ppdf-ex991

SHANGHAI, August 22, 2018 /PRNewswire/ – PPDAI Group Inc. (“PPDAI,” “Paipaidai,” or the “Company”) (NYSE: PPDF), a leading online consumer finance marketplace in China, today announced its unaudited financial results for the second quarter ended June 30, 2018.

Mr. Jun Zhang, the Chairman and the Chief Executive Officer of PPDAI, commented, “We are pleased to have achieved further growth in loan origination volume quarter over quarter despite the recent market headwinds faced by the Company. The resilence of our core business has been demonstrated by our continued profitability and a further improvement in our delinquency rate in the quarter.”

Mr. Zhang continued, “As we strive to invest in new engines of growth, we made positive progress in engaging a wide range of financial service providers with our “technologies as a service” offerings. The external acceptance of our financial technologies reinforces our leading-edge innovation and core capabilities. As a pioneer and industry leader, we are very proud to be among the first to be aligned with Baihang Credit, which further recognizes our industry leadership position. We remain focused on capturing the tremendous long-term growth opportunities in our industry, while maintaining compliance with regulations as they evolve.

“The industry has lately been going through significant change. We believe a strengthened regulatory framework and industry consolidation will benefit the industry’s long-term growth and sustainability. As an industry leader with the longest operating history and strong proprietary technologies and core capabilities, we are confident in our ability to meet upcoming P2P registration and well positioned for future growth,” concluded Mr. Zhang.

Mr. Simon Ho, the Chief Financial Officer of PPDAI, added, “During the quarter, we continued to improve our operating leverage by increasing efficiencies and maintained non-GAAP operating margin at a healthy level of 46.0%. Regulatory uncertainty and the exit of smaller players has led investors to grow more cautious, which, in additional to delays in the registration process, has caused us to temper our outlook for loan origination volume for 2018. The fundamentals of our business model remain intact as clearly evidenced by our continued profitability and strong balance sheet. Notably, we had approximately RMB3.9 billion of cash and short-term liquidity, and our quality assurance fund remain sufficiently funded and the total balance of the fund is approximately RMB3.6 billion, equivalent to 17.8% of the total outstanding loans protected by the fund. We don’t have concerns for liquidity on our plarform due to our unique funding structure and relatively short loan tenor.”

Operating revenues for the second quarter of 2018 slightly decreased to RMB1,047.3 million (US$158.3 million) from RMB1,064.9 million in the same period of 2017, primarily due to lower average transaction fee rate for the quarter. As a result of the adoption of the ASC 606 effective January 1, 2018, revenue is generally recognized earlier in the life of the contract as there is no contingency revenue cap under the new standard. For the three months ended June 30, 2018, the impact of applying the new revenue standard resulted in an increase of approximately RMB160.3 million (US$24.2 million) in revenues.

Loan facilitation service fees decreased by 7.1% to RMB753.3 million (US$113.8 million) for the second quarter of 2018 from RMB810.8 million in the same period of 2017, primarily due to lower average transaction fee rate in the second quarter of 2018.⁹ The average rate of transaction fees charged to borrowers was 6.31% in the period, compared to 6.32% in the first quarter of 2018 and 6.83% in the second quarter of 2017. Loan collection fees of RMB72.7 million (US$11.0 million) have been allocated from other revenue to loan facilitation services fees related to the adoption of ACS 606 effective January 1, 2018.

Post-facilitation service fees increased by 31.8% to RMB205.9 million (US$31.1 million) for the second quarter of 2018 from RMB156.2 million in the same period of 2017, due to the rolling impact of deferred transaction fees and the adoption of ASC 606 effective January 1, 2018. Loan collection fees of RMB26.3 million (US$4.0 million) have been allocated from other revenue to post facilitation service fees related to the adoption of ASC 606.

Other revenue decreased by 9.9% to RMB88.2 million (US$13.3 million) for the second quarter of 2018 from RMB97.9 million in the same period of 2017, primarily due to the adoption of ASC 606, effective January 1, 2018, offset by an increase in management fees from investment programs that invest in loans protected by the quality assurance fund.

Net interest income and loan provision losses for the second quarter of 2018 was a gain of RMB12.5 million (US$1.9 million), compared to a gain of RMB1.0 million in the same period of 2017, mainly due to the increased number of trusts established for the purpose of serving institutional investors.

Origination and servicing expenses increased by 13.3% to RMB234.7 million (US$35.5 million) for the second quarter of 2018 from RMB207.0 million in the same period of 2017, primarily due to an increase in fees paid to third-party providers for loan collection and technology services.

