Fincera Reports 2018 Year End Financial Results Highlighted by Record Loan Transaction Volume; Declares First Semi-Annual Dividend of US$0.30 per share

SHIJIAZHUANG, HEBEI PROVINCE, CHINA / ACCESSWIRE / April 30, 2019 / Fincera Inc. (”Fincera” or the ”Company”) (OTCQB: YUANF), a leading provider of internet-based financing and ecommerce services for small and medium-sized businesses (”SMBs”) and individuals in China, today reported financial results for the year ended December 31, 2018.

Full-year 2018 Financial Highlights

  • Income (revenue) for the year ended December 31, 2018 was RMB1,412.0 million (US$205.7 million), an increase of RMB388.1 million from RMB1,023.9 million in the prior year period, as a result of the ramp-up of the Company’s internet-based business segment.
  • Net income improved to RMB274.8 million (US$40.0 million) in the year ended December 31, 2018, or RMB5.45 per diluted share (US$0.79 per diluted share), compared to a net loss of RMB8.4 million, or RMB0.18 per diluted share in the prior-year.

Dividend Announcement
Fincera is pleased to announce plans to pay its shareholders a cash dividend semi-annually.

On April 24, 2019, the Company’s Board of Directors approved a cash dividend of US$0.30 per share, payable on or about May 22, 2019 to shareholders of record as of the close of business on May 10, 2019. Although the Company has paid special dividends in the past, this marks the first time that Fincera plans to pay a dividend twice per year going forward.

Operational Highlights
Loan transaction volume across all loan types for 2018 totaled approximately RMB27.9 billion (US$4.1 billion), an increase of approximately 3.9% compared to approximately RMB26.8 billion in 2017.

Operating Review
CeraVest, known as Qingyidai (轻易贷) in China, is the Company’s proprietary peer-to-peer lending platform through which it offers SMBs short-term financing at competitive interest rates. Fincera offers three loan types to its customers, 180-day term loans (the Company’s primary focus), 30-day lines of credit, and installment loans via its CeraVest platforms.

(in millions)
For the Year Ended
Transaction Volume
December 31, 2018
December 31, 2017
Amount
Amount
% Change
RMB
RMB
180-day term loans
12,000
5,819
106.2
%
30-day credit lines
12,916
16,958
(23.8
%)
Installment loans
2,939
4,031
(27.1
%)
Total
27,855
26,808
3.9
%

180-Day Term Loans (”Qingying”)
Fincera facilitates 180-day term loans that accrue interest at 4.25% (or 8.62% on an annualized basis) and are branded as Qingying. Fincera charges a facilitation fee between 3-5% depending on the type of the loan. The fee portion is collected by the Company while the investor holding the loan at maturity receives the entirety of the interest payments. In addition, the borrower remits 10.0% of the principal loan balance to the Company as a security deposit that is refunded to the borrower upon timely repayment of principal and interest. Payment of principal and interest is due in a lump sum at the maturity date at the end of the 180-day term. Outstanding balances after the maturity date are considered delinquent. In the event of delinquency, the Company will keep the security deposit as a one-time penalty fee and may assess additional penalties.

As of December 31, 2018, the Company has facilitated an aggregate of RMB24.9 billion (US$3.6 billion) in 180-day term loans.

During 2018, Fincera facilitated RMB12.0 billion (US$1.7 billion) in Qingying 180-day term loans.

30-day Lines of Credit (”Yueying”)
Fincera facilitates revolving credit lines that are interest-free to SMBs to fund their short-term working capital needs. Branded as Yueying, these credit lines have a 30-day billing cycle. Outstanding balances after the bill due date are considered delinquent and subject to certain penalties.

Similar to credit cards, Fincera’s credit lines contain no fees for borrowers as long as any outstanding balances are paid in full each month. A fee is charged to the merchants where the credit lines are used of between 1.6-2.2%. When the credit line is successfully facilitated by the Company’s online peer-to-peer (P2P) platform, which is called Qingyidai, Fincera collects a portion of this fee as facilitation fee income. The remainder of the fee goes to the investor in the loan.

Credit line users are subject to an application and credit approval process and are required to provide guarantees and collateral. Merchants may use funds received from users to make payments to other users or merchants, or to cash out the funds via transfer to a bank account. For certain payments, such as driver salary payments, a fee is charged to the borrower instead of to the merchant, since the merchant in these scenarios typically will not accept paying a fee for such a transaction.

