates between the RMB and the U.S. dollar; |
• | release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares or ADSs; and |
• | sales or perceived potential sales of additional ordinary shares or ADSs. |
• | we have failed to timely provide the depositary with our notice of meeting and related voting materials; |
• | we have instructed the depositary that we do not wish a discretionary proxy to be given; |
• | we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; |
• | a matter to be voted on at the meeting may have a material adverse impact on shareholders; or |
• | voting at the meeting is made on a show of hands. |
• | the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; |
• | the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; |
• | the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and |
• | the selective disclosure rules by issuers of material nonpublic information under Regulation FD. |
ITEM 4. |
INFORMATION ON THE COMPANY |
A. |
History and Development of the Company |
B. |
Business Overview |
• | historical credit data accumulated through our online platform; |
• | behavioral data that we glean from an applicant’s behaviors as they apply for loans, such as the location of the applicant or the use of multiple devices to access our platform; |
• | personal identity information maintained by an organization operated under the PRC Ministry of Public Security; |
• | background information, such as education level and marital status, collected from prospective borrowers; |
• | personal credit information maintained by the Credit Reference Center under the People’s Bank of China; and |
• | list and database of fraud cases. |
• | Repayment history |
• | Personal identity information |
• | Education |
• | Consumption behavior |
• | Social network behavior |
• | Credit reports |
• | Internet behavior, such as visiting history of our website and time spent on completing a loan application |
• | Fraudulent records |
(1) | Vintage delinquency rate for loans facilitated in 2017 is calculated as the volume weighed average of the quarterly vintage delinquency rates at the end of the 12th month following the inception of each loan in an applicable vintage. |
(2) | Vintage delinquency rate for loans facilitated in 2018 is calculated as the volume weighed average of the quarterly vintage delinquency rates at the end of the 12th month following the inception of each loan in an applicable vintage. |
(3) | Vintage delinquency rate for loans facilitated in 2019 is calculated as the volume weighed average of the quarterly vintage delinquency rates as of December 31, 2019. |
2017 |
2018 |
2019 |
||||||||||||||||||||||||||||||||||
RMB |
US$ |
% |
RMB |
US$ |
% |
RMB |
US$ |
% |
||||||||||||||||||||||||||||
(in thousands, except for percentages) |
||||||||||||||||||||||||||||||||||||
I |
1,274,484 |
195,048 |
2.3 |
1,239,780 |
180,642 |
2.1 |
4,848,750 |
696,479 |
6.0 |
|||||||||||||||||||||||||||
II |
4,115,975 |
629,913 |
7.5 |
8,344,223 |
1,215,792 |
13.8 |
16,664,293 |
2,393,676 |
20.4 |
|||||||||||||||||||||||||||
III |
14,900,158 |
2,280,334 |
27.1 |
15,182,306 |
2,212,132 |
25.1 |
19,673,551 |
2,825,929 |
24.1 |
|||||||||||||||||||||||||||
IV |
13,654,677 |
2,089,724 |
24.9 |
17,253,287 |
2,513,884 |
28.5 |
17,942,320 |
2,577,253 |
22.0 |
|||||||||||||||||||||||||||
V |
11,609,172 |
1,776,678 |
21.2 |
10,764,414 |
1,568,425 |
17.8 |
12,739,138 |
1,829,863 |
15.6 |
|||||||||||||||||||||||||||
VI |
6,916,155 |
1,058,455 |
12.6 |
5,167,237 |
752,890 |
8.5 |
7,949,249 |
1,141,838 |
9.8 |
|||||||||||||||||||||||||||
VII |
1,375,845 |
210,561 |
2.5 |
1,448,518 |
211,056 |
2.4 |
1,509,172 |
216,779 |
1.9 |
|||||||||||||||||||||||||||
Others (1) |
1,027,659 |
157,274 |
1.9 |
1,038,345 |
151,292 |
1.7 |
157,251 |
22,588 |
0.2 |
|||||||||||||||||||||||||||
Total |
54,874,125 |
8,397,987 |
100.0 |
60,438,110 |
8,806,113 |
100.0 |
81,483,724 |
11,704,405 |
100.0 |
|||||||||||||||||||||||||||
(1) | Include loans facilitated for testing our system or other purposes. |
• | Data Science |
• | Security |
• | Stability |
• | Scalability |
• | Automation |
• | Online Advertising |
• | Online Partnerships |
• | Search Engine Marketing |
• | Violation of prohibited regulations; |
• | Violation of legal obligations and requirements of risk management; |
• | Failure to perform the protection obligation to borrowers and investors; |
• | Violation of requirements of information disclosure; |
• | Violation of regulations of “college online loan” and “cash loan”; |
• | Other violation of relevant regulations and risk disclosure matters. |
• | Requirements relating to risk reserve funds |
• | Requirements to qualify for record-filing August |
• | Requirements relating to the timing of record-filing |
C. |
Organizational Structure |
(1) | Beijing Paipairongxin currently has four shareholders: Jun Zhang, our co-founder and director, Tiezheng Li, our co-founder, vice chairman and chief strategy officer, Honghui Hu, our co-founder, director and president, and Shaofeng Gu, our co-founder, chairman and chief innovation officer, each holding 13.22%, 4.81%, 12.85%, and 69.12% of Beijing Paipairongxin’s equity interests, respectively. |
(2) | Shanghai Zihe currently has four shareholders: Jun Zhang our co-founder and director, Tiezheng Li, our co-founder, vice chairman and chief strategy officer, Honghui Hu, our co-founder, director and president, Shaofeng Gu, our co-founder, chairman and chief innovation officer, each holding 25% of Shanghai Zihe’s equity interests, respectively. |
(3) | Shanghai Ledao currently has two shareholders: Lizhong Chen, a family relative of Tiezheng Li, and Yejun Jiang, a family relative of Honghui Hu, each holding 50% of Shanghai Ledao’s equity interests, respectively. |
(4) | Shanghai Nianqiao currently has two shareholders: Zhouhao Gu, a family relative of Shaofeng Gu, and Xiumeng Chen, a family relative of Jun Zhang, each holding 50% of Shanghai Nianqiao’s equity interests, respectively. |
• | exercise effective control over Beijing Paipairongxin, Shanghai Zihe, Shanghai Ledao, Shanghai Nianqiao, and their respective subsidiaries; |
• | receive substantially all of the economic benefits of Beijing Paipairongxin, Shanghai Zihe, Shanghai Ledao, Shanghai Nianqiao, and their respective subsidiaries; and |
• | have an exclusive option to purchase all or part of the equity interests in Beijing Paipairongxin, Shanghai Zihe, Shanghai Ledao, Shanghai Nianqiao, and their respective subsidiaries when and to the extent permitted by PRC law. |
• | the ownership structures of Shanghai Guangjian and Beijing Paipairongxin are in compliance with PRC laws or regulations currently in effect; |
• | the ownership structures of Shanghai Manyin and Shanghai Zihe are in compliance with PRC laws or regulations currently in effect; |
• | the ownership structures of Shanghai Manyin and Shanghai Nianqiao are in compliance with PRC laws or regulations currently in effect; |
• | the ownership structures of Shanghai Manyin and Shanghai Ledao are in compliance with PRC laws or regulations currently in effect; |
• | the contractual arrangements among Shanghai Guangjian, Shanghai Shanghu (with respect to the business operation agreement and the exclusive technology consulting and service agreement only), Beijing Paipairongxin, the shareholders of Beijing Paipairongxin and Shanghai PPDai (with respect to the exclusive technology consulting and service agreement only) governed by PRC law are valid, binding and enforceable under PRC law, and do not and will not result in any violation of applicable PRC laws or regulations currently in effect; |
• | the contractual arrangements among Shanghai Manyin, Shanghai Zihe and the shareholders of Shanghai Zihe governed by PRC law are valid, binding and enforceable under PRC law, and do not and will not result in any violation of applicable PRC laws or regulations currently in effect; |
• | the contractual arrangements among Shanghai Manyin, Shanghai Nianqiao and the shareholders of Shanghai Nianqiao governed by PRC law are valid, binding and enforceable under PRC law, and do not and will not result in any violation of applicable PRC laws or regulations currently in effect; and |
• | the contractual arrangements among Shanghai Manyin, Shanghai Ledao and the shareholders of Shanghai Ledao governed by PRC law are valid, binding and enforceable under PRC law, and do not and will not result in any violation of applicable PRC laws or regulations currently in effect. |
D. |
Property, Plants and Equipment |
ITEM 4A. |
UNRESOLVED STAFF COMMENTS |
ITEM 5. |
OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
A. |
Operating Results |
• | China’s overall economic growth, |
• | per capita disposable income, |
• | fluctuation of interest rates, |
• | development of regulatory environment for the China’s online consumer finance industry, and |
• | growth of mobile internet penetration, including the popularity of smart mobile devices. |
Delinquent for |
||||||||||||||||||||||||
15-29 days |
30-59 days |
60-89 days |
90-119 days |
120-149 days |
150-179 days |
|||||||||||||||||||
March 31, 2017 |
0.57 |
% | 0.95 |
% | 0.79 |
% | 0.59 |
% | 0.54 |
% | 0.51 |
% | ||||||||||||
June 30, 2017 |
0.86 |
% | 1.11 |
% | 0.79 |
% | 0.51 |
% | 0.55 |
% | 0.52 |
% | ||||||||||||
September 30, 2017 |
0.89 |
% | 1.40 |
% | 1.15 |
% | 1.02 |
% | 0.79 |
% | 0.60 |
% | ||||||||||||
December 31, 2017 |
2.27 |
% | 2.21 |
% | 1.72 |
% | 1.63 |
% | 1.36 |
% | 1.20 |
% | ||||||||||||
March 31, 2018 |
0.87 |
% | 2.10 |
% | 2.43 |
% | 3.83 |
% | 2.29 |
% | 1.89 |
% | ||||||||||||
June 30, 2018 |
0.83 |
% | 1.21 |
% | 1.05 |
% | 0.98 |
% | 1.60 |
% | 2.03 |
% | ||||||||||||
September 30, 2018 |
1.03 |
% | 1.77 |
% | 1.49 |
% | 1.29 |
% | 1.06 |
% | 1.02 |
% | ||||||||||||
December 31, 2018 |
0.92 |
% | 1.63 |
% | 1.41 |
% | 1.45 |
% | 1.44 |
% | 1.34 |
% | ||||||||||||
March 31, 2019 |
0.80 |
% | 1.61 |
% | 1.45 |
% | 1.29 |
% | 1.31 |
% | 1.20 |
% | ||||||||||||
June 30, 2019 |
0.86 |
% | 1.42 |
% | 1.37 |
% | 1.19 |
% | 1.26 |
% | 1.21 |
% | ||||||||||||
September 30, 2019 |
0.90 |
% | 1.50 |
% | 1.35 |
% | 1.31 |
% | 1.17 |
% | 1.20 |
% | ||||||||||||
December 31, 2019 |
1.34 |
% | 2.40 |
% | 1.86 |
% | 1.76 |
% | 1.62 |
% | 1.53 |
% |
(1) | Our vintage delinquency rate for loans facilitated during 2017 was 6.82%, calculated as the volume weighted average of the quarterly vintage delinquency rates at the end of the 12th month following the inception of each loan in an applicable vintage. |
(2) | Our vintage delinquency rate for loans facilitated during 2018 was 7.04%, calculated as the volume weighted average of the quarterly vintage delinquency rates at the end of the 12th month following the inception of each loan in an applicable vintage. |
(3) | As of December 31, 2019, our vintage delinquency rate for loans facilitated during the first three quarters was 4.43%, calculated as the volume weighted average of the quarterly vintage delinquency rates as of December 31, 2019. As loans facilitated during 2018 continue to age, the delinquency rate for the 2019 vintage, calculated as the volume weighted average of the quarterly vintage delinquency rates at the end of the 12th month following the inception of each loan in an applicable vintage, may be different from the vintage delinquency rate of 4.43% as of December 31, 2019. |
Month on Book |
||||||||||||||||||||||||||||||||||||||||||||
Vintage |
2nd |
3rd |
4th |
5th |
6th |
7th |
8th |
9th |
10th |
11th |
12th |
|||||||||||||||||||||||||||||||||
2017Q1 |
1.51 |
2.09 |
2.71 |
3.33 |
3.87 |
4.33 |
4.68 |
4.98 |
5.33 |
5.61 |
5.80 |
|||||||||||||||||||||||||||||||||
2017Q2 |
2.19 |
3.01 |
3.86 |
4.56 |
5.13 |
5.78 |
6.32 |
6.79 |
7.05 |
7.19 |
7.24 |
|||||||||||||||||||||||||||||||||
2017Q3 |
2.22 |
3.05 |
4.13 |
5.18 |
6.13 |
6.64 |
6.88 |
7.04 |
7.16 |
7.22 |
7.26 |
|||||||||||||||||||||||||||||||||
2017Q4 |
2.86 |
4.24 |
5.19 |
5.69 |
5.98 |
6.19 |
6.29 |
6.39 |
6.47 |
6.49 |
6.50 |
|||||||||||||||||||||||||||||||||
2018Q1 |
1.37 |
2.20 |
2.99 |
3.67 |
4.32 |
4.86 |
5.23 |
5.50 |
5.66 |
5.74 |
5.77 |
|||||||||||||||||||||||||||||||||
2018Q2 |
1.87 |
3.12 |
4.39 |
5.46 |
6.33 |
6.99 |
7.47 |
7.80 |
7.99 |
8.08 |
8.13 |