Sales and marketing expenses increased by 3.8% to RMB194.3 million (US$29.4 million) for the second quarter of 2018 from RMB187.2 million in the same period of 2017, primarily due to the increase in expenses associated with online customer acquisition and brand enhancement.

General and administrative expenses increased by 38.7% to RMB161.5 million (US$24.4 million) for the second quarter of 2018 from RMB116.5 million in the same period of 2017, primarily due to the increase in research and development cost. General and administrative expenses for the period included share-based compensation of RMB17.8 million (US$2.7 million).

Operating income decreased by 15.5% to RMB469.3 million (US$70.9 million) for the second quarter of 2018 from RMB555.3 million in the same period of 2017.

Non-GAAP adjusted operating income, which excludes share-based compensation expenses before tax, was RMB487.1 million (US$73.6 million) for the second quarter of 2018, representing a decrease of 12.3% from RMB555.3 million in the same period of 2017.

Other income was RMB296.5 million (US$44.8 million) for the second quarter of 2018, compared with RMB193.2 million in the same period of 2017. Other income primarily consisted of a gain of RMB151.1 million (US$22.8 million) from the quality assurance fund resulting from the increase in loans facilitated on the Company’s platform that are protected by the quality assurance fund, a gain of RMB196.5 million (US$29.7 million) from fair value change of financial guarantee derivatives due to an improvement in the expected default rate for loans invested by outstanding investment programs protected by the investor reserve funds, offset by a realized loss of RMB101.9 million (US$15.4 million) from financial guarantee derivatives due to the amount of investment programs maturing during the period. The Company re-evaluates the fair value of outstanding financial guarantee derivatives at each balance sheet date to reflect the views of market participants on the expected default rate based on the latest market changes. For the second quarter of 2018, RMB14.3 billion of loans facilitated on the Company’s platform were protected by the quality assurance fund.

Income tax expenses were RMB158.0 million (US$23.9 million) for the second quarter of 2018, compared with RMB116.7 million in the same period of 2017 due to the higher effective tax rate adopted for a software subsidiary which was established in the second half of 2017.

Net profit decreased by 3.8% to RMB607.8 million (US$91.8 million) for the second quarter of 2018 from RMB631.8 million in the same period of 2017.

Net profit attributable to ordinary shareholders of the Company was RMB606.6 million (US$91.7 million) for the second quarter of 2018, compared with net loss attributable to ordinary shareholders of RMB122.8 million in the same period of 2017 due to the accretion losses on the Company’s Series A, B and C preferred shares in the second quarter of 2017.

As of June 30, 2018, the Company had cash and cash equivalents of RMB2,485.1 million (US$375.6 million) and short-term investments mainly in wealth management products of RMB1,440.5 million (US$217.7 million).

The total balance of the quality assurance fund, which includes restricted cash of RMB1,564.8 million (US$236.5 million) and the quality assurance fund receivable of RMB2,043.4 million (US$308.8 million), was equivalent to 17.8% of the total outstanding loans protected by the quality assurance fund.

⁹ Beginning in the second quarter 2018, the calculation of average transaction fee rate excludes loans originated on PPDAI’s platform where transaction fees are not applicable.

The following table provides the delinquency rates for all outstanding loans on the Company’s platform as of the respective dates indicated.

The following chart and table display the historical cumulative 30-day plus past due delinquency rates by loan origination vintage for all continuing loan products facilitated through the Company’s online marketplace.