As of December 31, 2018, the Company has facilitated an aggregate of RMB59.2 billion (US$8.6 billion) in 30-day lines of credit transactions.

During 2018, Fincera facilitated RMB12.9 billion (US$1.9 billion) in Yueying 30-day lines of credit transactions.

Installment Loans (”Zhongying”)
Fincera facilitates installment loans, branded as Zhongying, that are utilized by borrowers primarily to fund purchases of trucks and consumer discretionary goods and services, with the borrowed purchase funds being transferred directly to the merchant via Fincera’s payment network. Based on the term of the loan and the type of purchase, Fincera charges the merchants where the funds are used a fee of between 6.5%-8.9% on the transaction. Similar to Yueying, when the loan is successfully facilitated by the Company’s online P2P platform, Fincera collects a portion of this fee as facilitation fee income. The remainder of the fee goes to the investor of the loan in the form of interest payments. The loans require some borrowers to provide collateral to partially secure their obligations. Terms of these installment loans may vary between three and 24 months; however, the majority of the installment loans carry a term of 12 months.

As of December 31, 2018, the Company has facilitated an aggregate RMB7.0 billion (US$1.0 billion) in installment loans.

In 2018, Fincera facilitated RMB2.9 billion (US$0.4 billion) in Zhongying installment loans.

New Broker Network Business Model
During the fourth quarter of 2018, Fincera converted its existing wholly owned store distribution network into a broker distribution network that is not owned by the Company. Fincera believes there are many advantages to making its distribution network independently owned and operated.

The broker distribution network operates under a revenue sharing arrangement where predetermined amounts of revenues are shared with the brokers. In addition, since the new distribution network is owned by third-parties, Fincera is no longer responsible for funding its operating costs. The Company believes that the broker network will provide greater incentive to the brokers than before, when the associated personnel were direct employees of the Company. Overall, the Company believes that the change will result in increased efficiency and profitability for Fincera.

As of December 31, 2018, the Company’s borrowers consisted of 21.1% companies and 78.9% individuals.

Management Commentary
Mr. Jason Wang, CFO of Fincera, stated, ”Fincera reported exceptional financial results during 2018, which is largely due to the continued growth and brand recognition of our online lending platform. We are pleased to have achieved record loan transaction volume during a time of industry-wide anxiety due to uncertainty about future government regulations. We believe we are one of the few, if not only P2P platforms in China that have established a strong reputation as a valuable partner to small and medium-sized business customers, as well as the investors who trust in our ability to properly underwrite in order to protect their money. We have successfully navigated changes within the P2P industry in China and support the government’s initiatives towards properly overseeing the marketplace. We believe our risk management efforts have Fincera well positioned to take advantage of the ongoing ‘flight toward quality’ in our industry.”

2018 Financial Results

Currency Conversion
This release contains approximate translations of certain RMB amounts into US$ for convenience. Unless otherwise noted, all translations from RMB to US$ are made at a rate of USD1.00 = RMB6. 8632 on December 31, 2018, representing the certificated exchange rate published by the People’s Bank of China’s Monetary Policy Division. No representation is intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into US$ at such rate, or at any other rate.

Income (Revenues)
The table below sets forth certain line items from the Company’s Consolidated Statement of Income as a percentage of income:

(RMB in thousands)
Year ended
December 31,
2018
Year ended
December 31,
2017
Amount
% of Revenue
Amount
% of Revenue
Y-O-Y % CHANGE
RMB
RMB
Facilitation fees
658,686
46.6
%
231,709
22.6
%
184.3
%
Interest income
194,855
13.8
%
310,289
30.3
%
(37.2
%)
Service charges
19,396
1.4
%
201,386
19.7
%
(90.4
%)
Property lease and management
212,026
15.0
%
192,221
18.8
%
10.3
%
Other income
123,644
8.8
%
72,600
7.1
%
70.3
%
Debt assignment income
203,409
14.4
%
15,646
1.5
%
1,200.1
%
Total income
1,412,016
100.0
%
1,023,851
100.0
%
37.9
%

