9F Expands Client Base but Stock Slides 4% on Earnings Drop

The company has been shifting its business to a capital-light model and diversifying its verticals as it copes with challenges in China's financing sector.

Anna Vodopyanova
    Dec 05, 2019 7:20 AM  PT
9F Expands Client Base but Stock Slides 4% on Earnings Drop
author: Anna Vodopyanova   

9F Inc.'s (Nasdaq: JFU) stock slipped 38 cents on Thursday morning despite posting solid revenue growth and soaring loan origination volume in the third quarter.

In a statement today, the financial account platform said it facilitated $3 billion worth of loan transactions in the three months through September, at a 254% increase from a year ago. It served a million more active borrowers than during the third quarter of 2018, a total of 1.4 million, according to the report.

9F said its revenue reached $238.6 million, up 81% year-over-year. Net income, however, declined to $1.5 million, or 1 cent per share, from $33.6 million a year ago.

In response to the news, the stock in 9F took a 4% dive to $9.72 per American depositary share at the start of the trading day.

The company has focused on user acquisition during the third quarter, which drove its sales and marketing expenses up 126% to $108.2 million. Its origination and servicing expenses grew 344%, attributed to the business transition. Total operating costs and expenses reached $239.8 million, according to the report.

"We continue to transition our business towards a more capital light model through the implementation of our Technology Enablement Strategy to ensure we are ideally positioned to adapt to whatever regulatory environment finally emerges and are able to generate long-term sustainable growth," 9F's chairman and chief executive, Lei Sun, said in the statement.

China's financing sector has been coping with regulatory challenges over the past few years as Beijing attempted to limit fraud. Many peer-to-peer lenders that have bloomed previously on small consumer credit, which banks failed to provide, went out of business or shifted to other means. Some, like 9F, have transitioned in part to institutional funding and expanded its service offerings in other verticals.

In the third quarter, the company launched 9F Superbrain, powered by artificial intelligence, cloud and blockchain technology to provide its financial institution and merchant partners with "highly customized modularized service packages," Sun said.

9F also said it plans to expand the SaaS version of 9F Superbrain into Southeast Asia and other international markets.

Sun also shared the company's other overseas growth strategies. He said, "We are exploring opportunities that relate to consumption verticals such as online retail, travel and beauty and social media, as we enable merchant partners to seamlessly offer financial services to their consumers."

While 9F is based in Beijing, in the third quarter it has established a research and development center in Shenzhen, according to the report. Sun said the center aims "to build an artificial intelligence and risk management team that is dedicated in streamlining our support for overseas markets, strengthening our risk management capabilities, and developing new and innovative modules and applications for our overall business development."

During the third quarter, 9F became publicly traded in New York, raising $85 million for its 8.9 million ADSs. Since IPO, its stock has been trading near or above the offering price of $9.5 per share.

In the fourth quarter, 9F said it expects to see loan origination volume of between 13 billion yuan to 14 billion yuan. For the full year, it targets to facilitate between 53.9 billion yuan and 54.9 billion yuan in loans.