|||||||||||||||||||||||||||||||||
2018Q3 |
1.45 |
2.51 |
3.53 |
4.39 |
5.09 |
5.59 |
5.97 |
6.28 |
6.50 |
6.64 |
6.72 |
|||||||||||||||||||||||||||||||||
2018Q4 |
1.43 |
2.49 |
3.55 |
4.42 |
5.18 |
5.76 |
6.20 |
6.54 |
6.81 |
7.01 |
7.16 |
|||||||||||||||||||||||||||||||||
2019Q1 |
1.34 |
2.38 |
3.45 |
4.36 |
5.13 |
5.75 |
6.22 |
6.65 |
— |
— |
— |
|||||||||||||||||||||||||||||||||
2019Q2 |
1.33 |
2.34 |
3.31 |
4.18 |
5.05 |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||||
2019Q3 |
1.02 |
2.16 |
— |
— |
— |
— |
— |
— |
— |
— |
— |
For the Year Ended December 31, |
||||||||||||||||||||||||||||
2017 |
2018 (1) |
2019 |
||||||||||||||||||||||||||
RMB |
% |
RMB |
% |
RMB |
US$ |
% |
||||||||||||||||||||||
(in thousands, except for percentages) |
||||||||||||||||||||||||||||
Operating revenues: |
||||||||||||||||||||||||||||
Loan facilitation service fees |
2,843,287 |
72.4 |
2,919,234 |
64.2 |
3,310,875 |
475,577 |
55.5 |
|||||||||||||||||||||
Post-facilitation service fees |
668,819 |
17.0 |
922,797 |
20.3 |
1,200,373 |
172,423 |
20.1 |
|||||||||||||||||||||
Net interest income (2) |
31,377 |
0.8 |
256,108 |
5.6 |
1,106,669 |
158,963 |
18.6 |
|||||||||||||||||||||
Other revenue |
491,400 |
12.5 |
376,915 |
8.3 |
344,840 |
49,533 |
5.8 |
|||||||||||||||||||||
Changes in expected discretionary payment to investors protected by investor reserve funds |
(107,660 |
) | (2.7 |
) | 68,619 |
1.5 |
— |
— |
— |
|||||||||||||||||||
Net revenues |
3,927,223 |
100.0 |
4,543,673 |
100.0 |
5,962,757 |
856,496 |
100.0 |
|||||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||||||
Origination and servicing expenses |
(890,160 |
) | (22.7 |
) | (875,905 |
) | (19.3 |
) | (1,164,716 |
) | (167,301 |
) | (19.5 |
) | ||||||||||||||
Origination and servicing expenses-related party |
(84,362 |
) | (2.1 |
) | (109,666 |
) | (2.4 |
) | (43,494 |
) | (6,248 |
) | (0.7 |
) | ||||||||||||||
Sales and marketing expenses |
(788,291 |
) | (20.1 |
) | (710,754 |
) | (15.6 |
) | (720,333 |
) | (103,469 |
) | (12.1 |
) | ||||||||||||||
General and administrative expenses |
(423,795 |
) | (10.8 |
) | (383,388 |
) | (8.4 |
) | (435,816 |
) | (62,601 |
) | (7.3 |
) | ||||||||||||||
Research and development expenses |
(164,869 |
) | (4.2 |
) | (317,965 |
) | (7.0 |
) | (390,585 |
) | (56,104 |
) | (6.6 |
) | ||||||||||||||
Provision for loans receivable (2) |
(46,586 |
) | (1.2 |
) | (192,749 |
) | (4.2 |
) | (299,504 |
) | (43,021 |
) | (5.0 |
) | ||||||||||||||
Provision for accounts receivable |
— |
— |
(106,652 |
) | (2.3 |
) | (261,882 |
) | (37,617 |
) | (4.4 |
) | ||||||||||||||||
Total operating expenses |
(2,398,063 |
) | (61.1 |
) | (2,697,079 |
) | (59.4 |
) | (3,316,330 |
) | (476,361 |
) | (55.6 |
) | ||||||||||||||
Other income/(expenses) (3) |
(171,542 |
) | (4.4 |
) | 774,063 |
17.0 |
210,053 |
30,173 |
3.5 |
|||||||||||||||||||
Profit before income tax expenses |
1,357,618 |
34.6 |
2,620,657 |
57.7 |
2,856,480 |
410,308 |
47.9 |
|||||||||||||||||||||
Income tax expense |
(274,711 |
) | (7.0 |
) | (151,206 |
) | (3.3 |
) | (481,962 |
) | (69,230 |
) | (8.1 |
) | ||||||||||||||
Net profit |
1,082,907 |
27.6 |
2,469,451 |
54.3 |
2,374,518 |
341,078 |
39.8 |
|||||||||||||||||||||
(1) | On January 1, 2018, we adopted new revenue guidance ASC Topic 606, “Revenue from Contracts with Customers,” using the modified retrospective method applied to those contracts the performance of which was not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting method under Topic 605. |
(2) | We historically presented interest income, interest expenses and provision for loan receivables within the financial statement line item “net interest income (expense) and loan provision losses.” In 2019, we reclassified provision for loan receivables amounting RMB299.5 million from “net interest income (expense) and loan provision losses” in operating revenue to “provision for loan receivables” in operating expenses. The amount of provision for loan receivables that have been reclassified to conform to the current period financial statement presentation were RMB46.6 million and RMB192.7 million for the year ended December 31, 2017 and 2018, respectively. |
(3) | The following table sets forth the breakdown of our other income/(expenses): |
For the Year Ended December 31, |
||||||||||||||||||||||||||||
2017 |
2018 |
2019 |
||||||||||||||||||||||||||
RMB |
% |
RMB |
% |
RMB |
US$ |
% |
||||||||||||||||||||||
(in thousands, except for percentages) |
||||||||||||||||||||||||||||
Other income/(expenses): |
||||||||||||||||||||||||||||
Gain from quality assurance |
5,885 |
0.2 |
510,894 |
11.2 |
98,405 |
14,135 |
1.6 |
|||||||||||||||||||||
Realized gain/(loss) from financial guarantee derivatives |
169,103 |
4.3 |
(157,244 |
) | (3.5 |
) | 31,444 |
4,517 |
0.5 |
|||||||||||||||||||
Fair value change of financial guarantee derivatives |
(383,061 |
) | (9.8 |
) | 272,057 |
6.0 |
(56,287 |
) | (8,085 |
) | (0.9 |
) | ||||||||||||||||
Other income, net |
36,531 |
0.9 |
148,356 |
3.3 |
136,491 |
19,606 |
2.3 |
|||||||||||||||||||||
Total other income/(expenses) |
(171,542 |
) | (4.4 |
) | 774,063 |
17.0 |
210,053 |
30,173 |
3.5 |
|||||||||||||||||||
As of December 31, |
||||||||||||||||
2017 |
2018 |
2019 |
||||||||||||||
RMB |
RMB |
RMB |
US$ |
|||||||||||||
(in thousands) |
||||||||||||||||
Assets: |
||||||||||||||||
Cash and cash equivalents |
1,891,131 |
1,616,164 |
2,324,542 |
333,900 |
||||||||||||
Restricted cash |
2,392,573 |
3,677,557 |
3,686,203 |
529,490 |
||||||||||||
Short-term investments |
1,958,910 |
1,694,660 |
114,560 |
16,456 |
||||||||||||
Quality assurance receivable |
1,152,769 |
2,064,366 |
3,649,642 |
524,238 |
||||||||||||
Investments |
12,234 |
167,501 |
952,833 |
136,866 |
||||||||||||
Contract assets |
— |
112,103 |
20,555 |
2,952 |
||||||||||||
Financial guarantee derivative assets |
— |
56,287 |
— |
— |
||||||||||||
Total assets |
8,603,663 |
13,142,467 |
18,304,456 |
2,629,268 |
||||||||||||
Liabilities and shareholders’ equity |
|
|
|
|
||||||||||||
Liabilities: |
|
|
|
|
||||||||||||
Payable to platform customers |
1,113,966 |
905,034 |
684,630 |
98,341 |
||||||||||||
Quality assurance payable |
2,062,844 |
3,819,379 |
4,776,153 |
686,051 |
||||||||||||
Deferred revenue |
265,094 |
— |
— |
— |
||||||||||||
Provision for payment to investor reserve fund investor |
107,660 |
— |
— |
— |
||||||||||||
Contract liabilities |
— |
165,469 |
55,728 |
8,005 |
||||||||||||
Financial guarantee derivative liabilities |
215,770 |
— |
— |
— |
||||||||||||
Total liabilities |
4,921,475 |
7,156,729 |
10,292,976 |
1,478,494 |
||||||||||||
Total shareholders’ equity |
3,682,188 |
5,985,738 |
8,011,480 |
1,150,774 |
||||||||||||
As of December 31, |
||||||||||||||||
2017 |
2018 |
2019 |
||||||||||||||
RMB |
RMB |
RMB |
US$ |
|||||||||||||
(in thousands) |
||||||||||||||||
Restricted cash: |
||||||||||||||||
Quality assurance commitment and quality assurance fund |
1,058,617 |
2,414,449 |
1,473,749 |
211,691 |
||||||||||||
Investor reserve funds |
175,215 |
17,971 |
41,958 |
6,027 |
||||||||||||
Cash received from investors and borrowers |
1,113,966 |
905,034 |
684,630 |
98,341 |
||||||||||||
Cash received via consolidated trust that has not yet been distributed |
44,775 |
303,667 |
799,646 |
114,862 |
||||||||||||
Collateral for short-term borrowings |
— |
26,000 |
251,853 |
36,176 |
||||||||||||
Escrow accounts |
— |
10,436 |
44,367 |
6,373 |
||||||||||||
Designated accounts for security deposits |
— |
— |
390,000 |
56,020 |
||||||||||||
Total restricted cash |
2,392,573 |
3,677,557 |
3,686,203 |
529,490 |
||||||||||||
B. |
Liquidity and Capital Resources |
For the Year Ended December 31, |
||||||||||||||||
2017 |
2018 |
2019 |
||||||||||||||
RMB |
RMB |
RMB |
US$ |
|||||||||||||
(in thousands) |
||||||||||||||||
Summary Consolidated Cash Flows Data: |
||||||||||||||||
Net cash provided by operating activities |
3,409,451 |
1,884,956 |
(215,522 |
) | (30,958 |
) | ||||||||||
Net cash used in investing activities |
(2,450,800 |
) | (1,447,013 |
) | (828,219 |
) | (118,966 |
) | ||||||||
Net cash provided by financing activities |
2,132,933 |
530,097 |
1,749,512 |
251,301 |
||||||||||||
Net increase in cash, cash equivalents and restricted cash |
3,076,139 |
1,010,017 |
717,024 |
102,995 |
||||||||||||
Cash, cash equivalents and restricted cash at beginning of year |
1,207,565 |
4,283,704 |
5,293,721 |
760,395 |
||||||||||||
Cash, cash equivalents and restricted cash at end of year |
4,283,704 |
5,293,721 |
6,010,745 |
863,390 |
C. |
Research and Development, Patents, and Licenses, etc. |
D. |
Trend Information |
E. |
Off-Balance Sheet Arrangements |
F. |
Tabular Disclosure of Contractual Obligations |
Total |
2020 |
2021 |
2022 |
2023 |
After 2023 |
|||||||||||||||||||||||||||||||||||||||||||
RMB |
US$ |
RMB |
US$ |
RMB |
US$ |
RMB |
US$ |
RMB |
US$ |
RMB |
US$ |
|||||||||||||||||||||||||||||||||||||
(in thousands) |
||||||||||||||||||||||||||||||||||||||||||||||||
Operating lease obligations |
101,787 |
14,621 |
45,174 |
6,489 |
40,688 |
5,844 |
15,285 |
2,196 |
640 |
92 |
— |
— |
G. |
Safe Harbor |
ITEM 6. |
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
A. |
Directors and Senior Management |
Directors and Executive Officers |
Age |
Position/Title | ||||
Shaofeng Gu |
41 |
Chairman of the Board, Chief Innovation Officer | ||||
Tiezheng Li |
35 |
Vice Chairman of the Board, Chief Strategy Officer | ||||
Honghui Hu |
42 |
Director, President | ||||
Jun Zhang |
42 |
Director | ||||
Ronald Cao |
46 |
Director | ||||
Jimmy Y. Lai |
63 |
Independent Director | ||||
Bing Xiang |
57 |
Independent Director | ||||
Feng Zhang |
44 |
Chief Executive Officer | ||||
Simon Tak Leung Ho |
46 |
Chief Financial Officer | ||||
Yuxiang Wang |
40 |
Chief Technology Officer and Chief Product Officer | ||||
Ming Gu |
38 |
Chief Risk Officer and Chief Data Officer | ||||
Jiayuan Xu |
39 |
Senior Vice President for Finance |
B. |
Compensation |
Name |
Ordinary Shares Underlying Options Awarded |
Exercise Price (US$/Share) |
Date of Grant |
Date of Expiration |
||||||||||||
Shaofeng Gu |
* |
0.126 |
March 21, 2016 |
March 20, 2021 |
||||||||||||
Tiezheng Li |
* |
0.007 |
January 29, 2014 |
January 28, 2019 |
||||||||||||
* |
0.030 |
April 1, 2015 |
March 31, 2020 |
|||||||||||||
* |
0.126 |
March 21, 2016 |
March 20, 2021 |
|||||||||||||
* |
1.4 |
February 1, 2018 |
January 31, 2023 |
|||||||||||||
* |
0.654 |
January 28, 2019 |
January 27, 2024 |
|||||||||||||
Honghui Hu |
* |
0.007 |
January 29, 2014 |
January 28, 2019 |
||||||||||||
* |
0.126 |
March 21, 2016 |
March 20, 2021 |
|||||||||||||
Jun Zhang |
* |
0.007 |
January 29, 2014 |
January 28, 2019 |
||||||||||||
* |
0.030 |
April 1, 2015 |
March 31, 2020 |
|||||||||||||
* |
0.126 |
March 21, 2016 |
March 20, 2021 |
|||||||||||||
* |
0.320 |
February 1, 2017 |
January 31, 2022 |
|||||||||||||
* |
1.4 |
February 1, 2018 |
January 31, 2023 |
|||||||||||||
Simon Tak Leung Ho |
* |
0.126 |
September 7, 2016 |
September 6, 2021 |
||||||||||||
* |
1.4 |
February 1, 2018 |
January 31, 2023 |
|||||||||||||
Feng Zhang |
* |
0.028 |
May 24, 2015 |
May 23, 2020 |
||||||||||||
* |
0.126 |
March 21, 2016 |
March 20, 2021 |
|||||||||||||
* |
0.320 |
February 1, 2017 |
January 31, 2022 |
|||||||||||||
Yuxiang Wang |
* |
0.030 |
June 15, 2015 |
June 14, 2020 |
||||||||||||
* |
0.126 |
March 21, 2016 |
March 20, 2021 |
|||||||||||||
* |
0.320 |
February 1, 2017 |
January 31, 2022 |
|||||||||||||
Ming Gu |
* |
0.0085 |
August 1, 2014 |
July 31, 2019 |
||||||||||||
* |
0.030 |
April 1, 2015 |
March 31, 2020 |
|||||||||||||
* |
0.126 |
March 21, 2016 |
March 20, 2021 |
|||||||||||||
* |
0.320 |
February 1, 2017 |
January 31, 2022 |
|||||||||||||
Jiayuan Xu |
* |
0.030 |
May 5, 2015 |
May 4, 2020 |
||||||||||||
* |
0.126 |
March 21, 2016 |
March 20, 2021 |
|||||||||||||
* |
0.320 |
February 1, 2017 |
January 31, 2022 |
|||||||||||||
Other grantees as a group |
56,952,730 |
From 0.0001 to 1.4 |
From July 1, 2012 to January 28, 2019 |
From June 30, 2018 to January 27, 2024 |
* | Less than 1% of our total outstanding shares. |
Name |
Class A Ordinary Shares Underlying Restricted Share Units Awarded |
Date of Grant |
Date of Expiration |
|||||||||
Feng Zhang |
* |
February 1, 2018 |
