SEC Company Response from Yiren Digital (YRD) — Sep 1, 2017
Yiren Digital Ltd.
Date: Sept. 1, 2017 · CIK: 0001631761 · Accession: 0001104659-17-055049
AI Filing Summary & Sentiment
File numbers found in text: 001-37657
Referenced dates: August 7, 2017
Letter
VIA EDGAR Office of Financial Services Division of Corporation Finance Yirendai Ltd. (the “Company”) Form 20-F for the Fiscal Year Ended December 31, 2016 Filed April 24, 2017 File No. 001-37657
Dear Mr. Volley and Mr. Phippen:
This letter sets forth the Company’s responses to the comments contained in the letter dated August 7, 2017 from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) regarding the Company’s Form 20-F for the fiscal year ended December 31, 2016 (the “2016 Form 20-F”). The Staff’s comments are repeated below and are followed by the Company’s responses thereto. All capitalized terms used but not defined in this letter shall have the meaning ascribed to such terms in the 2016 Form 20-F.
Form 20-F for the Fiscal Year Ended December 31, 2016
Fluctuations in exchange rates could have a material adverse effect on our results of operations and the price of our ADSs., page 36
1. Please revise future filings to correctly identify your reporting currency as Renminbi.
In response to the Staff’s comment, the Company will revise the risk factor in its future Form 20-F filings in substantially the same form as follows (the additions are marked in underline text and deletions are marked in strikethrough text):
“Fluctuations in exchange rates could have a material adverse effect on our results of operations result in foreign currency exchange losses and have a material adverse effect on the price of our ADSs.
Substantially all of our revenues and expenditures are denominated in RMB, whereas our reporting currency is the U.S. dollar. As a result, fluctuations in the exchange rate between the U.S. dollar and RMB will affect the relative purchasing power in RMB terms of our U.S. dollar assets and the proceeds from our initial public offering. Our reporting currency is the U.S. dollar while the functional currency for our PRC subsidiaries and consolidated variable interest entities are RMB. Gains and losses from the remeasurement of assets and liabilities that are receivable or payable in RMB are included in our consolidated statements of operations. The remeasurement has caused the U.S. dollar value of our results of operations to vary with exchange rate fluctuations, and the U.S. dollar value of our results of operations will continue to vary with exchange rate fluctuations. A fluctuation in the value of RMB relative to the U.S. dollar could reduce our profits from operations and the translated value of our net assets when reported in U.S. dollars in our financial statements. This could have a negative impact on our business, financial condition or results of operations as reported in U.S. dollars. If we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. In addition, fluctuations in currencies relative to the periods in which the earnings are generated may make it more difficult to perform period-to-period comparisons of our reported results of operations.
The value of the RMBRenminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions and China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMBRenminbi to the U.S. dollar, and the RMBRenminbi appreciated more than 20% against the U.S. dollar over the following three years. However, the PBOC regularly intervenes in the foreign exchange market to limit fluctuations in RMBRenminbi exchange rates and achieve policy goals. During the period between July 2008 and June 2010, the exchange rate between the RMBRenminbi and the U.S. dollar had been stable and traded within a narrow range. Since June 2010, the RMBRenminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. Since October 1, 2016, Renminbi has joined the International Monetary Fund (IMF)’s basket of currencies that make up the Special Drawing Right (SDR), along with the U.S. dollar, the Euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the RMBRenminbi has depreciated significantly in the backdrop of a surging U.S. dollar and persistent capital outflows of China. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalisation, the PRC government may in the future announce further changes to the exchange rate system and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future. There remains significant international pressure on the PRC government to adopt a flexible currency policy.
There remains significant international pressure on the PRC government to adopt a flexible currency policy. Our operations are conducted through subsidiaries and VIEs located in China where Renminbi is the functional currency. Our reporting currency is Renminbi as well. Any significant appreciation or depreciation of the RMBRenminbi may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollarsour liquidity and cash flows. For example, to the extent that we need to convert U.S. dollars we received from our initial public offering into RMBRenminbi to pay our operating expenses, appreciation of the RMBRenminbi against the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. Conversely, a significant depreciation of the RMB against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of our ADSs if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount we would receive.
Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMBRenminbi into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on the price of our ADSs.”
Item 5. Operating and Financial Review and Prospects, page 83
2. Please revise future filings to discuss the changes in financial position for the periods presented.
In response to the Staff’s comment, the Company will add the disclosure contained in Exhibit I hereto to its future Form 20-F filings in substantially the same form with necessary updates.
3. Please provide us, and revise future filings to disclose, an analysis of the loans outstanding at each period end presented, including but not limited to:
· Loan balance outstanding by grade and channel; and
· Average maturity by grade and by channel.
Please discuss and analyze any significant changes or trends.
The Company respectfully advises the Staff that as an online consumer finance marketplace, the Company plays the role of an online lending information intermediary service provider that matches borrowers with investors. The Company does not bear default risks of the loans facilitated through its online marketplace, and thus neither the loan balance outstanding at each period end nor the average maturity of such loans is a key parameter that the Company’s management uses to monitor its business. In the 2016 Form 20-F, the amount of loans facilitated during each period presented was disclosed by grade and channel, and the Company believes such disclosure is sufficient for investors to understand the Company’s business model and risk exposure.
4. Please tell us, and revise future flings to disclose, your average customer acquisition costs for each period presented and discuss and analyze any significant trends.
The Company respectfully advises the Staff that it has observed significant fluctuation of user acquisition costs across different historical periods. The fluctuation was mainly because of the different user acquisition strategies it used in different periods. Since the acquisition cost of a new user differs substantially from the cost of getting new businesses from an existing user and the difficulty to separately track acquisition costs of new and existing users, the Company believes that the information on average user acquisition costs would not provide meaningful information to help investors understand the Company’s business.
In addition, user acquisition costs from different channels vary and the Company view such information as one of its key commercial secrets. The disclosure of average user acquisition costs may compromise the Company’s ability in future negotiation with channel providers, which could materially and adversely affect the Company’s financial condition and results of operations.
5. Please provide us, and revise future filings to disclose, key operating metrics related to your investors including, but not limited to:
· the reinvestment rate of existing investors;
· the number of new investors that made an investment during each quarter in the most recent fiscal year and during the prior fiscal years; and
· the total number of investors that made an investment during each quarter in the most recent fiscal year and during the prior fiscal years.
In response to the Staff’s comment, the Company will add the following to the disclosure currently on page 55 of the 2016 Form 20-F in its future Form 20-F filings with necessary updates:
“As of December 31, 2016, 41.8% of our cumulative investors have made more than one investment on our platform.
The following table provides the number of investors and new investors who made at least one investment during each quarter presented:”
For the Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
December 31,
Number of new investors
16,207
31,281
125,667
139,608
163,682
136,120
101,236
111,031
Total number of investors
25,124
44,000
144,107
177,501
212,318
206,706
177,499
194,505
6. Please provide us, and revise future filings to disclose, key operating metrics related to your borrowers including, but not limited to:
· the re-borrowing rate of existing borrowers;
· the number of new borrowers that borrowed money during each quarter in the most recent fiscal year and during the prior fiscal years; and
· the total number of borrowers that borrowed money during each quarter in the most recent fiscal year and during the prior fiscal years.
In response to the Staff’s comment, the Company will expand the disclosure currently on page 54 of the 2016 Form 20-F as follows in its future Form 20-F filings with necessary updates:
“As of December 31, 2016, 2.3% of our cumulative borrowers have borrowed more than one loan on our platform.
The following table provides the number of borrowers and new borrowers who took out a loan during each quarter presented:”
For the Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
December 31,
Number of new borrowers
27,536
34,487
36,307
47,549
49,772
67,756
90,772
104,160
Total number of borrowers
27,581
34,568
36,493
48,072
50,542
68,882
92,479
110,785
7. We note disclosure related to concentrations of credit risk on page F-25 and your disclosure that referrals from CreditEase’s on-the-ground sales network account for a majority of your borrowers and loan volume. Please ensure you identify, quantify and analyze known trends, demands, commitments, events and uncertainties related to borrowers, investors or referring entities, whether affiliated or unaffiliated, that are reasonably likely to have a material impact on your financial results or business. Refer to Item 303 of Regulation S-K for guidance.