	Month on Book
Vintage	2^nd	3^rd	4^th	5^th	6^th	7^th	8^th	9^th	10^th	11^th	12^th
2015Q1 . . . .	1.95%	2.75%	3.46%	3.98%	4.36%	4.58%	4.67%	4.69%	4.73%	4.76%	4.74%
2015Q2 . . . .	1.74%	2.66%	3.38%	3.75%	4.02%	4.15%	4.30%	4.38%	4.45%	4.46%	4.46%
2015Q3 . . . .	1.46%	2.13%	2.70%	3.15%	3.47%	3.68%	3.77%	3.85%	3.93%	4.01%	4.02%
2015Q4 . . . .	1.54%	2.27%	2.88%	3.17%	3.53%	3.77%	3.97%	4.12%	4.26%	4.32%	4.33%
2016Q1 . . . .	1.00%	1.57%	2.21%	2.82%	3.33%	3.77%	4.09%	4.33%	4.45%	4.57%	4.59%
2016Q2 . . . .	1.75%	2.49%	3.21%	3.77%	4.17%	4.39%	4.59%	4.76%	4.88%	4.94%	4.96%
2016Q3 . . . .	1.67%	2.45%	2.96%	3.47%	3.87%	4.11%	4.27%	4.44%	4.59%	4.70%	4.77%
2016Q4 . . . .	1.29%	2.07%	2.66%	3.15%	3.59%	3.97%	4.32%	4.62%	4.88%	5.07%	5.18%
2017Q1 . . . .	1.20%	2.01%	2.68%	3.32%	3.87%	4.33%	4.68%	4.98%	5.33%	5.61%	5.80%
2017Q2 . . . .	1.72%	2.89%	3.81%	4.55%	5.14%	5.78%	6.32%	6.79%	7.05%	7.19%	7.24%
2017Q3 . . . .	1.82%	2.93%	4.08%	5.16%	6.13%	6.64%	6.88%	7.04%	—	—	—
2017Q4 . . . .	2.51%	4.12%	5.16%	5.68%	5.97%	—	—	—	—	—
2018Q1 . . . .	1.35%	2.18%	—

The Board of Directors of the Company (the “Board”) has approved the appointment of Mr. Kai Deng as a member of the Board and a member of the compensation committee of the Board, effective immediately. Mr. Nanpeng Shen will step down from the Board with immediate effect.

Mr. Kai Deng is an associate with Sequoia Capital China and focuses on financial services and other TMT sector investments. Prior to joining Sequoia in 2015, Mr. Deng served as a consultant and a manager at Ernst & Young from 2007 to 2014. Mr. Deng received his bachelor’s degree in Accounting from Peking University and is also a member of the Chinese Institute of Certified Public Accounts.

The Company’s management will host an earnings conference call at 8:00 AM U.S. Eastern Time on August 22, 2018 (8:00 PM Beijing/Hong Kong time on August 22, 2018).

Participants should dial-in at least 5 minutes before the scheduled start time and ask to be connected to the call for “PPDAI Group.”

Additionally, a live and archived webcast of the conference call will be available on the Company's investor relations website at http://ir.ppdai.com.

A replay of the conference call will be accessible approximately one hour after the conclusion of the live call until August 29, 2018, by dialing the following telephone numbers:

PPDAI is a leading online consumer finance marketplace in China with strong brand recognition. Launched in 2007, the Company is the first online consumer finance marketplace in China connecting borrowers and investors. As a pioneer in China’s online consumer finance marketplace, the Company benefits from both its early-mover advantages and the invaluable data and experience accumulated throughout multiple complete loan lifecycles. The Company’s platform, empowered by its proprietary, cutting-edge technologies, features a highly automated loan transaction process, which enables a superior user experience, as evidenced by the rapid growth of the Company’s user base and loan origination volume. As of June 30, 2018, the Company had over 78 million cumulative registered users.

We use Non-GAAP operating income, a Non-GAAP financial measure, in evaluating our operating results and for financial and operational decision-making purposes. We believe that adjusted operating income help identify underlying trends in our business by excluding the impact of share-based compensation expenses and expected discretionary measures. We believe that adjusted operating income provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.

Non-GAAP adjusted operating income is not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. This Non-GAAP financial measure has limitations as analytical tools, and when assessing our operating performance, cash flows or our liquidity, investors should not consider them in isolation, or as a substitute for net (loss)/income, cash flows provided by operating activities or other consolidated statements of operation and cash flow data prepared in accordance with U.S. GAAP. The Company encourages investors and others to review our financial information in its entirety and not rely on a single financial measure.

For more information on this Non-GAAP financial measure, please see the table captioned "Reconciliations of GAAP and Non-GAAP results" set forth at the end of this press release.

This announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.6171 to US$1.00, the rate in effect as of June 29, 2018 as certified for customs purposes by the Federal Reserve Bank of New York.

This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “target,” “confident” and similar statements. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company’s control. Forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from those contained in any such statements. Potential risks and uncertainties include, but are not limited to, uncertainties as to the Company's ability to attract and retain borrowers and investors on its marketplace, its ability to increase volume of loans facilitated through the Company’s marketplace, its ability to introduce new loan products and platform enhancements, its ability to compete effectively, laws, regulations and governmental policies relating to the online consumer finance industry in China, general economic conditions in China, and the Company’s ability to meet the standards necessary to maintain listing of its ADSs on the NYSE, including its ability to cure any non-compliance with the NYSE's continued listing criteria. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is as of the date of this press release, and PPDAI does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