January 31, 2023 |
|||||||||
* |
January 28, 2019 |
January 27, 2024 |
||||||||||
Yuxiang Wang |
* |
February 1, 2018 |
January 31, 2023 |
|||||||||
* |
January 28, 2019 |
January 27, 2024 |
||||||||||
Ming Gu |
* |
February 1, 2018 |
January 31, 2023 |
|||||||||
* |
January 28, 2019 |
January 27, 2024 |
||||||||||
Jiayuan Xu |
* |
February 1, 2018 |
January 31, 2023 |
|||||||||
* |
January 28, 2019 |
January 27, 2024 |
||||||||||
Other grantees as a group |
* |
From February 1, 2018 to December 5, 2019 |
From January 31, 2023 to December 4, 2024 |
* | Less than 1% of our total outstanding shares. |
C. |
Board Practices |
• | appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; |
• | reviewing with the independent auditors any audit problems or difficulties and management’s response; |
• | discussing the annual audited financial statements with management and the independent auditors; |
• | reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; |
• | reviewing and approving all proposed related party transactions; |
• | meeting separately and periodically with management and the independent auditors; and |
• | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. |
• | reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers; |
• | reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; |
• | reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and |
• | selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management. |
• | selecting and recommending nominees for election by the shareholders or appointment by the board; |
• | reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; |
• | making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and |
• | advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken. |
• | convening shareholders’ annual and extraordinary general meetings; |
• | declaring dividends and distributions; |
• | appointing officers and determining the term of office of the officers; |
• | exercising the borrowing powers of our company and mortgaging the property of our company; and |
• | approving the transfer of shares in our company, including the registration of such shares in our register of members. |
D. |
Employee |
As of December 31, 2019 |
||||||||
Number of employees |
% of total |
|||||||
Functions: |
||||||||
Operations |
1,216 |
31.3 |
% | |||||
Risk Management |
1,775 |
45.7 |
% | |||||
Research and Development |
378 |
9.7 |
% | |||||
Sales and Marketing |
186 |
4.8 |
% | |||||
General and Administration |
190 |
4.9 |
% | |||||
Data Engineering |
138 |
3.6 |
% | |||||
Total number of employees |
3,883 |
100.0 |
% | |||||
E. |
Share Ownership |
• | each of our directors and executive officers; and |
• | each of our principal shareholders who beneficially own more than 5% of our total outstanding ordinary shares. |
Ordinary Shares Beneficially Owned as of March 31, 2020 |
||||||||||||||||
Class A ordinary shares |
Class B ordinary shares |
Percentage of total ordinary shares† |
Percentage of aggregate voting power†† |
|||||||||||||
Directors and Executive Officers**: |
||||||||||||||||
Shaofeng Gu (1) |
10,138,475 |
394,818,900 |
26.5 |
% | 62.4 |
% | ||||||||||
Tiezheng Li (2) |
9,615,650 |
27,987,900 |
2.5 |
% | 4.5 |
% | ||||||||||
Honghui Hu (3) |
4,500,000 |
59,883,400 |
4.2 |
% | 9.5 |
% | ||||||||||
Jun Zhang (4) |
13,616,000 |
77,009,800 |
5.9 |
% | 12.3 |
% | ||||||||||
Ronald Cao (5) |
101,418,870 |
— |
6.6 |
% | 0.8 |
% | ||||||||||
Jimmy Y. Lai |
— |
— |
— |
— |
||||||||||||
Bing Xiang |
— |
— |
— |
— |
||||||||||||
Feng Zhang |
* |
— |
* |
* |
||||||||||||
Simon Tak Leung Ho |
* |
— |
* |
* |
||||||||||||
Yuxiang Wang |
* |
— |
* |
* |
||||||||||||
Ming Gu |
* |
— |
* |
* |
||||||||||||
Jiayuan Xu |
* |
— |
* |
* |
||||||||||||
All directors and executive officers as a group |
167,488,065 |
559,700,000 |
47.2 |
% | 89.6 |
% | ||||||||||
Principal and Selling Shareholders: |
||||||||||||||||
PPD Investment Limited (6) |
10,138,475 |
394,818,900 |
26.5 |
% | 62.4 |
% | ||||||||||
Seahawk China Dynamic Fund (7) |
106,042,850 |
— |
6.9 |
% | 0.8 |
% | ||||||||||
Lightspeed China Partner I, L.P. and its affiliate (8) |
101,418,870 |
— |
6.6 |
% | 0.8 |
% | ||||||||||
Metallica Holding Limited (9) |
10,000,000 |
77,009,800 |
5.7 |
% | 12.2 |
% | ||||||||||
Sequoia Capital 2010 CV Holdco, Ltd. (10) |
86,931,820 |
— |
5.7 |
% | 0.7 |
% | ||||||||||
SIG China Investments Master Fund III, LLLP (11) |
80,471,100 |
— |
5.3 |
% | 0.6 |
% | ||||||||||
Emma & Oliver Holding Limited (12) |
4,500,000 |
59,883,400 |
4.2 |
% | 9.5 |
% |
** | Except for Ronald Cao, Jimmy Y. Lai, and Bing Xiang, the business address for our directors and executive officers is Building G1, No. 999 Dangui Road, Pudong New District, Shanghai 201203, People’s Republic of China. The business address of Ronald Cao is 1133 Changning Road, Suite 1807, Office Tower 1, Raffles City Changning, Shanghai, China. The business address of Jimmy Y. Lai is 4521 Turnberry Ct. Plano, Texas, 75024, USA. The business address of Bing Xiang is Floor 20th, Tower East II, Dongfang Square, Dongcheng District, Beijing, China. |
† | For each person and group included in this column, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of the total number of shares outstanding and the number of shares such person or group has the right to acquire upon exercise of option, warrant or other right within 60 days after March 31, 2020. The total number of ordinary shares outstanding as of March 31, 2020 is 1,528,723,759, consisting of (i) 942,723,759 Class A ordinary shares, and (ii) 586,000,000 Class B ordinary shares. |
†† | For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all of our Class A and Class B ordinary shares as a single class. Each holder of Class A ordinary shares is entitled to one vote per share and each holder of our Class B ordinary shares is entitled to twenty votes per share on all matters submitted to them for vote. Our Class B ordinary shares are convertible at any time by the holder thereof into Class A ordinary shares on a one-for-one basis. |
(1) | Represents (i) 394,818,900 Class B ordinary shares directly held by PPD Investment Limited, a company incorporated in the British Virgin Islands, and (ii) 2,027,695 ADSs, representing 10,138,475 Class A ordinary shares, directly held by PPD Investment Limited. Mr. Shaofeng Gu is the sole shareholder and the sole director of PPD Investment Limited. The registered office address of PPD Investment Limited is Geneva Place, Waterfront Drive, P.O. Box 3469, Road Town, Tortola, British Virgin Islands. |
(2) | Represents (i) 27,987,900 Class B ordinary shares directly held by Happyariel Holding Limited, a company incorporated in the British Virgin Islands, (ii) 1,728,130 ADSs, representing 8,640,650 Class A ordinary shares directly held by Happyariel Holding Limited, and (iii) 975,000 Class A ordinary shares that Mr. Tiezhang Li may purchase upon exercise of options within 60 days after March 31, 2020. Mr. Tiezheng Li is the sole shareholder and the sole director of Happyariel Holding Limited. The registered office address of Happyariel Holding Limited is Geneva Place, Waterfront Drive, P.O. Box 3469, Road Town, Tortola, British Virgin Islands. |
(3) | Represents (i) 59,883,400 Class B ordinary shares directly held by Emma & Oliver Holding Limited, a company incorporated in the British Virgin Islands, and (ii) 900,000 ADSs, representing 4,500,000 Class A ordinary shares, directly held by Emma & Oliver Holding Limited. Mr. Honghui Hu is the sole shareholder and the sole director of Emma & Oliver Holding Limited. The registered office address of Emma & Oliver Holding Limited is Geneva Place, Waterfront Drive, P.O. Box 3469, Road Town, Tortola, British Virgin Islands. |
(4) | Represents (i) 77,009,800 Class B ordinary shares directly held by Metallica Holding Limited, a company incorporated in the British Virgin Islands, (ii) 1,550,000 ADSs, representing 7,750,000 Class A ordinary shares, directly held by Metallica Holding Limited, (iii) 663,200 ADSs, representing 3,316,000 Class A ordinary shares directly held by Mr. Jun Zhang, (iv) 2,250,000 Class A ordinary shares that Metallica Holding Limited may purchase upon exercise of options within 60 days after March 31, 2020, and (v) 300,000 Class A ordinary shares that Mr. Jun Zhang may purchase upon exercise of options within 60 days after March 31, 2020. Mr. Jun Zhang is the sole shareholder and the sole director of Metallica Holding Limited. The registered office address of Metallica Holding Limited is Geneva Place, Waterfront Drive, P.O. Box 3469, Road Town, Tortola, British Virgin Islands. |
(5) | Represents (i) 89,218,150 Class A ordinary shares directly held by Lightspeed China Partner I, L.P. and (ii) 12,200,720 Class A ordinary shares directly held by Lightspeed China Partner I-A, L.P. Lightspeed China Partner I, L.P. and Lightspeed China Partner I-A, L.P. are Cayman Island limited partnerships. Lightspeed China Partners I GP, LLC, a Cayman limited liability company, is the general partner of both Lightspeed China Partner I, L.P. and Lightspeed China Partner I-A, L.P. Ronald Cao and James Qun Mi each owns 50% of the ownership of Lightspeed China Partners I GP, LLC. Both Ronald Cao and James Qun Mi disclaim beneficial ownership of their shares held by Lightspeed funds, except to the extent of their pecuniary interest therein. The registered office address of Lightspeed China Partner I, L.P. and Lightspeed China Partner I-A, L.P. is P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. |
(6) | Represents (i) 394,818,900 Class B ordinary shares directly held by PPD Investment Limited, a company incorporated in the British Virgin Islands, and (ii) 2,027,695 ADSs, representing 10,138,475 Class A ordinary shares, directly held by PPD Investment Limited. Mr. Shaofeng Gu is the sole shareholder and the sole director of PPD Investment Limited. Mr. Shaofeng Gu is the sole shareholder and the sole director of PPD Investment Limited. The registered office address of PPD Investment Limited is Geneva Place, Waterfront Drive, P.O. Box 3469, Road Town, Tortola, British Virgin Islands. |
(7) | Represents 21,208,570 ADSs, representing 106,042,850 Class A ordinary shares directly held by Seahawk China Dynamic Fund. Gold Dragon Worldwide Asset Management Limited is the investment manager for Seahawk China Dynamic Fun pursuant to an investment management agreement and, as such, has discretionary authority to vote and dispose of the 106,042,850 Class A ordinary shares. The registered office of the Seahawk China Dynamic Fund is 89 Nexus Way, Camana Bay, Grand Cayman, KY1-9009, Cayman Islands. The business address of Gold Dragon Worldwide Asset Management Limited is Unit 4004-05, 40/F, COSCO Tower, 183 Queen’s Road, Central, Hong Kong. |
(8) | Represents (i) 89,218,150 Class A ordinary shares directly held by Lightspeed China Partner I, L.P. and (ii) 12,200,720 Class A ordinary shares directly held by Lightspeed China Partner I-A, L.P. Lightspeed China Partner I, L.P. and Lightspeed China Partner I-A, L.P. are Cayman Island limited partnerships. Lightspeed China Partners I GP, LLC, a Cayman limited liability company, is the general partner of both Lightspeed China Partner I, L.P. and Lightspeed China Partner I-A, L.P. Ronald Cao and James Qun Mi each owns 50% of the ownership of Lightspeed China Partners I GP, LLC. Both Ronald Cao and James Qun Mi disclaim beneficial ownership of their shares held by Lightspeed funds, except to the extent of their pecuniary interest therein. The registered office address of Lightspeed China Partner I, L.P. and Lightspeed China Partner I-A, L.P. is P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. |
(9) | Represents (i) 77,009,800 Class B ordinary shares directly held by Metallica Holding Limited, a company incorporated in the British Virgin Islands, (ii) 2,250,000 Class A ordinary shares that Metallica Holding Limited may purchase upon exercise of options within 60 days after March 31, 2020, (iii) 1,550,000 ADSs, representing 7,750,000 Class A ordinary shares directly held by Metallica Holding Limited. Mr. Jun Zhang is the sole shareholder and the sole director of Metallica Holding Limited. The registered office address of Metallica Holding Limited is Geneva Place, Waterfront Drive, P.O. Box 3469, Road Town, Tortola, British Virgin Islands. |