The Staff’s comment is noted. The Company disclosed in the 2016 Form 20-F information and known trends that were reasonably likely to have a material impact on its financial results or business. For example, on page 93 of the 2016 Form 20-F, the Company disclosed the fee rate charged by CreditEase for the offline borrower acquisition services, and on page 23 of the 2016 Form 20-F, the Company discussed its reliance on CreditEase’s referral services. If it comes to its knowledge in the future, the Company will make necessary updates in its future 20-F filings to discuss any other trends, demands, commitments, events and uncertainties that are reasonably likely to have a material impact on its financial results or business.
Transaction Fees, page 91
8. Please provide us, and revise future filings to disclose, the average yield (i.e. revenue/average balance of loans) by channel for the periods presented.
The Company respectfully advises the Staff that as an online lending information intermediary service provider, the Company’s revenues come from fees charged for providing services, rather than interests generated by loan assets. As disclosed on page 91 of the 2016 Form 20-F, a major portion of the transaction fees charged to borrowers are collected upfront. Thus, the Company believes that both of its revenues and cash position have little relevance to the balance of loans outstanding on its platform.
In addition, to understand the profitability of the Company’s business, investors may refer to the information already disclosed in the 2016 Form 20-F, such as the average transaction fee rate.
Service Fees, page 92
9. Please tell us, and revise future filings to disclose, the approximate percentage of investors that use the automated investing tool and the percentage that use the self-directed investing tool.
In response to the Staff’s comment, the Company will expand the disclosure currently on page 92 of the 2016 Form 20-F as follows in its future Form 20-F filings with necessary updates:
“In 2016, more than 99% of investors made investments on our marketplace using the automated investing tool.”
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 2015 and 2016, page F-3
10. We note that your consolidated balance sheets include RMB1.2 mi
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CORRESP
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Yirendai Ltd.
10/F, Building 9, 91 Jianguo Road
Chaoyang District, Beijing 100022
The People’s Republic of China
September 1, 2017
VIA EDGAR
Mr. Michael Volley, Staff Accountant
Mr. Benjamin Phippen, Staff Accountant
Office of Financial Services
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re:
Yirendai Ltd. (the “Company”)
Form 20-F for the Fiscal Year Ended December 31, 2016
Filed April 24, 2017
File No. 001-37657
Dear Mr. Volley and Mr. Phippen:
This letter sets forth the Company’s responses to the comments contained in the letter dated August 7, 2017 from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) regarding the Company’s Form 20-F for the fiscal year ended December 31, 2016 (the “2016 Form 20-F”). The Staff’s comments are repeated below and are followed by the Company’s responses thereto. All capitalized terms used but not defined in this letter shall have the meaning ascribed to such terms in the 2016 Form 20-F.
Form 20-F for the Fiscal Year Ended December 31, 2016
Fluctuations in exchange rates could have a material adverse effect on our results of operations and the price of our ADSs., page 36
1. Please revise future filings to correctly identify your reporting currency as Renminbi.
In response to the Staff’s comment, the Company will revise the risk factor in its future Form 20-F filings in substantially the same form as follows (the additions are marked in underline text and deletions are marked in strikethrough text):
“Fluctuations in exchange rates could have a material adverse effect on our results of operations result in foreign currency exchange losses and have a material adverse effect on the price of our ADSs.
1
Substantially all of our revenues and expenditures are denominated in RMB, whereas our reporting currency is the U.S. dollar. As a result, fluctuations in the exchange rate between the U.S. dollar and RMB will affect the relative purchasing power in RMB terms of our U.S. dollar assets and the proceeds from our initial public offering. Our reporting currency is the U.S. dollar while the functional currency for our PRC subsidiaries and consolidated variable interest entities are RMB. Gains and losses from the remeasurement of assets and liabilities that are receivable or payable in RMB are included in our consolidated statements of operations. The remeasurement has caused the U.S. dollar value of our results of operations to vary with exchange rate fluctuations, and the U.S. dollar value of our results of operations will continue to vary with exchange rate fluctuations. A fluctuation in the value of RMB relative to the U.S. dollar could reduce our profits from operations and the translated value of our net assets when reported in U.S. dollars in our financial statements. This could have a negative impact on our business, financial condition or results of operations as reported in U.S. dollars. If we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. In addition, fluctuations in currencies relative to the periods in which the earnings are generated may make it more difficult to perform period-to-period comparisons of our reported results of operations.