In China:
PPDAI Group Inc.
Jimmy Tan / Sally Huo
Tel: +86 (21) 8030 3200-8601
E-mail: ir@ppdai.com

	As of December 31,			As of June 30,
	2017			2018
	RMB			RMB			USD
Assets
Cash and cash equivalents		1,891,131			2,485,054			375,550
Restricted cash		2,392,573			2,361,996			356,953
Short-term investments		1,958,910			1,440,540			217,700
Available for sale securities		3,377			4,935			746
Quality assurance fund receivable		1,152,769			2,043,394			308,805
Intangible asset		63,760			64,280			9,714
Property, equipment and software, net		108,248			131,322			19,846
Loans receivable, net of provision for loan losses		681,794			784,299			118,526
Investment in equity investees		8,857			12,872			1,945
Accounts receivable		17,773			473,660			71,581
Deferred tax assets		128,361			50,406			7,617
Financial guarantee derivative assets	-				52,303			7,904
Contract asset	-				76,013			11,487
Prepaid expenses and other assets		145,699			146,128			22,083
Goodwill		50,411			50,411			7,618
Total assets		8,603,663			10,177,613			1,538,075
Liabilities and Shareholders’ Equity
Payable to platform customers		1,113,966			688,967			104,119
Quality assurance fund payable		2,062,844			3,248,858			490,979
Deferred revenue		265,094		-			-
Payroll and welfare payable		156,831			113,888			17,211
Taxes payable		257,143			307,055			46,403
Provision for payment to investor reserve fund investor		107,660			107,660			16,270
Short-term borrowing loan	-				29,950			4,526
Funds payable to investors of consolidated trusts		502,641			437,728			66,151
Contract liability	-				154,792			23,393
Due to related party		11,972			2,023			306
Deferred tax liabilities		15,940			15,940			2,409
Accrued expenses and other liabilities		211,614			241,210			36,453
Financial guarantee derivative liabilities		215,770		-			-
Total liabilities		4,921,475			5,348,071			808,220
Commitments and contingencies
PPDAI Group Inc. Shareholders’ deficits
Ordinary shares		100			102			15
Additional paid-in capital		5,951,044			5,866,091			886,505
Treasury stock	-				(2	)	-
Statutory reserves		55,090			55,090			8,325
Accumulated other comprehensive income		14,917			25,372			3,834
Accumulated deficit		(2,398,984	)		(1,176,885	)		(177,857	)
Total PPDai Group Inc. shareholders’ equity		3,622,167			4,769,768			720,822
Non-controlling interest		60,021			59,774			9,033
Total shareholders' equity		3,682,188			4,829,542			729,855
Total liabilities and shareholders’ equity		8,603,663			10,177,613			1,538,075

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	For the Three Months Ended June 30,									For the Six Months Ended June 30,
	2017			2018						2017			2018
	RMB			RMB			USD			RMB			RMB			USD