(10) | Represents 17,386,364 ADSs, representing 86,931,820 Class A ordinary shares directly held by Sequoia Capital 2010 CV Holdco, Ltd., a Cayman Islands limited liability company. Sequoia Capital 2010 CV Holdco, Ltd. is wholly owned by Sequoia Capital China Venture 2010 Fund, L.P. The general partner of Sequoia Capital China Venture 2010 Fund, L.P. is SC China Venture 2010 Management, L.P., the general partner of which is SC China Holding Limited, a company incorporated in the Cayman Islands. SC China Holding Limited is wholly owned by SNP China Enterprises Limited, a company wholly owned by Mr. Neil Nanpeng Shen. The address of Sequoia Capital 2010 CV Holdco, Ltd. is Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands. |
(11) | Represents 80,471,100 Class A ordinary shares directly held by SIG China Investments Master Fund III, LLLP, a Delaware limited liability partnership. SIG Asia Investment, LLLP, a Delaware limited liability limited partnership, is the investment manager for SIG China Investments Master Fund III, LLLP pursuant to an investment management agreement and, as such, has discretionary authority to vote and dispose of the 80,471,100 Class A ordinary shares. In addition, Heights Capital Management, Inc., a Delaware corporation, is the investment manager for SIG Asia Investment, LLLP pursuant to an investment management agreement and, as such, has discretionary authority to vote and dispose of the 80,471,100 Class A ordinary shares. Arthur Dantchik, in his capacity as the president of SIG Asia Investment, LLLP, and vice president of Heights Capital Management, Inc. may also be deemed to have investment discretion over the shares held by SIG China Investments Master Fund III, LLLP. Mr. Dantchik disclaims any such investment discretion or beneficiary ownership with respect to these shares. The registered office address of SIG China Investments Master Fund III, LLLP is One Commerce Center, 1201 N. Orange Street, Suite 715 in the City of Wilmington, State of Delaware, USA. |
(12) | Represents (i) 59,883,400 Class B ordinary shares directly held by Emma & Oliver Holding Limited, a company incorporated in the British Virgin Islands, and (ii) 900,000 ADSs, representing 4,500,000 Class A ordinary shares, directly held by Emma & Oliver Holding Limited. Mr. Honghui Hu is the sole shareholder and the sole director of Emma & Oliver Holding Limited. The registered office address of Emma & Oliver Holding Limited is Geneva Place, Waterfront Drive, P.O. Box 3469, Road Town, Tortola, British Virgin Islands. |
ITEM 7. |
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
A. |
Major Shareholders |
B. |
Related Party Transactions |
C. |
Interests of Experts and Counsel |
ITEM 8. |
FINANCIAL INFORMATION |
A. |
Consolidated Statements and Other Financial Information |
B. |
Significant Changes |
ITEM 9. |
THE OFFER AND LISTING |
A. |
Offer and Listing Details |
B. |
Plan and Distribution |
C. |
Markets |
D. |
Selling Shareholders |
E. |
Dilution |
F. |
Expenses of the Issue |
ITEM 10. |
ADDITIONAL INFORMATION |
A. |
Share Capital |
B. |
Memorandum and Articles of Association |
• | the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; |
• | the instrument of transfer is in respect of only one class of shares; |
• | the instrument of transfer is properly stamped, if required; |
• | in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; and |
• | a fee of such maximum sum as the NYSE may determine to be payable or such lesser sum as our directors may from time to time require is paid to us in respect thereof. |
• | the designation of the series; |
• | the number of shares of the series; |
• | the dividend rights, dividend rates, conversion rights, voting rights; and |
• | the rights and terms of redemption and liquidation preferences. |
• | authorize our board of directors to issue preferred shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preferred shares without any further vote or action by our shareholders; and |
• | limit the ability of shareholders to requisition and convene general meetings of shareholders. |
• | increase our share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe; |
• | consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares; |
• | sub-divide our existing shares, or any of them into shares of a smaller amount, provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in case of the share from which the reduced share is derived; or |
• | cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of our share capital by the amount of the shares so canceled. |
• | does not have to file an annual return of its shareholders with the Registrar of Companies; |
• | is not required to open its register of members for inspection; |
• | does not have to hold an annual general meeting; |
• | may issue negotiable or bearer shares or shares with no par value; |
• | may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance); |
• | may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands; |
• | may register as a limited duration company; and |
• | may register as a segregated portfolio company. |
• | the names and addresses of the members, a statement of the shares held by each member, and of the amount paid or agreed to be considered as paid, on the shares of each member, and confirmation on whether shares held by each member carries voting rights under our articles of association, and if so, whether such voting rights are conditional; |
• | the date on which the name of any person was entered on the register as a member; and |
• | the date on which any person ceased to be a member. |
C. |
Material Contracts |
D. |
Exchange Controls |
E. |
Taxation |
• | such excess distribution and/or gain will be allocated ratably over the U.S. holder’s holding period for the ADSs or ordinary shares; |
• | such amount allocated to the current taxable year and any taxable years in the U.S. holder’s holding period prior to the first taxable year in which we are a PFIC, or pre-PFIC year, will be taxable as ordinary income; |
• | such amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect for that year; and |
• | an interest charge generally applicable to underpayments of tax will be imposed on the tax attributable to each prior taxable year, other than a pre-PFIC year. |
F. |
Dividends and Paying Agents |
G. |
Statement by Experts |
H. |
Documents on Display |
I. |
Subsidiary Information |
ITEM 11. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 12. |
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
A. |
Debt Securities |
B. |
Warrants and Rights |
C. |
Other Securities |
D. |
American Depositary Shares |
Service |
Fees | |||
• |
Issuance of ADSs (e.g., an issuance of ADS upon a deposit of Class A ordinary shares, upon a change in the ADS(s)-to-Class A ordinary share(s) ratio, or for any other reason), excluding ADS issuances as a result of distributions of Class A ordinary shares |
Up to U.S. 5¢ per ADS issued | ||
• |
Cancelation of ADSs (e.g., a cancelation of ADSs for delivery of deposited property, upon a change in the ADS(s)-to-Class A ordinary share(s) ratio, or for any other reason) |
Up to U.S. 5¢ per ADS canceled | ||
• |
Distribution of cash dividends or other cash distributions (e.g., upon a sale of rights and other entitlements) |
Up to U.S. 5¢ per ADS held | ||
• |
Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ADSs |
Up to U.S. 5¢ per ADS held | ||
• |
Distribution of securities other than ADSs or rights to purchase additional ADSs (e.g., upon a spin-off) |
Up to U.S. 5¢ per ADS held | ||
• |
ADS Services |
Up to U.S. 5¢ per ADS held on the applicable record date(s) established by the depositary bank |
• | taxes (including applicable interest and penalties) and other governmental charges; |
• | the registration fees as may from time to time be in effect for the registration of Class A ordinary shares on the share register and applicable to transfers of Class A ordinary shares to or from the name of the custodian, the depositary bank or any nominees upon the making of deposits and withdrawals, respectively; |
• | certain cable, telex and facsimile transmission and delivery expenses; |
• | the expenses and charges incurred by the depositary bank in the conversion of foreign currency; |
• | the fees and expenses incurred by the depositary bank in connection with compliance with exchange control regulations and other regulatory requirements applicable to Class A ordinary shares, ADSs and ADRs; and |
• | the fees and expenses incurred by the depositary bank, the custodian, or any nominee in connection with the servicing or delivery of deposited property. |
ITEM 13. |
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
ITEM 14. |
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
• | Approximately US$74.1 million for shares repurchases; |
• | Approximately US$58.4 million for dividend distribution; |
• | Approximately US$20.0 million for the acquisition of, and/or investment in, technologies, solutions and/or businesses that complement our business; and |
• | Approximately US$75.0 million for general corporate purposes. |
ITEM 15. |
CONTROLS AND PROCEDURES |
2018 |
2019 |
|||||||||||||||
(RMB’000) |
(US$’000)* |
(RMB’000) |
(US$’000)* |
|||||||||||||
Audit fees (1) |
7,800 |
1,120 |
9,570 |
1,375 |
||||||||||||
Audit-related fees (2) |
— |
— |
— |
— |
||||||||||||
Tax fees (3) |
2,614 |
375 |
— |
— |
||||||||||||
All other fees (4) |
— |
— |
— |
— |
* | The US$ amounts are translated from corresponding RMB amounts using a rate of RMB6.9618 = US$1.00, the noon buying rate on December 31, 2019 set forth in the H.10 statistical release of the U.S. Federal Reserve Board. |
(1) | “Audit fees” means the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. |
(2) | “Audit-related fees” means the aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the registrant’s financial statements and are not reported under footnote (1) above. |
(3) | “Tax fees” means the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. |
(4) | “All other fees” means the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in footnotes (1) through (3). |
Period |
Total number of ADSs purchased |
Average price paid per ADS |
Total number of ADSs purchased as part of the publicly announced plan |
Approximate dollar value of ADSs that may yet be purchased under the plan |
||||||||||||
March 2019 |
346,800 |
3.87 |
346,800 |
51,335,477 |
||||||||||||
April 2019 |
123,500 |
3.89 |
123,500 |
50,855,677 |
||||||||||||
June 2019 |
100 |
3.90 |
100 |
50,855,287 |
||||||||||||
December 2019 |
2,075,500 |
2.37 |
2,075,500 |
45,941,192 |
||||||||||||
January 2020 |
2,133,600 |
2.37 |
2,133,600 |
40,894,632 |
||||||||||||
April 2020 |
1,015,000 |
1.75 |
1,015,000 |
39,117,489 |
||||||||||||
Total |
5,694,500 |
— |
5,694,500 |
— |
||||||||||||
ITEM 17. |
FINANCIAL STATEMENTS |
ITEM 18. |
FINANCIAL STATEMENTS |
ITEM 19. |
EXHIBITS |
Exhibit Number |
Description of Document | |||
1.1 |
||||
2.1 |
||||
2.2 |
||||
2.3 |
||||
2.4* |
||||
4.1 |
||||
4.2 |
||||
4.3 |
||||
4.4 |
Exhibit Number |
Description of Document | |||
4.5 |
||||
4.6 |
||||
4.7 |
||||
4.8 |
||||
4.9 |
||||
4.10 |
||||
4.11 |
||||
4.12 |
||||
4.13 |
||||
4.14 |
Exhibit Number |
Description of Document | |||
4.15 |
||||
4.16 |
||||
4.17 |
||||
4.18 |
||||
4.19 |
||||
4.20 |
||||
4.21 |
||||
4.22 |
||||
4.23 |
||||
4.24 |
Exhibit Number |
Description of Document | |||
4.25 |
||||
4.26 |
||||
4.27 |
||||
4.28 |
||||
4.29 |
||||
4.30 |
||||
4.31 |
||||
4.32 |
||||
4.33 |
||||
4.34 |
||||
4.35 |
Exhibit Number |
Description of Document | |||
4.36 |
||||
4.37 |
||||
4.38 |
||||
4.39 |
||||
8.1* |
||||
11.1 |
||||
12.1* |
||||
12.2* |
||||
13.1** |
||||
13.2** |
||||
15.1* |
||||
15.2* |
||||
101.INS* |
Inline XBRL Instance Document—this instance document does not appear in the Interactive Data File because its XBRL tags are not embedded within the Inline XBRL document | |||
101.SCH* |
Inline XBRL Taxonomy Extension Schema Document | |||
101.CAL* |
Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||
101.DEF* |
Inline XBRL Taxonomy Extension Definition Linkbase Document | |||