  • Income for the year ended December 31, 2018 was RMB1,412.0 million (US$205.7 million), an increase of RMB388.1 million from RMB1,023.9 million in the prior year period, as a result of the ramp-up of the Company’s internet-based business segment and the significant increasing sales of delinquent loans to third parties.
  • Facilitation fees, which represent fees charged for matching borrowers with investors on our CeraVest platform, totaled RMB658.7 million (US$96.0 million) in the year ended December 31, 2018. Facilitation fees emerged in July 2017 when Fincera re-developed its loan transaction process to comply with online lending regulations.
  • Interest income, which mainly represents interest earned on loans to CeraVest borrowers and loans to other borrowers, totaled RMB194.9 million (US$28.4 million) in the year ended December 31, 2018, a decrease of RMB115.4 million compared to the prior year mainly due to the reduction of origination fees. During the year 2017, interest income included the loan origination fee which was collected from borrowers. Origination fees were deducted from >the loan balance and amortized as interest income over the contract term. The Company no longer has such revenue after the change of its loan transaction process beginning in July 2017.
  • Service charges, which represents CeraPay’s transaction fees, totaled RMB19.4 million (US$2.8 million) in the year ended December 31, 2018, a decrease of RMB182.0 million compared to the prior year. Since July 2017, CeraPay loan transactions have been facilitated through its peer-to-peer lending platform; as a result, the service charges under the previous transaction process are now allocated instead as facilitation fee to the Company and as interest payable to investors of each loan once the facilitation is successful. Thus, the Company has not had this revenue item to report since the third quarter of 2018.
  • Property lease and management revenues, which represent the revenues of the property lease and management business, consisting of revenue derived from the Kaiyuan Finance Center, which includes the Shijiazhuang Hilton Hotel and office leasing operations, totaled RMB212.0 million (US$30.9 million) in the year ended December 31, 2018. This represents an increase of 10.3% compared to the prior year. During the year ended December 31, 2018, revenues of the Shijiazhuang Hilton Hotel were approximately RMB137.0 million (US$20.0 million), compared to RMB133.7 million during the prior year, representing an increase of 2.0%. Office leasing revenues were approximately RMB75.0 million (US$10.9 million), compared to RMB58.5 million during the prior year, representing an increase of 28.0%, due to higher occupancy rates of 95.0% the Kaiyuan Finance Center during the year ended December 31, 2018, as compared to 78.0% during the year ended December 31, 2017 as the Company continued improving the property management service and providing more competitive lease rates.
  • Debt assignment income, which represents the receipts of fees when delinquent loans are sold to third parties, totaled RMB203.4 million (US$29.6 million) in the year ended December 31, 2018, an increase of RMB 187.8 million when compared 2017, which was due to a significant increase in sales of delinquent loans to third parties.

Other income, which mainly consists of penalty and late fees across all loan types and is reduced by redeemed cash incentives that the Company provides to investors, totaled RMB123.6 million (US$18.0 million) in the year ended December 31, 2018, an increase of RMB51.0 million compared to the prior year, which was due to the strengthening of collection efforts and offset by an increase in redeemed cash incentives during 2018.

Operating Costs and Expenses

  • The Company’s operating costs and expenses decreased approximately 0.2% to RMB1,033 million (US$150.6 million) for the year ended December 31, 2018, from RMB1,035 million in the prior-year period. Interest expense decreased significantly as a result of the Company’s change to its new business model in July 2017 in response to new regulations in China. Under the new business model, loans that are successfully subscribed by investors on the Company’s peer-to-peer lending platform are derecognized from the Company’s balance sheet.

Net Income

  • Net income improved to RMB274.8 million (US$40.0 million) in the year ended December 31, 2018, or RMB5.45 per diluted share (US$0.79 per diluted share), compared to a net loss of RMB8.4 million, or 0.18 per diluted share in the prior-year.

Balance Sheet Data / Highlights

(in thousands, except per share amounts)
2018

2018

2017

USD

RMB

RMB

Cash and cash equivalents
144,902
994,489
1,123,296
Restricted cash
104
714
127,762
Total current assets
493,327
3,385,799
5,151,057
Total assets
720,401
4,944,255
6,753,504
Total current liabilities
593,838
4,075,631
6,046,590
Total liabilities
667,419
4,580,631
6,873,117
Total stockholders’ equity (deficit)
52,982
363,624
(119,613
)
Total shares outstanding
48,908,860
48,908,860
47,531,799

At December 31, 2018, Fincera’s cash and cash equivalents (not including restricted cash) were RMB994.5 million (US$144.9 million), compared to RMB1.1 billion at December 31, 2017.

