AHG — Akso Health Group

Summary of Hexindai Q1 2020 Earnings Call

1. Key Financial Results and Metrics

• Net Revenue: $4.9 million, a significant decrease of 90.5% year-over-year.
• Loan Volume Facilitated: $28.2 million, down from $2.9 billion in the same period last year.
• Operating Costs: $12.6 million, down 18.9% year-over-year, primarily due to reduced sales and marketing expenses.
• Net Loss: $7.2 million, compared to a net income of $29.7 million in Q1 2019.
• Earnings Per Share: Basic and diluted loss per share of $0.15, compared to earnings of $0.62 and $0.56, respectively, in the prior year.
• Adjusted Net Loss: $7 million, down from an adjusted net income of $29.9 million last year.

2. Strategic Updates and Business Highlights

• The company is transitioning from a P2P lending model to a loan assistance business due to a challenging regulatory environment.
• Hexindai is focusing on partnerships with financial institutions to diversify funding sources, with institutional partners accounting for about 20% of total loans facilitated in Q1.
• The company aims for institutional funding to represent approximately 80% of loans facilitated in 2020.
• The loan assistance business is expected to leverage Hexindai's experience in borrower acquisition and risk management.

3. Forward Guidance and Outlook

• Management expresses confidence in the loan assistance business as a driver of future growth, regardless of regulatory changes affecting the P2P sector.
• The company plans to continue expanding partnerships with licensed financial institutions to enhance funding sources and operational stability.

4. Bad News, Challenges, or Points of Concern

• The P2P business remains under pressure, with ongoing regulatory uncertainty impacting market conditions.
• The significant year-over-year decline in revenue and loan volume raises concerns about the sustainability of the current business model.
• The ramp-up period for the new loan assistance business has not yet compensated for the decline in P2P operations, indicating potential short-term challenges.

5. Notable Q&A Insights

• Borrower Acquisition: 42% of borrowers were acquired online in Q1, with expectations for this percentage to increase as the loan assistance business develops.
• Advantages of Loan Assistance: Compared to P2P, the loan assistance business benefits from strong institutional demand and a clearer regulatory framework.
• Share Repurchase Program: The company has repurchased approximately 1.2 million ADS for about $4 million, signaling confidence in long-term growth.
• Regulatory Compliance: Hexindai is compliant with new regulations requiring connections to the Credit Reference Center, having established a relationship with Baihang Credit.

Overall, while Hexindai is navigating a challenging transition period with significant declines in key financial metrics, management is optimistic about the future growth potential of its loan assistance business and its ability to adapt to regulatory changes.