101.LAB* |
Inline XBRL Taxonomy Extension Label Linkbase Document | |||
101.PRE* |
Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
** | Furnished herewith |
FinVolution Group | ||
By: |
/s/ Feng Zhang | |
Name: |
Feng Zhang | |
Title: |
Chief Executive Officer |
Page |
||||
F- 2 |
||||
F- 5 |
||||
F- 7 |
||||
F- 9 |
||||
F- 12 |
||||
F- 14 |
As of December 31, |
||||||||||||||||
Note |
2018 |
2019 |
||||||||||||||
RMB |
RMB |
US$ Note 2(f) |
||||||||||||||
Assets |
||||||||||||||||
Cash and cash equivalents |
2 (h) |
|
|
|
||||||||||||
Restricted cash (including restricted cash of the consolidated trusts of RMB RMB |
2 ( i ) |
|
|
|
||||||||||||
Short-term investments |
2 (j) |
|
|
|
||||||||||||
Accounts receivable, net of provision for doubtful accounts of RMB (adjusted , N ote 2( ah )) |
8 |
|
|
|
||||||||||||
Quality assurance receivable |
2 (s) |
|
|
|
||||||||||||
Property, equipment and software, net |
6 |
|
|
|
||||||||||||
Right of use assets, net |
18 |
— |
|
|
||||||||||||
Intangible assets |
7 |
|
|
|
||||||||||||
Goodwill |
|
|
|
|||||||||||||
Loans receivable, net of provision for loan losses of RMB (adjus and RMBt ed, N ote 2 (a h )) as of December 31, 2018 and 2019, respectively (including loans receivable, net of provision for loan losses of the consolidated trusts of RMB as of December 31, 2018 and 2019 , respectively) |
4 |
|
|
|
||||||||||||
Financial guarantee derivative assets |
2 ( t) |
|
— |
— |
||||||||||||
Investments |
2 (l) |
|
|
|
||||||||||||
Deferred tax assets |
12 |
|
|
|
||||||||||||
Amou ue from related party nt s d |
11 |
|
— |
— |
||||||||||||
Contract assets |
8 |
|
|
|
||||||||||||
Prepaid expenses and other assets |
5 |
|
|
|
||||||||||||
Total assets |
|
|
|
|||||||||||||
Liabilities and Shareholders’ Equity: |
||||||||||||||||
Payable to platform customers (including payable to platform customers of the consolidated variable interest entity (“VIE”) and VIE’s subsidiaries without recourse to the Company of RMB and RMB |
|
|
|
|||||||||||||
Quality assurance payable (including quality assurance payable of the consolidated VIE and VIE’s subsidiaries without recourse to the Company of RMB RMB |
2 (s) |
|
|
|
||||||||||||
Payroll and welfare payable (including payroll and welfare payable of the consolidated VIE and VIE’s subsidiaries without recourse to the Company of RMB RMB |
9 |
|
|
|
||||||||||||
Taxes payable (including taxes payable of the consolidated VIE and VIE’s subsidiaries without recourse to the Company of RMB RMB 2019, |
|
|
|
|||||||||||||
Short-term borrowings (including short-term borrowings of the consolidated VIE and VIE’s subsidiaries without recourse to the Company of RMB 2018 and 2019, respectively ) |
17 |
|
|
|
||||||||||||
Funds payable to investors of consolidated trusts (including funds payable to investors of consolidated trusts of RMB RMB |
4 |
|
|
|
||||||||||||
Contract liabilities (including contract liabilities of the consolidated VIE and VIE’s subsidiaries without recourse to the Company of RMB RMB |
2 (u) |
|
|
|
As of December 31, |
||||||||||||||||
Note |
2018 |
2019 |
||||||||||||||
RMB |
RMB |
US$ Note 2(f) |
||||||||||||||
Liabilities and Shareholders’ Equity (Continued) |
||||||||||||||||
Amounts due to related party (including amounts due to related party of the consolidated VIE and VIE’s subsidiaries without recourse to the Company of RMB |
11 |
— |
|
|
||||||||||||
Leasing liabilities (including leasing liabilities of the consolidated VIE and VIE’s subsidiaries without recourse to the Company of and RMB |
1 8 |
— |
|
|
||||||||||||
Deferred tax liabilities (including deferred tax liabilities of the consolidated VIE and VIE’s subsidiaries without recourse to the Company of RMB RMB |
12 |
|
|
|
||||||||||||
Accrued expenses and other liabilities (including accrued expenses and other liabilities of the consolidated VIE and VIE’s subsidiaries without recourse to the Company of RMB |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|||||||||||||
Commitments and contingencies |
1 9 |
|
|
|||||||||||||
FinVolution Group Shareholders’ equity : |
||||||||||||||||
Class A ordinary shares (US$ |
1 3 |
|
|
|
||||||||||||
Class B ordinary shares (US$ |
1 3 |
|
|
|
||||||||||||
Additional paid-in capital |
|
|
|
|||||||||||||
Treasury stock ( |
1 3 |
( |
) | ( |
) | ( |
) | |||||||||
Statutory reserves |
2 (ag) |
|
|
|
||||||||||||
Accumulated other comprehensive income |
|
|
|
|||||||||||||
Retained earnings |
|
|
|
|||||||||||||
Total FinVolution Group shareholders’ equity |
|
|
|
|||||||||||||
Non-controlling Interest |
|
|
|
|||||||||||||
Total shareholders’ equity |
|
|
|
|||||||||||||
Total liabilities and shareholders’ equity |
|
|
|
|||||||||||||
For the Years Ended December 31, |
||||||||||||||||||||
Note |
2017 |
2018 |
2019 |
|||||||||||||||||
RMB |
RMB |
RMB |
US$ Note 2(f) |
|||||||||||||||||
Operating revenue: |
||||||||||||||||||||
Loan facilitation service fees |
2(u) |
|
|
|
|
|||||||||||||||
Post-facilitation service fees |
2(u) |
|
|
|
|
|||||||||||||||
Net interest income |
2(n) |
|
|
|
|
|||||||||||||||
Other revenue |
2(u) |
|
|
|
|
|||||||||||||||
Changes in expected discretionary payment to IRF investors |
2(u) |
( |
) | |
— |
— |
||||||||||||||
Net revenues |
|
|
|
|
||||||||||||||||
Operating expenses: |
||||||||||||||||||||
Origination and servicing expenses |
2(v) |
( |
) | ( |
) | ( |
) | ( |
) | |||||||||||
Origination and servicing expenses-related party |
2(v) |
( |
) | ( |
) | ( |
) | ( |
) | |||||||||||
Sales and marketing expenses |
2(w) |
( |
) | ( |
) | ( |
) | ( |
) | |||||||||||
General and administrative expenses |
2(x) |
( |
) | ( |
) | ( |
) | ( |
) | |||||||||||
Research and development expenses |
|
|
2(y) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) | |
Provision for loans receivable |
4 |
( |
) |
( |
) | ( |
) | ( |
) | |||||||||||
Provision for accounts receivable |
|
|
8 |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) | |
Total operating expenses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Other income (expenses) |
||||||||||||||||||||
Gain from quality assurance |
2(s) |
|
|
|||||||||||||||||
Realized gain (loss) from financial guarantee derivatives |
2(v) |
|
( |
) | |
|
||||||||||||||
Fair value change of financial guarantee derivatives |
2(v) |
( |
) | |
( |
) | ( |
) | ||||||||||||
Other income, net |
2(j), 2(ab) |
|
|
|
|
|||||||||||||||
Profit before income tax expenses |
|
|
|
|
||||||||||||||||
Income tax expenses |
12 |
( |
) | ( |
) | ( |
) | ( |
) | |||||||||||
Net profit |
|
|
|
|
||||||||||||||||
Less: Net profit (loss) attributable to non-controlling interest shareholders |
( |
) | |
|
|
|||||||||||||||
Net profit attributable to FinVolution Group |
|
|
|
|
||||||||||||||||
Accretion on Series A convertible redeemable preferred shares to redemption value |
14 |
( |
) | — |
— |
— |
||||||||||||||
Accretion on Series B convertible redeemable preferred shares to redemption value |
14 |
( |
) | — |
— |
— |
||||||||||||||
Accretion on Series C convertible redeemable preferred shares to redemption value |
14 |
( |
) | — |
— |
— |
||||||||||||||
Net profit (loss) attributable to FinVolution Group’s ordinary shareholders |
( |
) | |
|
|
|||||||||||||||
For the Years Ended December 31, |
||||||||||||||||||||
Note |
2017 |
2018 |
2019 |
|||||||||||||||||
RMB |
RMB |
RMB |
US$ Note 2(f) |
|||||||||||||||||
Net profit |
|
|
|
|
||||||||||||||||
Foreign currency translation adjustment, net of nil tax |
|
|
|
|
||||||||||||||||
Total comprehensive income |
|
|
|
|
||||||||||||||||
Total comprehensive income (loss) attributable to non-controlling interests shareholders |
( |
) | |
|
|
|||||||||||||||
Total comprehensive income attributable to FinVolution Group |
|
|
|
|
||||||||||||||||
Weighted average number of ordinary shares used in computing net income (loss) per share |
||||||||||||||||||||
Basic |
|
|
|
|
||||||||||||||||
Diluted |
|
|
|
|
||||||||||||||||
Net income (loss) per share - Basic |
( |
) | |
|
|
|||||||||||||||
Net income (loss) per share - Diluted |
( |
) | |
|
|
|||||||||||||||
Net income (loss) per ADS - Basic |
( |
) | |
|
|
|||||||||||||||
Net income (loss) per ADS - Diluted |
( |
) | |
|
|
Note |
Issued |
Treasury stock |
Retained |
|||||||||||||||||||||||||||||||||||||||||
Share |
Amount |
Additional paid-in capital |
Share |
Amount |
Accumulated other comprehensive income (loss) |
Statutory reserves |
earnings ( a ccumulateddeficit) |
Non- controlling interest |
Total shareholders’ equity (deficit) |
|||||||||||||||||||||||||||||||||||
RMB |
RMB |
RMB |
RMB |
RMB |
RMB |
RMB |
RMB |
|||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2016 |
|
— |
— |
— |
— |
( |
) | |
( |
) | — |
( |
) | |||||||||||||||||||||||||||||||
Issuance of ordinary shares upon Initial Public Offering (“IPO”) and Concurrent Private Placement (“CPP”), net of expense |
3 |
|
|
|
— |
— |
— |
— |
— |
— |
|
|||||||||||||||||||||||||||||||||
Accretions to preferred shares redemption value |
— |
— |
— |
— |
— |
— |
— |
( |
) | — |
( |
) | ||||||||||||||||||||||||||||||||
Conversion of series A preferred shares to ordinary shares |
1 4 |
|
|
|
— |
— |
— |
— |
— |
— |
|
|||||||||||||||||||||||||||||||||
Conversion of series B preferred shares to ordinary shares |
1 4 |
|
|
|
— |
— |
— |
— |
— |
— |
|
|||||||||||||||||||||||||||||||||
Conversion of series C preferred shares to ordinary shares |
1 4 |
|
|
|
— |
— |
— |
— |
— |
— |
|
|||||||||||||||||||||||||||||||||
Share-based compensation |
— |
— |
|
— |
— |
— |
— |
— |
— |
|
||||||||||||||||||||||||||||||||||
Cancellation of Share-based compensation plan of a subsidiary |
— |
— |
|
— |
— |
— |
— |
— |
— |
|
||||||||||||||||||||||||||||||||||
Net profit |
— |
— |
— |
— |
— |
— |
— |
|
( |
) | |
|||||||||||||||||||||||||||||||||
Foreign currency translation adjustment |
— |
— |
— |
— |
— |
|
— |
— |
— |
|
||||||||||||||||||||||||||||||||||
Business Combination |
3 |
— |
— |
— |
— |
— |
— |
— |
— |
|
|
|||||||||||||||||||||||||||||||||
Appropriation to statutory |
— |
— |
— |
— |
— |
— |
|
( |
) | — |
— |
|||||||||||||||||||||||||||||||||
Balance as of December 31, 2017 |
|
|
|
— |
— |
|
|
( |
) | |
|
|||||||||||||||||||||||||||||||||
Note |
Issued rdinary shares o |
Treasury stock |
Retained |
|||||||||||||||||||||||||||||||||||||||||
|
|
Share |
Amount |
Additional paid-in capital |
Share |
Amount |
Accumulated other comprehensive income |
Statutory reserves |
earnings ( a ccumulateddeficit) |
Non- controlling interest |
Total shareholders’ equity |
|||||||||||||||||||||||||||||||||
RMB |
RMB |
RMB |
RMB |
RMB |
RMB |
RMB |
RMB |
|||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2017 |
|
|
|
— |
— |
|
|
( |
) | |
|
|||||||||||||||||||||||||||||||||
Issuance of ordinary shares for share-based compensation plans |
1 3 |
|
|
— |
( |
) | ( |
) | — |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||
Repurchase of ordinary shares |
1 3 |
— |
— |
— |
( |
) | ( |
) | — |
— |
— |
— |
( |
) | ||||||||||||||||||||||||||||||
Cumulative effect of accounting change |
2 ( w ) |
— |
— |
— |
— |
— |
— |
— |
|
— |
|
|||||||||||||||||||||||||||||||||
Share-based compensation |
1 5 |
— |
— |
|
— |
— |
— |
— |
— |
— |
|
|||||||||||||||||||||||||||||||||
Exercise of share-based compensation plans |
1 5 |
— |
— |
( |
) | |
|
— |
— |
— |
— |
|
||||||||||||||||||||||||||||||||
Net profit |
— |
— |
— |
— |
— |
— |
— |
|
|
|
||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment |
— |
— |
— |
— |
— |
|
— |
— |
— |
|
||||||||||||||||||||||||||||||||||
Capital injection from non-controlling interest |
— |
— |
— |
— |
— |
— |
— |
— |
|
|
||||||||||||||||||||||||||||||||||
Appropriation to statutory reserve |
— |
— |
— |
— |
— |
— |
|
( |
) | — |
— |
|||||||||||||||||||||||||||||||||
Balance as of December 31, 2018 |
|
|
|
( |
) | ( |
) | |
|
|
|
|
||||||||||||||||||||||||||||||||
Note |
Issued o rdinary shares |
Treasury stock |
|
|||||||||||||||||||||||||||||||||||||||||
Share |
Amount |
Additional paid-in capital |
Share |
Amount |
Accumulated other comprehensive income |
Statutory reserves |
Retained earnings (accumulated deficit) |
Non- controlling interest |
Total shareholders’ equity |
|||||||||||||||||||||||||||||||||||
RMB |
RMB |
RMB |
RMB |