Operating revenues:
Loan facilitation service fees		810,792			753,260			113,835			1,316,136			1,374,069			207,654
Post-facilitation service fees		156,178			205,866			31,111			241,576			433,030			65,441
Other Revenue		97,925			88,214			13,331			175,695			157,021			23,730
Total operating revenues		1,064,895			1,047,340			158,277			1,733,407			1,964,120			296,825
Net interest income and loan provision losses		984			12,462			1,883			1,449			39,453			5,962
Net revenues		1,065,879			1,059,802			160,160			1,734,856			2,003,573			302,787
Operating expenses:
Origination and servicing expenses-related party		(19,617	)		(27,557	)		(4,165	)		(35,554	)		(52,890	)		(7,993	)
Origination and servicing expenses		(187,404	)		(207,093	)		(31,297	)		(344,873	)		(428,859	)		(64,811	)
Sales and marketing expenses		(187,150	)		(194,309	)		(29,365	)		(324,357	)		(345,372	)		(52,194	)
General and administrative expenses		(116,452	)		(161,495	)		(24,406	)		(193,570	)		(307,034	)		(46,400	)
Total operating expenses		(510,623	)		(590,454	)		(89,233	)		(898,354	)		(1,134,155	)		(171,398	)
Other income (expenses)
Gain from quality assurance fund		47,656			151,089			22,833			146,439			210,832			31,862
Realized gain (loss) from financial guarantee derivatives		36,078			(101,885	)		(15,397	)		99,639			(147,107	)		(22,231	)
Fair value change of financial guarantee derivatives		101,402			196,543			29,702			144,747			268,073			40,512
Other income, net		8,109			50,748			7,669			11,578			96,776			14,625
Profit before income tax expense		748,501			765,843			115,734			1,238,905			1,297,992			196,157
Income tax expenses		(116,701	)		(158,049	)		(23,885	)		(190,305	)		(252,634	)		(38,179	)
Net profit		631,800			607,794			91,849			1,048,600			1,045,358			157,978
Net profit (loss) attributable to non-controlling interest shareholders	-				1,235			187		-				(247	)		(37	)
Net profit attributable to PPDai Group Inc.	631,800				606,559			91,662			1,048,600			1,045,605			158,015
Accretion on Series A convertible redeemable preferred shares to redemption value		(340,016	)	-			-				(620,026	)	-			-
Accretion on Series B convertible redeemable preferred shares to redemption value		(219,882	)	-			-				(424,146	)	-			-
Accretion on Series C convertible redeemable preferred shares to redemption value		(194,676	)	-			-				(412,314	)	-			-
Net profit (loss) attributable to ordinary shareholders		(122,774	)		606,559			91,662			(407,886	)		1,045,605			158,015
Net profit attributable to PPDai Group Inc.		631,800			606,559			91,662			1,048,600			1,045,605			158,015
Foreign currency translation adjustment, net of nil tax		40,806			51,751			7,821			49,141			10,455			1,580
Total comprehensive income attributable to PPDAIGroup Inc.		672,606			658,310			99,483			1,097,741			1,056,060			159,595
Weighted average number of ordinary shares used in computing net income/(loss) per share
Basic		665,000,000			1,505,581,042			1,505,581,042			665,000,000			1,504,315,031			1,504,315,031
Diluted		665,000,000			1,621,402,274			1,621,402,274			665,000,000			1,612,638,809			1,612,638,809
Income (loss) per share -Basic		(0.1847	)		0.4029			0.0609			(0.6134	)		0.6951			0.1050
Income (loss) per ADS-Basic		(0.9236	)		2.0144			0.3044			(3.0668	)		3.4754			0.5252
Income (loss) per share -Diluted		(0.1847	)		0.3741			0.0565			(0.6134	)		0.6484			0.0980
Income (loss) per ADS-Diluted		(0.9236	)		1.8705			0.2827			(3.0668	)		3.2419			0.4899

	As of
	June 30, 2017	March 31, 2018	June 30, 2018
Cumulative registered users¹(’000)	48,300	71,424	78,144
Cumulative number of borrowers²(’000)	6,919	11,282	12,409
Cumulative number of individual investors³	461,651	581,977	613,653

	For the Three Months Ended		YoY Change
	June 30, 2017	June 30, 2018
Number of unique borrowers⁴(’000)	3,823	3,252	-14.9%
Loan origination volume⁵ (RMB, million)	16,504	16,761	1.6 %
Repeat borrowing rate⁶(%)	68.3%	73.3%	7.3%
Average loan size⁷ (RMB)	2,284	3,212	40.6%

As of	15-29 days	30-59 days	60-89 days	90-119 days	120-149 days	150-179 days
March 31, 2015	0.79%	1.75%	1.10%	1.01%	0.87%	0.67%
June 30, 2015	0.88%	1.06%	0.67%	0.54%	0.89%	0.67%
September 30, 2015	0.67%	0.89%	0.61%	0.54%	0.44%	0.35%
December 31, 2015	0.80%	0.93%	0.51%	0.49%	0.39%	0.32%
March 31, 2016	0.62%	0.93%	0.72%	0.61%	0.48%	0.32%
June 30, 2016	0.82%	1.01%	0.63%	0.43%	0.47%	0.44%
September 30, 2016	0.83%	1.11%	0.80%	0.63%	0.49%	0.39%
December 31, 2016	0.63%	0.91%	0.75%	0.79%	0.69%	0.57%
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%	2.11%	2.43%	3.83%	2.29%	1.89%
June 30, 2018	0.83%	1.21%	1.05%	0.98%	1.60%	2.03%


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	Three Months Ended June 30									Six Months Ended June 30,
	2017			2018						2017			2018
	RMB			RMB			USD			RMB			RMB			USD
Net cash provided by operating activities		775,790			152,204			23,001			1,890,002			240,294			36,314
Net cash provided by (used in) investing activities		286,690			716,167			108,230			(78,463	)		489,418			73,963
Net cash used in financing activities		(31,250	)		(110,254	)		(16,662	)		(32,000	)		(174,226	)		(26,329	)
Effect of exchange rate changes on cash and cash equivalents		(148	)		48,988			7,403			(288