Other financing receivables were RMB11.9 million (US$1.7 million) at December 31, 2018, compared to RMB1.9 billion at December 31, 2017, due to a change in business model made in July 2017 in order to comply with regulations in which certain loans became facilitated on the Company’s peer-to-peer lending platform and therefore no longer recognized as other financing receivables on the Company’s balance sheet.

Total liabilities were RMB4.6 billion (US$667.4 million) and stockholders’ equity was RMB363.6 million (US$53.0 million), compared to RMB6.9 billion and negative RMB119.6 million, respectively, at December 31, 2017. The increase in stockholders’ equity was primarily a result of net income earned during 2018 and a transaction into which the Company entered to exchange debt for equity during the first quarter of 2018. During the first quarter of 2018, the Company issued RMB188.6 million (or US$30.0 million at the time of the transaction) in shares to Mr. Yong Hui Li, its Chairman and CEO, as repayment of certain debts. The repayment consisted of an RMB22.0 million (or US$3.5 million at the time of the transaction) partial repayment of a loan Mr. Li had previously provided to the Company in March 2017 and payment of RMB166.6 million (or US$26.5 million at the time of the transaction) still owed to Mr. Li from the US$2.00 per share dividend the Company declared in June 2017. The resulting issuance of 1.32 million shares was calculated using the trailing 90 trading day average price of US$22.71 per share.

About Fincera Inc.
Founded in 2005, Fincera Inc. (OTCQB: YUANF) provides innovative internet-based financing and ecommerce services for small and medium-sized businesses and individuals in China. The Company works with a network of brokers in 31 provinces, municipalities, and autonomous regions across China. Fincera’s primary service offerings include a credit advance/online payment-processing network and a web-based small business lending platform. The Company’s website is http://www.fincera.net. Fincera trades on the OTCQB venture stage marketplace for early stage and developing U.S. and international companies. OTCQB companies are current in their reporting and undergo an annual verification and management certification process.

Safe Harbor Statement
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about the Company. Forward-looking statements are statements that are not historical facts. Such forward-looking statements, based upon the current beliefs and expectations of the Company’s management, are subject to risks and uncertainties, which could cause actual results to differ from the forward-looking statements. The following factors, among others, could cause actual results to materially differ from those set forth in the forward-looking statements:

  • legislation or regulatory environments, requirements, policies or changes affecting the financial services industry in China;
  • continued compliance with government regulations and policies;
  • changing principles of generally accepted accounting principles;
  • outcomes of any government or government-related reviews, inquiries, investigations, and related litigation;
  • fluctuations in consumer demand;
  • management of rapid growth;
  • general economic conditions;
  • changes in government policy generally, both in China and in the U.S.;
  • fluctuations in sales of commercial vehicles in China;
  • China’s overall economic conditions and local market economic conditions;
  • the Company’s business strategy and plans, including its ability to expand through strategic acquisitions, the establishment of new locations, the discontinuance of certain products and services, and the introduction of new products and services;
  • the Company’s ability to successfully integrate acquisitions;
  • credit risk affecting the Company’s revenue and profitability, including its ability to manage the default risk of customers;
  • the results of future financing efforts; and
  • geopolitical events.

The information set forth herein should be read in light of such risks. The Company does not assume any obligation to update the information, including forward looking statements, contained in this press release.

CONTACT
At the Company

Jason Wang
Chief Financial Officer
(858) 997-0680 / jcwang@fincera.net

Investor Relations
The Equity Group Inc.
Adam Prior
Senior Vice President
(212) 836-9606 / aprior@equityny.com

FINCERA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except share and per share data)

Years ended December 31,
2018
2018
2017
USD
RMB
RMB
Income
Facilitation fee
95,974 658,686 231,709
Interest income
28,391 194,855 310,289
Service charges
2,826 19,396 201,386
Property lease and management
30,893 212,026 192,221
Other income
18,016 123,644 72,600
Debt assignment income
29,638 203,409 15,646
Total income
205,738 1,412,016 1,023,851
Operating Costs and Expenses (Income)
Interest expense
10,666 73,206 307,191
Interest expense, related parties
22,843 156,775 162,041
Provision for credit losses
51,683 354,711 (13,443 )
Product development expense
11,665 80,057 82,375
Property and management cost
17,048 117,006 112,030
Marketing expense
(26,030 ) (178,650 ) 51,284
Selling and marketing
34,551 237,128 129,892
General and administrative
28,148 193,187 204,077
Total operating costs and expenses
150,574 1,033,420 1,035,447
Income (loss) from continuing operations before income taxes
55,164 378,596 (11,596 )
Income tax provision (benefit)
15,125 103,804 (878 )
Income (loss) from continuing operations
40,039 274,792 (10,718 )
Income from discontinued operations, net of taxes
1 9 2,336
Net income (loss)
40,040 274,801 (8,382 )