RMB |
RMB |
RMB |
RMB |
|||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2018 |
|
|
|
( |
) | ( |
) | |
|
|
|
|
||||||||||||||||||||||||||||||||
Issuance of ordinary shares for share-based compensation plans |
1 3 |
|
|
— |
( |
) | ( |
) | — |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||
Repurchase of ordinary shares |
1 3 |
— |
— |
— |
( |
) | ( |
) | — |
— |
— |
— |
( |
) | ||||||||||||||||||||||||||||||
Share-based compensation |
1 5 |
— |
— |
|
— |
— |
— |
— |
— |
— |
|
|||||||||||||||||||||||||||||||||
Exercise of share-based compensation plans |
15 |
— |
— |
( |
) | |
|
— |
— |
— |
— |
|
||||||||||||||||||||||||||||||||
Net profit |
— |
— |
— |
— |
— |
— |
— |
|
|
|
||||||||||||||||||||||||||||||||||
Dividends paid to shareholders |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) | |
Foreign currency translation adjustment |
— |
— |
— |
— |
— |
|
— |
— |
— |
|
||||||||||||||||||||||||||||||||||
Appropriation to statutory reserve |
— |
— |
— |
— |
— |
— |
|
( |
) | — |
— |
|||||||||||||||||||||||||||||||||
Balance as of December 31, 2019 |
|
|
|
( |
) | ( |
) | |
|
|
|
|
||||||||||||||||||||||||||||||||
For the Years Ended December 31, |
||||||||||||||||||||
Note |
2017 |
2018 |
2019 |
|||||||||||||||||
RMB |
RMB |
RMB |
US$ Note 2(f) |
|||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||||||
Net profit |
|
|
|
|
||||||||||||||||
Adjustments to reconcile net profit to net cash provided by (used in) operating activities: |
||||||||||||||||||||
Provision for loans receivable |
|
|
|
|
||||||||||||||||
Provision for accounts receivable |
— |
|
|
|
||||||||||||||||
Depreciation and amortization |
|
|
|
|
||||||||||||||||
Amortization of right-of-use asset and interest of leasing liabilities |
— |
— |
|
|
||||||||||||||||
Change in fair value of short term investments |
( |
) | ( |
) | |
|
||||||||||||||
Gain from disposal of investments |
— | — | ( |
) | ( |
) | ||||||||||||||
Change in fair value of investments |
— |
|
— |
— |
||||||||||||||||
Net gain from investment in loans |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Share-based compensation |
|
|
|
|
||||||||||||||||
Impairment of intangible assets |
— |
— |
|
|
||||||||||||||||
Changes in operating assets and liabilities: |
||||||||||||||||||||
Accounts receivable |
( |
) | ( |
) |
( |
) |
( |
) | ||||||||||||
Quality assurance receivable |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Financial guarantee derivative assets and discretionary payment |
|
( |
) | |
|
|||||||||||||||
Deferred tax assets |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Amounts due from related party |
( |
) | ( |
) | |
|
||||||||||||||
Contract assets |
— |
( |
) | |
|
|||||||||||||||
Prepaid expenses and other assets |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Deferred revenue |
|
— |
— |
— |
||||||||||||||||
Payable to platform customers |
|
( |
) | ( |
) | ( |
) | |||||||||||||
Quality assurance payable |
|
|
|
|
||||||||||||||||
Payroll and welfare payable |
|
|
( |
) | ( |
) | ||||||||||||||
Taxes payable |
|
( |
) | ( |
) | ( |
) | |||||||||||||
Contract liabilities |
— |
( |
) | ( |
) | ( |
) | |||||||||||||
Amounts due to related party |
( |
) | ( |
) | |
|
||||||||||||||
Leasing liabilities |
— |
— |
( |
) | ( |
) | ||||||||||||||
Deferred tax liabilities |
|
|
|
|
||||||||||||||||
Accrued expenses and other liabilities |
|
|
|
|
||||||||||||||||
Net cash provided by operating activities |
|
|
( |
) | ( |
) | ||||||||||||||
Cash flows from investing activities: |
||||||||||||||||||||
Collection of loans originated and held by the Group |
|
|
|
|
||||||||||||||||
Investment in loans originated and held by the Group |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Investment in convertible loan |
|
|
5 |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) | |
Proceeds from disposal of investments |
— |
— |
|
|
||||||||||||||||
Purchase of investments |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Proceeds from short-term investments |
|
|
|
|
|
|||||||||||||||
Purchase of short-term investments |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Purchase of property, equipment and software |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Proceeds from disposal of a subsidiary |
|
— |
— |
— |
||||||||||||||||
Acquisition of intangible assets |
— |
( |
) | — |
— |
|||||||||||||||
Cash paid for business combinations, net of cash acquired |
3 |
(b) | ( |
) | — |
— |
— |
|||||||||||||
Net cash used in investing activities |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Cash flows from financing activities: |
||||||||||||||||||||
Cash received from investors - consolidated trusts |
|
|
|
|
||||||||||||||||
Cash paid to investors - consolidated trusts |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Cash paid for repurchase of preferential beneficiaries of consolidated trusts |
( |
) | ( |
) | ( |
) |
( |
) | ||||||||||||
Cash received from short-term borrowings |
— |
|
|
|
||||||||||||||||
Repayment of short-term borrowings |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) | |
Cash paid for dividends |
— |
— |
( |
) | ( |
) | ||||||||||||||
Repurchase of ordinary shares |
— |
( |
) | ( |
) | ( |
) | |||||||||||||
Proceeds from exercise of share-based compensation plans |
— |
|
|
|
||||||||||||||||
Capital injection from non-controlling interest |
— |
|
— |
— |
||||||||||||||||
Proceeds from issuance of ordinary shares, net |
|
— |
— |
— |
||||||||||||||||
Net cash provided by financing activities |
|
|
|
|
||||||||||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
( |
) | |
|
|
|||||||||||||||
Net increase in cash, cash equivalents and restricted cash |
|
|
|
|
||||||||||||||||
Cash, cash equivalents and restricted cash at beginning of year |
|
|
|
|
||||||||||||||||
Cash, cash equivalents and restricted cash at end of year |
|
|
|
|
||||||||||||||||
For the Years Ended December 31, |
||||||||||||||||||||
Note |
2017 |
2018 |
2019 |
|||||||||||||||||
RMB |
RMB |
RMB |
US$ Note 2(f) |
|||||||||||||||||
Supplemental disclosure of cash investing and financing activities |
||||||||||||||||||||
Cash paid for interest including paid to investors of consolidated trusts |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Cash paid for income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Supplemental disclosure of non-cash investing and financing activities |
||||||||||||||||||||
Accretion on convertible redeemable preferred shares to redemption value |
|
— |
— |
— |
||||||||||||||||
Payable for purchase of property, equipment and software |
|
|
|
|
||||||||||||||||
Payable for repurchase of ordinary shares |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
| |
Receivable from exercise of share-based incentive plans |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
||||||||||||
2018 |
2019 |
|||||||||||
US$ |
||||||||||||
RMB |
RMB |
Note 2(f) |
||||||||||
Cash and cash equivalents |
|
|
|
|||||||||
Restricted cash |
|
|
|
|||||||||
|
|
|
||||||||||
Name |
Percentage of direct or indirect ownership |
Date of incorporation |
Place of incorporation |
|||||||||
Subsidiaries |
||||||||||||
FinVolution (HK) LIMITED. (“FinVolution HK”) |
|
% | |
|
||||||||
Beijing Prosper Investment Consulting Co., Ltd. (“Beijing Prosper”) |
|
% | |
|
||||||||
Shanghai Guangjian Information Technology Co., Ltd. (“Shanghai Guangjian”) |
|
% | |
|
||||||||
Shanghai Shanghu Information Technology Co., Ltd. (“Shanghai Shanghu”) Shanghai Manyin Information Technology Co., Ltd. (“Shanghai Manyin”) |
|
% | |
|
||||||||
Consolidated VIEs |
||||||||||||
Beijing Paipairongxin Investment Consulting Co., Ltd. (“Beijing Paipairongxin”) |
|
%* | |
|
||||||||
Shanghai Zihe Information Technology Co., Ltd. (“Shanghai Zihe”) |
|
%* | |
|
||||||||
Shanghai Nianqiao Technology Co., Ltd. (“Shanghai Nianqiao”) |
|
%* | |
|
||||||||
Shanghai Ledao Technology Co., Ltd. (“Shanghai Ledao”) |
|
|
%* |
|
|
|
| |||||
Consolidated VIEs’ principal subsidiaries |
||||||||||||
Shanghai PPDai Financial Information Services Co.,Ltd. (“Shanghai PPDai”) |
|
%* | |
|
||||||||
Shanghai Erxu Information Technology Co., Ltd. (“Shanghai Erxu”) |
|
%* | |
|
||||||||
Fujian Zhiyun Financing Guarantee Co., Ltd.. (“Fujian Zhiyun”) |
|
%* | |
|
* | Controlled via contractual relationships |
1) | Fin V olution Group was incorporated in the |
2) | On June 12, 2012, FinVolution HK was incorporated in Hong Kong as a wholly owned subsidiary of the Company. |
3) | On June 15, 2012, Beijing Prosper was incorporated in the PRC as a wholly owned subsidiary of FinVolution . HK |
4) | On August 21, 2012, Beijing Paipairongxin was incorporated in the PRC by the founders of Shanghai PPDAI. |
1) | On June 5, 2017, Shanghai Guangjian was incorporated in the PRC as a wholly owned subsidiary of Finvolution HK. |
2) | On June 15, 2017, Shanghai Shanghu was incorporated in PRC as a wholly owned subsidiary of Shanghai Guangjian. |
As of December 31, |
||||||||
2018 |
2019 |
|||||||
RMB |
RMB |
|||||||
Cash and cash equivalents |
|
|
||||||
Restricted cash |
|
|
||||||
Short-term investments |
|
— |
||||||
Account s receivable |
|
|
||||||
Quality assurance receivable |
|
|
||||||
Property, equipment and software, net |
|
|
||||||
Right of Use assets |
— |
|
||||||
Loans and receivables, net of provision for loan losses |
|
|
— |
|
|
|
| |
Financial guarantee derivative assets |
|
— |
||||||
Investments |
|
|
||||||
Deferred tax assets |
|
|
||||||
Contract assets |
|
|
||||||
Prepaid expenses and other assets |
|
|
||||||
Total assets |
|
|
||||||
Payable to platform customers |
|
|
||||||
Quality assurance payable |
|
|
||||||
Payroll and welfare payable |
|
|
||||||
Taxes payable |
|
|
||||||
Short-term borrowings |
|
|
— |
|
|
|
| |
Contract liabilities |
|
|
||||||
Deferred tax liabilities |
|
|
||||||
Leasing liabilities |
— |
|
||||||
Amounts |
|
|
||||||
Accrued expenses and other liabilities |
|
|
|
|
|
|
| |
Total liabilities |
|
|
||||||
For the Years Ended December 31, |
||||||||||||
2017 |
2018 |
2019 |
||||||||||
RMB |
RMB |
RMB |
||||||||||
Net revenue |
|
|
|
|||||||||
Net profit |
|
|
|
|||||||||
Net cash provided by operating activities |
|
|
|
|||||||||
Net cash provided by (used in) investing activities |
( |
) | ( |
) | |
|||||||
Net cash provided by (used in) financing activities |
( |
) | |
|
||||||||
Net increase in cash, cash equivalents and restricted cash |
|
|
|
|||||||||
Cash, cash equivalents and restricted cash at beginning of year |
|
|
|
|||||||||
Cash, cash equivalents and restricted cash at end of year |
|
|
|
|||||||||
(i) | Cash in quality assurance is cash managed by the Group through designated bank accounts and cash managed by China United SME Guarantee Corporation under the new quality assurance program. There is no other use of these funds except for making payments to investors for default loans that are subject to quality assurance protection. As of December 31, 2018 and 2019, the restricted cash related to quality assurance obligations were RMB RM B |
(ii) | Cash in investor reserve funds is cash managed by the Group through a designated bank account or third party payment company account. There is no other use of these funds except for payments to protect relevant investors from potential losses resulting from delinquent loans and or underperformance of the investment programs. As of December 31, 2018 and 2019, the restricted cash related to investor reserve funds amounted to RMB RMB As of December 31, 2019, the underlying investment programs were all matured and the Group was in the process of settling the remaining balance in this account. |
(iii) | Cash received from investors or borrowers that has not yet been disbursed, due to a settlement time lag. As of December 31, 2018 and 2019, the restricted cash related to cash not yet disbursed amounted to RMB RMB , respectively. |
(iv) | Cash received via consolidated trusts that has not yet been distributed. As of December 31, 2018 and 2019, the restricted cash related to cash not yet distributed amounted to RMB RMB , respectively. |
(v) | Cash held as collateral for short-term borrowings of subsidiar ies of the Group. As of December 31, 2018 and 2019, the restricted cash held as collateral amounted to RMBRMB , respectively. |