The value of the RMBRenminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions and China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMBRenminbi to the U.S. dollar, and the RMBRenminbi appreciated more than 20% against the U.S. dollar over the following three years. However, the PBOC regularly intervenes in the foreign exchange market to limit fluctuations in RMBRenminbi exchange rates and achieve policy goals. During the period between July 2008 and June 2010, the exchange rate between the RMBRenminbi and the U.S. dollar had been stable and traded within a narrow range. Since June 2010, the RMBRenminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. Since October 1, 2016, Renminbi has joined the International Monetary Fund (IMF)’s basket of currencies that make up the Special Drawing Right (SDR), along with the U.S. dollar, the Euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the RMBRenminbi has depreciated significantly in the backdrop of a surging U.S. dollar and persistent capital outflows of China. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalisation, the PRC government may in the future announce further changes to the exchange rate system and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future. There remains significant international pressure on the PRC government to adopt a flexible currency policy.
There remains significant international pressure on the PRC government to adopt a flexible currency policy. Our operations are conducted through subsidiaries and VIEs located in China where Renminbi is the functional currency. Our reporting currency is Renminbi as well. Any significant appreciation or depreciation of the RMBRenminbi may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollarsour liquidity and cash flows. For example, to the extent that we need to convert U.S. dollars we received from our initial public offering into RMBRenminbi to pay our operating expenses, appreciation of the RMBRenminbi against the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. Conversely, a significant depreciation of the RMB against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of our ADSs if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount we would receive.
2
Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMBRenminbi into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on the price of our ADSs.”
Item 5. Operating and Financial Review and Prospects, page 83
2. Please revise future filings to discuss the changes in financial position for the periods presented.
In response to the Staff’s comment, the Company will add the disclosure contained in Exhibit I hereto to its future Form 20-F filings in substantially the same form with necessary updates.
3. Please provide us, and revise future filings to disclose, an analysis of the loans outstanding at each period end presented, including but not limited to:
· Loan balance outstanding by grade and channel; and
· Average maturity by grade and by channel.
Please discuss and analyze any significant changes or trends.
The Company respectfully advises the Staff that as an online consumer finance marketplace, the Company plays the role of an online lending information intermediary service provider that matches borrowers with investors. The Company does not bear default risks of the loans facilitated through its online marketplace, and thus neither the loan balance outstanding at each period end nor the average maturity of such loans is a key parameter that the Company’s management uses to monitor its business. In the 2016 Form 20-F, the amount of loans facilitated during each period presented was disclosed by grade and channel, and the Company believes such disclosure is sufficient for investors to understand the Company’s business model and risk exposure.
4. Please tell us, and revise future flings to disclose, your average customer acquisition costs for each period presented and discuss and analyze any significant trends.
The Company respectfully advises the Staff that it has observed significant fluctuation of user acquisition costs across different historical periods. The fluctuation was mainly because of the different user acquisition strategies it used in different periods. Since the acquisition cost of a new user differs substantially from the cost of getting new businesses from an existing user and the difficulty to separately track acquisition costs of new and existing users, the Company believes that the information on average user acquisition costs would not provide meaningful information to help investors understand the Company’s business.
In addition, user acquisition costs from different channels vary and the Company view such information as one of its key commercial secrets. The disclosure of average user acquisition costs may compromise the Company’s ability in future negotiation with channel providers, which could materially and adversely affect the Company’s financial condition and results of operations.
3
5. Please provide us, and revise future filings to disclose, key operating metrics related to your investors including, but not limited to:
· the reinvestment rate of existing investors;
· the number of new investors that made an investment during each quarter in the most recent fiscal year and during the prior fiscal years; and
· the total number of investors that made an investment during each quarter in the most recent fiscal year and during the prior fiscal years.