Earnings (loss) per share
Basic
Continuing operations
0.82 5.65 (0.23 )
Discontinued operations
0.05
0.82 5.65 (0.18 )
Diluted
Continuing operations
0.79 5.45 (0.23 )
Discontinued operations
0.05
0.79 5.45 (0.18 )
Weighted average shares outstanding
Basic
48,604,738 48,604,738 47,271,473
Diluted
50,456,098 50,456,098 47,271,473

FINCERA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share data)

December 31,
2018
2017
USD
RMB
RMB
ASSETS
Current assets
Cash and cash equivalents
144,902 994,489 1,123,296
Restricted cash
104 714 127,762
Loans, net
329,436 2,260,982 1,851,001
Other financing receivables, net
1,729 11,868 1,936,213
Prepaid expenses and other current assets
11,556 79,313 62,913
Current assets of discontinued operations
5,600 38,433 49,872
Total current assets
493,327 3,385,799 5,151,057
Property, equipment and leasehold improvements, net
189,578 1,301,114 1,350,858
Deferred tax assets, net
31,961 219,355 209,587
Long-term loans, net
3,354 23,021
Non-current assets of discontinued operations
2,181 14,966 42,002
Total assets
720,401 4,944,255 6,753,504

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Dividends payable
172,932
Short-term bank borrowings (including short-term bank borrowings of the consolidated VIEs without recourse to Fincera of RMB678,772 and RMB520,000 as of December 31, 2018 and 2017, respectively)
98,900 678,772 520,000
Long-term bank borrowings, current portion
12,531 86,000 73,000
Borrowed funds from CeraVest investor, related party (including borrowed funds from CeraVest investor, related party of the consolidated VIEs without recourse to Fincera of none and RMB1,161 as of December 31, 2018 and 2017, respectively)
1,161
Borrowed funds from CeraVest investors (including borrowed funds from CeraVest investors of the consolidated VIEs without recourse to Fincera of none and RMB743,496 as of December 31, 2018 and 2017, respectively)
743,496
Financing payables, related parties (including financing payables, related parties of the consolidated VIEs without recourse to Fincera of RMB2,129,374 and RMB1,729,327 as of December 31, 2018 and 2017, respectively)
323,315 2,218,974 1,836,203
Other payables and accrued liabilities (including other payables and accrued liabilities of the consolidated VIEs without recourse to Fincera of RMB235,541 and RMB2,358,109 as of December 31, 2018 and 2017, respectively)
141,792 973,147 2,635,604
Income tax payable (including income tax payable of the consolidated VIEs without recourse to Fincera of RMB90,389 and RMB36,733 as of December 31, 2018 and 2017, respectively)
15,792 108,386 53,278

FINCERA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS – CONTINUED
(in thousands except share and per share data)

December 31,
2018
2017
USD
RMB
RMB
Current liabilities of discontinued operations (including current liabilities of discontinued operations of the consolidated VIEs without recourse to Fincera of RMB70 and RMB5 as of December 31, 2018 and 2017, respectively)
1,508 10,352 10,916
Total current liabilities
593,838 4,075,631 6,046,590
Non-current liabilities
Long-term bank borrowings
73,581 505,000 591,000
Long-term financing payables, related party
235,527
Total liabilities
667,419 4,580,631 6,873,117
Commitments and Contingencies
Stockholders’ equity
Preferred shares, $0.001 par value authorized – 1,000,000 shares; issued – none
Ordinary shares – $0.001 par value authorized – 1,000,000,000 shares; issued and outstanding – 48,908,860 shares at December 31, 2018; issued and outstanding – 47,531,799 shares at December 31, 2017

49 336 327
Additional paid-in capital
131,472 902,316 693,889
Statutory reserves
27,104 186,022 160,289
Accumulated deficit
(105,643 ) (725,050 ) (974,118 )
Total stockholders’ equity (deficit)
52,982 363,624 (119,613 )
Total liabilities and stockholders’ equity
720,401 4,944,255 6,753,504


SOURCE:
Fincera Inc.

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