(vi) | Cash held in escrow accounts that is jointly managed by the Group and institutional funding partners. As of December 31, 2018 and 2019, the restricted cash managed by the Group and institutional funding partners amounted to RMBRMB |
(vii) |
Cash held in designated account under the name of a subsidiary of the Group as a security deposit for an institutional funding partner. As of December 31, 2018 and 2019, the restricted cash related to security deposit amounted to Nil and RMB |
As of December 31, |
||||||||
2018 |
2019 |
|||||||
Equity method investments |
|
|
||||||
Non-marketable equity investments |
|
|
||||||
|
|
|||||||
December 31, 2018 |
||||||||||||||||
Level 1 Inputs |
Level 2 Inputs |
Level 3 Inputs |
Balance at Fair value |
|||||||||||||
RMB |
RMB |
RMB |
RMB |
|||||||||||||
Assets |
||||||||||||||||
Short-term investments |
||||||||||||||||
—wealth management products |
— |
|
— |
|
||||||||||||
Investments |
||||||||||||||||
—non-marketable equity investments |
— |
— |
|
|
||||||||||||
Financial guarantee derivative assets |
— |
— |
|
|
||||||||||||
Total Assets |
— |
|
|
|
||||||||||||
December 31, 2019 |
||||||||||||||||
Level 1 Inputs |
Level 2 Inputs |
Level 3 Inputs |
Balance at Fair value |
|||||||||||||
RMB |
RMB |
RMB |
RMB |
|||||||||||||
Assets |
||||||||||||||||
Short-term investments |
||||||||||||||||
—wealth management products |
— |
|
— |
|
||||||||||||
Investments |
||||||||||||||||
—non-marketable equity investments |
— |
— |
|
|
||||||||||||
Total Assets |
— |
|
|
|
||||||||||||
As of December 31, |
||||||||
2018 |
2019 |
|||||||
Expected default rate |
- |
For the years ended December 31, |
||||||||
2018 |
2019 |
|||||||
Opening balance |
— |
|
||||||
Purchase of non-marketable investments |
|
|
||||||
Disposal of non-marketable investments |
— |
( |
) | |||||
Fair value change |
( |
) |
— |
|||||
Ending balance |
|
|
||||||
For the Years Ended December 31, |
||||||||||||
2017 |
2018 |
2019 |
||||||||||
RMB |
RMB |
RMB |
||||||||||
Interest income |
||||||||||||
Less: Interest expense |
( |
) | ( |
) | ( |
) | ||||||
Net interest income |
||||||||||||
Category |
Estimated useful life |
Residual value |
||||
Office furniture and equipment |
||||||
Computer and electronic equipment |
||||||
Leasehold improvements |
||||||
Software |
For the years ended December 31, |
||||||||||||
2017 |
2018 |
2019 |
||||||||||
Opening balance |
||||||||||||
Fair value of newly written guarantee and quality assurance obligation |
||||||||||||
Release of guarantee and quality assurance payable upon repayment |
( |
) | ( |
) | ( |
) | ||||||
Contingent liability |
||||||||||||
Payouts during the year |
( |
) | ( |
) | ( |
) | ||||||
Recoveries during the year |
||||||||||||
Ending balance |
||||||||||||
For the years ended December 31, |
||||||||||||
2017 |
2018 |
2019 |
||||||||||
Opening balance |
||||||||||||
Fair value of newly written guarantee and quality assurance obligation |
||||||||||||
Guarantee fee and quality assurance obligation contribution received from borrowers |
( |
) | ( |
) | ( |
) | ||||||
Gain (loss) from quality assurance |
( |
) | ( |
) | ||||||||
Fair value of early repaid investment program * |
— |
— |
||||||||||
Ending balance |
||||||||||||
For the years ended December 31, |
||||||||||||
2017 |
2018 |
2019 |
||||||||||
Opening balance |
|
( |
) | |
||||||||
Initial recognition of and change in fair value of ongoing investor reserve arrangements |
( |
) | |
( |
) | |||||||
Settlement upon maturity of investor reserve arrangements |
( |
) | |
( |
) | |||||||
Ending balance |
( |
) | |
— |
||||||||
For the years ended December 31, 2018 |
||||||||||||
As reported |
Amounts without adoption of ASC Topic 606 |
Effect of change |
||||||||||
Loan facilitation service fees |
|
|
|
|||||||||
Post-facilitation service fees |
|
|
|
|||||||||
Other Revenue |
|
|
( |
) | ||||||||
|
|
|
||||||||||
• |
The Group operates a platform that enables borrowers and investors to exchange information; |
• |
The Group collects information from borrowers, conduct credit assessment and match borrowers with investors; |
• |
Once borrowers and investors are matched, the Group is responsible for collect and transfer funds between borrowers and investors; |
• |
The Group will also provide investors with collection services upon borrowers’ default; |
• |
Borrowers are obligated to pay the Group a monthly transaction service fee as part of their monthly repayment. In the event of prepayment, borrowers are obligated to pay the outstanding unpaid transactionservice |
• |
If a loan is subject to the protection of the quality assurance program which provides a protection mechanism to investors who subscribe to these loans, borrowers are obligated to pay a monthly quality assurance contribution on top of the principle, interest and transaction service fee as part of the monthly repayment; |
• |
In the event of prepayment, the borrowers are also obligated to pay the outstanding unpaid transaction service fee and quality assurance contribution in full; |
• |
If the investor is an institutional funding partner, the Group provides quality assurance commitment as credit enhancement. |
• | When a loan is successfully matched during the relevant incentive program period, the investor receives a cash incentive, either provided upfront as a one-time contribution to the loan investment amount (effectively reducing the amount an investor has to fund in cash for a loan, while still being entitled to repayment of the entire stated principal balance) or on a monthly basis over the term of the loan as additional interest. These cash incentives are considered a reduction of transaction price. |
• | In certain other circumstances, the Group may provide a cash incentive to a new potential investor upon signing up as a new user on the platform, without a requirement for the potential investor to fund a loan. This is considered a type of marketing expense to attract potential investors to the platform, and is recorded as expense, rather than a reduction of transaction price. |
For the year ended December 31, |
||||||||||||||||
2018 |
2019 |
|||||||||||||||
|
With quality assurance protection |
Without quality assurance protection |
With quality assurance protection |
Without quality assurance protection |
||||||||||||
Loan facilitation service fees |
|
|
|
|
||||||||||||
Post-facilitation service fees |
|
|
|
|
||||||||||||
Other revenue |
||||||||||||||||
- investment management fee |
|
— |
|
— |
||||||||||||
- borrowers referral fee |
— |
|
— |
|
||||||||||||
- others |
|
|
|
|
||||||||||||
Changes in expected discretionary payment to IRF investors |
— |
|
— |
— |
||||||||||||
|
|
|
|
|||||||||||||
(i) | Persuasive evidence of an arrangement exists; |
(ii) | Delivery has occurred or services have been provided; |
(iii) | The selling price is fixed or determinable; and, |
(iv) | Collectability is reasonably assured. |
• | When a loan is successfully matched during the relevant incentive program period, the investor receives a cash incentive, either provided upfront as a one-time contribution to the loan investment amount (effectively reducing the amount an investor has to fund in cash for a loan, while still being entitled to repayment of the entire stated principal balance) or on a monthly basis over the term of the loan as additional interest. These cash incentives are accounted for as reduction of revenue in accordance with ASC subtopic 605-50. |
• | In certain other circumstances, the Group may provide a cash incentive to a new potential investor upon signing up as a new user on the platform, without a requirement for the potential investor to fund a loan. This is considered a type of marketing expense to attract potential investors to the platform, and is recorded as expense, rather than a reduction of revenue. |
(a) |
Initial public offering |
(b) |
Acquisition of HB micro lending company |
As of acquisition date |
Amortization years |
|||||||
RMB |
||||||||
Identifiable assets acquired |
||||||||
Identifiable intangible asset |
|
|
||||||
Cash |
|
|||||||
Other asset |
|
|||||||
Identifiable liabilities assumed |
||||||||
Deferred tax liability |
( |
) | ||||||
Other liability |
( |
) | ||||||
Goodwill |
|
|||||||
Non-controlling interest |
( |
) | ||||||
Total purchase price |
|
|||||||
As of December 31, |
||||||||
2018 |
2019 |
|||||||
RMB |
RMB |
|||||||
Loans (adjusted, Note 2(ah)) |
|
|
||||||
Allowance for loan losses (adjusted, Note 2(ah)) |
( |
) | ( |
) | ||||
Loans receivable, net |
|
|
||||||
For the Years Ended December 31, |
||||||||||||
2017 |
2018 |
2019 |
||||||||||
RMB |
RMB |
RMB |
||||||||||
Beginning balance |
|
|
|
|||||||||
Current period provision |
|
|
|
|||||||||
Current period reversal |
( |
) | ( |
) | ( |
) | ||||||
Current period write off |
— |
( |
) |
( |
) | |||||||
Ending balance |
|
|
|
|||||||||
1-89 days past due |
90-119 days Past due |
120-149 days Past due |
150-179 days Past due |
Total past due |
Current |
Total loans receivable |
||||||||||||||||||||||
December 31, 2018 |
|
|
|
|
|
|
|
|||||||||||||||||||||
December 31, 2019 |
|
|
|
|
|
|
|
|||||||||||||||||||||
As of December 31, |
||||||||||||
2018 |
2019 |
|||||||||||
RMB |
RMB |
|||||||||||
Restricted cash |
|
|
||||||||||
Loans and other receivable |
|
|
||||||||||
Total assets |
|
|
||||||||||
Funds payable to investors of consolidated trusts |
|
|
||||||||||
Taxes payable |
|
|
||||||||||
Total liabilities |
|
|
||||||||||
For the Years Ended December 31, |
||||||||||||
2017 |
2018 |
2019 |
||||||||||
RMB |
RMB |
RMB |
||||||||||
Net revenue |
( |
) | ( |
) | ( |
) | ||||||
Net loss |
( |
) | — |
— |
||||||||
Net cash used in operating activities |
( |
) | ( |
) | ( |
) | ||||||
Net cash used in investing activities |
( |
) | ( |
) | ( |
) | ||||||
Net cash provided by financing activities |
|
|
|
|||||||||
Net increase in cash, cash equivalents and restricted cash |
|
|
|
|||||||||
Cash, cash equivalents and restricted cash at beginning of year |
|
|
|
|||||||||
Cash, cash equivalents and restricted cash at end of period |
|
|
|
|||||||||
As of December 31, |
||||||||||||||||
2018 |
2019 |
|||||||||||||||
Institutional funding partners |
The Group |
Institutional funding partners |
The Group |
|||||||||||||
Principal invested |
|
|
|
|
||||||||||||
Accrued interest/residual interest |
|
|
|
|
||||||||||||
Total |
|
|
|
|
||||||||||||
As of December 31, |
||||||||
2018 |
2019 |
|||||||
RMB |
RMB |
|||||||
Security deposits 1 |
|
|
||||||
Prepaid rental deposits |
|
|
||||||
Prepaid online marketing expenses |
|
|
||||||
Advances |
|
|
||||||
Convertible loan 2 |
|
|
— |
|
|
|
|
|
Others |
|
|
||||||
|
|
|||||||
1 |
The balances represent security deposits set aside as requested by certain institutional funding partners, held in deposit accounts with the institutional funding partners. |
2 |
In 2019, the Group agrees to grant a RMB |
As of December 31, |
||||||||
2018 |
2019 |
|||||||
RMB |
RMB |
|||||||
Computer and electronic equipment |
|
|
||||||
Office furniture and equipment |
|
|
||||||
Leasehold improvement |
|
|
||||||
Software |
|
|
||||||
Total |
|
|
||||||
Less: Accumulated depreciation and amortization (1) |
( |
) | ( |
) | ||||
Property, equipment and software, net |
|
|
||||||
(1) | Depreciation and amortization expenses for the years ended December 31, 2017, 2018 and 2019 was RMB |
As of December 31, |
||||||||
2018 |
2019 |
|||||||
RMB |
RMB |
|||||||
Micro-Lending License |
|
|
||||||
Financing guarantee License 1 |
|
|
||||||
Factoring License 1 |
|
|
||||||
Financial Leasing License 1 |
|
|
||||||
Total |
|
|
||||||
Less: Accumulated amortization and impairment |
— |
( |
) | |||||
Intangible assets |
|
|
||||||
1 | The Group acquired Shenzhen Rongze Commerecial Co., Ltd, Zhongyu Financial Leasing and Zhongyisheng Financial Guarantee Co., Ltd. in 2018. The acquisitions met the “single or similar asset threshold” and are not considered as business combination in accordance with ASC Topic 805. In 2019, the financial guarantee licenses related to Zhongyisheng Financial Guarantee Co., Ltd. was revoked and therefore full impairment was provided. |
As of December 31, |
||||||||
2018 |
2019 |
|||||||
RMB |
RMB |