In response to the Staff’s comment, the Company will add the following to the disclosure currently on page 55 of the 2016 Form 20-F in its future Form 20-F filings with necessary updates:
“As of December 31, 2016, 41.8% of our cumulative investors have made more than one investment on our platform.
The following table provides the number of investors and new investors who made at least one investment during each quarter presented:”
For the Three Months Ended
March 31,
2015
June 30,
2015
September 30,
2015
December 31,
2015
March 31,
2016
June 30,
2016
September 30,
2016
December 31,
2016
Number of new investors
16,207
31,281
125,667
139,608
163,682
136,120
101,236
111,031
Total number of investors
25,124
44,000
144,107
177,501
212,318
206,706
177,499
194,505
6. Please provide us, and revise future filings to disclose, key operating metrics related to your borrowers including, but not limited to:
· the re-borrowing rate of existing borrowers;
· the number of new borrowers that borrowed money during each quarter in the most recent fiscal year and during the prior fiscal years; and
· the total number of borrowers that borrowed money during each quarter in the most recent fiscal year and during the prior fiscal years.
In response to the Staff’s comment, the Company will expand the disclosure currently on page 54 of the 2016 Form 20-F as follows in its future Form 20-F filings with necessary updates:
“As of December 31, 2016, 2.3% of our cumulative borrowers have borrowed more than one loan on our platform.
The following table provides the number of borrowers and new borrowers who took out a loan during each quarter presented:”
For the Three Months Ended
March 31,
2015
June 30,
2015
September 30,
2015
December 31,
2015
March 31,
2016
June 30,
2016
September 30,
2016
December 31,
2016
Number of new borrowers
27,536
34,487
36,307
47,549
49,772
67,756
90,772
104,160
Total number of borrowers
27,581
34,568
36,493
48,072
50,542
68,882
92,479
110,785
4
7. We note disclosure related to concentrations of credit risk on page F-25 and your disclosure that referrals from CreditEase’s on-the-ground sales network account for a majority of your borrowers and loan volume. Please ensure you identify, quantify and analyze known trends, demands, commitments, events and uncertainties related to borrowers, investors or referring entities, whether affiliated or unaffiliated, that are reasonably likely to have a material impact on your financial results or business. Refer to Item 303 of Regulation S-K for guidance.
The Staff’s comment is noted. The Company disclosed in the 2016 Form 20-F information and known trends that were reasonably likely to have a material impact on its financial results or business. For example, on page 93 of the 2016 Form 20-F, the Company disclosed the fee rate charged by CreditEase for the offline borrower acquisition services, and on page 23 of the 2016 Form 20-F, the Company discussed its reliance on CreditEase’s referral services. If it comes to its knowledge in the future, the Company will make necessary updates in its future 20-F filings to discuss any other trends, demands, commitments, events and uncertainties that are reasonably likely to have a material impact on its financial results or business.
Transaction Fees, page 91
8. Please provide us, and revise future filings to disclose, the average yield (i.e. revenue/average balance of loans) by channel for the periods presented.
The Company respectfully advises the Staff that as an online lending information intermediary service provider, the Company’s revenues come from fees charged for providing services, rather than interests generated by loan assets. As disclosed on page 91 of the 2016 Form 20-F, a major portion of the transaction fees charged to borrowers are collected upfront. Thus, the Company believes that both of its revenues and cash position have little relevance to the balance of loans outstanding on its platform.
In addition, to understand the profitability of the Company’s business, investors may refer to the information already disclosed in the 2016 Form 20-F, such as the average transaction fee rate.
Service Fees, page 92
9. Please tell us, and revise future filings to disclose, the approximate percentage of investors that use the automated investing tool and the percentage that use the self-directed investing tool.
In response to the Staff’s comment, the Company will expand the disclosure currently on page 92 of the 2016 Form 20-F as follows in its future Form 20-F filings with necessary updates:
“In 2016, more than 99% of investors made investments on our marketplace using the automated investing tool.”
5
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 2015 and 2016, page F-3
10. We note that your consolidated balance sheets include RMB1.2 mi