|||||||
Accounts receivable (adjusted, Note 2(ah)) |
|
|
||||||
Allowance for doubtful accounts (adjusted, Note 2(ah)) |
( |
) | ( |
) | ||||
Accounts receivable, net |
|
|
||||||
Current |
1-89 days past due |
90-119 days Past due |
120-149 days Past due |
150-179 days Past due |
Total accounts receivable |
|||||||||||||||||||
December 31, 2018 |
||||||||||||||||||||||||
Loan facilitation |
|
|
|
|
|
|
||||||||||||||||||
Post facilitation |
|
|
|
|
|
|
||||||||||||||||||
Other |
|
— |
— |
— |
— |
|
||||||||||||||||||
Total |
|
|
|
|
|
|
||||||||||||||||||
December 31, 2019 |
||||||||||||||||||||||||
Loan facilitation |
|
|
|
|
|
|
||||||||||||||||||
Post facilitation |
|
|
|
|
|
|
||||||||||||||||||
Other |
|
— |
— |
— |
— |
|
||||||||||||||||||
Total |
|
|
|
|
|
|
||||||||||||||||||
For the Years Ended December 31, |
||||||||
2018 |
2019 |
|||||||
RMB |
RMB |
|||||||
Beginning balance |
— |
|
||||||
Impact due to adoption of new revenue standard |
|
— |
||||||
Current period accrual |
|
|
||||||
Current period reversal |
|
|
( |
) |
|
|
( |
) |
Current period write-off |
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
|
||||||
As of December 31, |
||||||||
2018 |
2019 |
|||||||
RMB |
RMB |
|||||||
Investment management fee for investment programs |
|
|
||||||
Contract acquisition cost |
|
— |
||||||
|
|
|||||||
For the Years Ended December 31, |
||||||||
2018 |
2019 |
|||||||
RMB |
RMB |
|||||||
Beginning balance |
— |
|
||||||
Impact due to adoption of new revenue standard |
|
— |
||||||
Recognition of investment management fee |
|
|
||||||
Recognition of contract acquisition cost |
|
— |
||||||
Settlement upon maturity of investment programs |
( |
) | ( |
) | ||||
Settlement upon fulfilment of contract |
( |
) | ( |
) | ||||
Ending balance |
|
|
||||||
As of December 31 |
||||||||
2018 |
2019 |
|||||||
RMB |
RMB |
|||||||
Funds payable to financial institution partners* |
|
|
||||||
Accrued marketing expense |
|
|
|
|
|
|
|
|
Accrued collection service fee |
|
|
||||||
Accrued technical services expense |
|
|
|
|
|
|
|
|
Accrued payment channel expenses |
|
|
||||||
Accrued professional service fee |
|
|
||||||
Others |
|
|
||||||
|
|
|||||||
* |
The balance of payable mainly includes funds received from borrowers but not yet transferred to the institutional funding partners due to the settlement time lag. |
For the Years ended December 31, |
||||||||||||
2017 |
2018 |
2019 |
||||||||||
RMB |
RMB |
RMB |
||||||||||
Data collection service expense (i) . |
|
|
|
|||||||||
(i) | PPcredit Data Service (Shanghai) Co., Ltd. (“PPcredit”) was founded in April 2016 by the founders of the Group to provide data collection services. The Group mainly uses PPcredit as a data provider since PPcredit was established. The price for the service is determined based on the price charged by other market participants. |
As of December 31, |
||||||||
2018 |
2019 |
|||||||
RMB |
RMB |
|||||||
PPcredit |
— |
|
||||||
As of December 31, |
||||||||
2018 |
2019 |
|||||||
RMB |
RMB |
|||||||
PPcredit |
|
— |
||||||
For the Years Ended December 31, |
||||||||||||
2017 |
2018 |
2019 |
||||||||||
RMB |
RMB |
RMB |
||||||||||
Current income tax expenses |
||||||||||||
Deferred income tax expense (benefit) |
( |
) | ||||||||||
Total |
||||||||||||
For the Years Ended December 31, |
||||||||||||
2017 |
2018 |
2019 |
||||||||||
RMB |
RMB |
RMB |
||||||||||
Statutory tax rate |
% | % | % | |||||||||
Research and development tax credit |
( |
)% | ( |
)% | ( |
) % | ||||||
Effect of tax holiday* |
( |
)% | ( |
)% | ( |
) % | ||||||
Change in valuation allowance |
— |
— |
% | |||||||||
Non-deductible expenses |
% | % | % | |||||||||
Others |
% | — |
— |
|||||||||
Effective income tax rate |
% | % | % | |||||||||
* |
Due to the confirmation of software enterprise status of a subsidiary of the Group in the fourth quarter of 2018, the Group reversed a total of RMB |
For the Years Ended December 31, |
||||||||||||
2017 |
2018 |
2019 |
||||||||||
RMB |
RMB |
RMB |
||||||||||
Tax holiday effect |
||||||||||||
Net income per share effect |
||||||||||||
- Basic |
||||||||||||
- Diluted |
||||||||||||
As of December 31, |
||||||||
2018 |
2019 |
|||||||
RMB |
RMB |
|||||||
Deferred tax assets: |
||||||||
Timing difference in revenue recognition for transaction service fee |
||||||||
Provision for accounts receivable and loans receivable |
||||||||
Net accumulated losses-carry forward |
||||||||
Payroll and welfare payable and other temporary difference |
||||||||
Less: valuation allowance |
( |
) | ( |
) | ||||
Total deferred tax assets |
||||||||
Deferred tax liabilities: |
||||||||
Quality assurance payable |
( |
) | ( |
) | ||||
Intangible assets arisen from business combination |
( |
) | ( |
) | ||||
Investor reserve funds |
( |
) |
( |
) | ||||
Unrealized gain in consolidated trusts |
— |
( |
) | |||||
Other taxable temporary difference |
( |
) | ( |
) | ||||
Total deferred tax liabilitie s |
( |
) | ( |
) | ||||
Net deferred tax assets (liabilities) |
( |
) |
For the Years Ended December 31, |
||||||||||||
2017 |
2018 |
2019 |
||||||||||
RMB |
RMB |
RMB |
||||||||||
At beginning of year |
||||||||||||
Current year additions |
||||||||||||
Current year reversals |
( |
) | ( |
) | ( |
) | ||||||
At end of year |
||||||||||||
Options Outstanding |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life |
Aggregate Intrinsic Value |
|||||||||||||
US$ |
US$ |
|||||||||||||||
Outstanding at December 31, 2016 |
|
|
|
|
||||||||||||
Granted |
|
|
— |
— |
||||||||||||
Canceled/ Forfeited |
( |
) | |
— |
— |
|||||||||||
Outstanding at December 31, 2017 |
|
|
|
|
||||||||||||
Granted |
|
|
— |
— |
||||||||||||
Canceled/ Forfeited |
( |
) | |
— |
— |
|||||||||||
Expired |
( |
) | |
— |
— |
|||||||||||
Exercised |
( |
) | |
— |
— |
|||||||||||
Outstanding at December 31, 2018 |
|
|
|
|
||||||||||||
Granted |
|
|
— |
— |
||||||||||||
Canceled/ Forfeited |
( |
) | |
— |
— |
|||||||||||
Exercised |
( |
) | |
— |
— |
|||||||||||
Outstanding at December 31, 2019 |
|
|
|
|
||||||||||||
Vested and expected to vest at December 31, 2019 |
|
|
|
|
||||||||||||
Exercisable as of December 31, 2019 |
|
|
|
|
Options Granted in 2017 |
Options Granted in 2018 |
Options Granted in 2019 |
||||||||||
RMB |
RMB |
RMB |
||||||||||
Risk-free interest rate |
|
% | |
% | ||||||||
Expected life (in years) |
|
|
||||||||||
Expected dividend yield |
|
% | |
% | ||||||||
Expected volatility |
|
% | |
% | ||||||||
Exercise multiple |
|
|
Number of RSUs |
Weighted- averagegrant date fair value |
|||||||
US$ |
||||||||
Unvested at December 31, 2017 |
— |
— |
||||||
Granted |
|
|
|
|
|
|
|
|
Vested |
|
|
— |
|
|
|
— |
|
Canceled/ Forfeited |
|
|
( |
) |
|
|
|
|
Unvested at December 31, 2018 |
|
|
||||||
Granted |
|
|
||||||
Vested |
( |
) | |
|||||
Canceled/ Forfeited |
( |
) | |
|||||
Unvested at December 31, 2019 |
|
|
For the years ended December 31, |
||||||||||||
2017 |
2018 |
2019 |
||||||||||
RMB |
RMB |
RMB |
||||||||||
Basic net income (loss) per share calculation: |
|
|
|
|
|
|
|
|
| |||
Numerator: |
||||||||||||
Net profit (loss) attributable to FinVolution Group |
|
|
|
|||||||||
Accretion on Series A convertible redeemable preferred shares redemption value |
( |
) | — |
— |
||||||||
Accretion on Series B convertible redeemable preferred shares redemption value |
( |
) | — |
— |
||||||||
Accretion on Series C convertible redeemable preferred shares redemption value |
( |
) | — |
— |
||||||||
Net income (loss) attributable to ordinary shareholders - basic |
( |
) | |
|
||||||||
Denominator: |
||||||||||||
Weighted average number of ordinary shares outstanding - basic |
||||||||||||
Net income (loss) per share attributable to ordinary shareholders - basic |
( |
) | |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilute net income (loss) per share calculation: |
||||||||||||
Numerator: |
||||||||||||
Net income (loss) attributable to ordinary shareholders |
( |
) | |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|||||||||
Weighted average number of ordinary shares outstanding - basic |
|
|
|
|||||||||
Ordinary shares issuable upon the exercise of outstanding stock options using the treasury stock method |
|
|
— |
|
|
|
|
|
|
|
|
|
Ordinary shares issuable upon the vesting of outstanding restricted share units using the treasury stock method |
|
|
— |
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to ordinary shareholders - diluted |
|
|
( |
) |
|
|
|
|
|
|
|
|
For the years ended December 31, |
||||
2019 |
||||
RMB |
||||
Lease cost: |
||||
Amortization of right-of-use assets |
|
|||
Interest of lease liabilities |
|
|||
Expenses for short-term leases within 12 months |
|
|||
Total lease cost |
|
|||
For the years ended December 31, |
||||
2019 |
||||
RMB |
||||
Other information: |
||||
Cash paid for amounts included in the measurement of lease liabilities: |
||||
Operating lease payments |
|
|||
As of December 31, |
||||
2019 |
||||
Weighted-average remaining lease term |
||||
Operating leases |
|
|||
Weighted-average discount rate |
||||
Operating leases |
|
% | ||
For the years ended December 31, |
||||
2019 |
||||
RMB |
||||
2020 |
|
|||
2021 |
|
|||
2022 |
|
|||
2023 |
|
|
|
|
Total undiscounted lease payments |
|
|||
Less: imputed interest |
( |
) | ||
Total lease liabilities |
|
|||
As of December 31, |
||||
2018 |
||||
RMB |
||||
2019 |
|
|||
2020 |
|
|||
2021 |
|
|||
2022 |
|
|||
Thereafter |
|
|||
Total |
|
|||
i) |
VIE Arrangements |
i) |
VIE Arrangements (continued) |
ii) |
VIE Arrangements |
iii) |
Class Action |
|
As of December 31, |
|||||||||||
|
2018 |
|
|
2019 |
||||||||
|
RMB |
|
|
RMB |
|
|
US$ Note2(f) |
|||||
Assets |
|
|
|
|
||||||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
||||
Prepaid expenses and other assets |
|
|
|
|
|
|
|
|
||||
Investment in and advances to subsidiaries |
|
|
|
|
|
|
|
|
||||
Total assets |
|
|
|
|
|
|
|
|
||||
Liabilities and Shareholders’ Equity |
|
|
|
|
||||||||
Accrued expenses and other liabilities |
|
|
|
|
|
|
|
|
||||
Total liabilities |
|
|
|
|
|
|
|
|
||||
Shareholders’ equity : |
|
|
|
|
||||||||
Class A ordinary shares (US$ |
|
|
|
|
|
|
|
|
||||
Class B ordinary shares (US$ 2018 and 2019) |
|
|
|
|
|
|
|
|
||||
Additional paid-in capital |
|
|
|
|
|
|
|
|
||||
Treasury stock ( and 2019, respectively) |
|
( |
) | |
( |
) | |
( |
) | |||
Statutory reserves |
|
|
|
|
|
|
|
|
||||
Accumulated other comprehensive income |
|
|
|
|
|
|
|
|
||||
Retained earnings |
|
|
|
|
|
|
|
|
||||
Total shareholders’ equity |
|
|
|
|
|
|
|
|
||||
Total liabilities and shareholders’ equity |
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
For the Years Ended December 31, |
||||||||||||||||
2017 |
2018 |
2019 |
||||||||||||||
RMB |
RMB |
RMB |
US$ Note 2(f) |
|||||||||||||
Operating expenses |
||||||||||||||||
Sales and marketing expenses |
— |
( |
) | — |
— |
|||||||||||
General and administrative expenses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Profits from operations |
|
|
|
|
|
|
|
|
|
|
|
— |
| |||
Other income, net |
|
|
|
|
||||||||||||
Share of profit of subsidiaries |
|
|
|
|
||||||||||||
Net profit |
|
|
|
|
||||||||||||
Accretion on Series A convertible redeemable preferred shares to redemption value |
( |
) | — |
— |
— |
|||||||||||
Accretion on Series B convertible redeemable preferred shares to redemption value |
( |
) | — |
— |
— |
|||||||||||
Accretion on Series C convertible redeemable preferred shares to redemption value |
( |
) | — |
— |
— |
|||||||||||
Net profit (loss) attributable to ordinary shareholders |
( |
) | |
|
|
|||||||||||
For the Years Ended December 31, |
||||||||||||||||
2017 |
2018 |
2019 |
||||||||||||||
RMB |
RMB |
RMB |
US$ Note 2(f) |
|||||||||||||
Net cash provided by (used in) operating activities |
( |
) | |
|
|
|||||||||||
Net cash used in investing activities |
( |
) | ( |
) | |
|
||||||||||
Net cash provided by (used in) financing activities |
|
( |
) | ( |
) | ( |
) | |||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
( |
) | |
|
|
|||||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
( |
) | ( |
) | ( |
) | |||||||||
Cash, cash equivalents and restricted cash-beginning of year |
|
|
|
|
||||||||||||
Cash, cash equivalents and restricted cash-end of year |
|
|
|
|
||||||||||||