Qifu Technology (QFIN) 16 Mar 212020 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the 360 DigiTech Fourth Quarter 2020 Earnings Conference Call. Please also note that today's event is being recorded. At this time, I'd like to turn the conference call over to Ms. Mandy Dole, IR Director. Please go ahead, Mandy.

you. Thank welcome Call. Quarter and XXXX full our Conference Earnings to everyone and Fourth year Hello

were earlier results IR Our issued website. on be our found today and can

Mr. Haisheng, Joining Mr. and our CEO Mr. today Yan, our Wu me and and are Zheng Director; Alex CRO. Director; Xu, CFO our

current to based here statements. them. estimates we historical Except undue plans, Before like information, the on may the you of the place remarks, prepared you begin discussed contain for statements, forward-looking company's our would materials Therefore, not projections. I remind Safe and Harbor should on reliance

Forward-looking and cause a actual involve those We could number differ to caution statements. materially from statements that inherent risks results in factors of important forward-looking uncertainties.

Last, please the of mentioned our now release filings refer GAAP Haisheng. and to for information stated, more refer ones. Mr. CEO, call measures. I will For otherwise reconciliation RMB. the SEC. a discussion Wu this uncertainties, with figures call between certain includes a turn non-GAAP to to Please our about in potential unless earnings and all Also, company's over risks the non-GAAP are

with quarter everyone. growth Language] another QX. you, report very over results exciting continued of set [Foreign pleased momentum Thank the to am I since XXXX record-breaking Hello Mandy. year and another growth with the

year-over-year. by XX% total loan up to year-over-year XX% RMBXX.X up increased net year-over-year. XX% RMBX.XX XXX% billion. RMBX.XX balance billion, billion, QX For revenue loan facilitation was up income RMBXX Outstanding year-over-year. Total was was billion Non-GAAP

XXX We which is net and total operations. XX% important risk billion a RMBXX.X Total [ph] system outstanding management our hurt of This upper to by income was year, efficiency was up despite year-over-year. billion billion. overall of the testament an the RMBXX.X of pandemic. Non-GAAP COVID-XX resilience up billion results was the to revenue end XX% challenging by year delivered RMBX.X our For billion guidance loan RMBXXX.X facilitation billion was the range, exceeding year-over-year. RMBXXX our full

We Meanwhile, confident diversify ever and channels. we than resilient we of will solid to customer that results growth. be a these and more testament able and to our strategy are are plan base maintain sustainable our

expecting are XXXX. accelerating We growth in

Capital-Lite, While of overall strong Recently, Capital-Light the succeeded of operational optimizing the financial improvement around and reached Moreover, our quality are our other the our new cap ratio Despite overall quality improved in earnings milestone we and on operational also cap basis. with our metrics, key the phase efficiency. business rising the fixed contribution growth facilitation that and we in from of of loans XX.X% upgrade. successfully trends monthly indicate X% have finance a boosting maintaining milestones and exceeding have QX. in in meaningfully. driven over XX% solutions total contractor strategy by the contributing rate earnings fixed

more are to driven we this business ever our forward, determined than own technology further model. Going advance build strategy to

in particular As continued macro economy activity increased we economy at the seasonality saw guideline business as during operational New policies and normal the our we macro tailwinds holiday outperformed the macro par. stayput business enter activities we across strong seeing level, XXXX, the The [ph]. from both industry recovery level are Year and government demand has [ph] Chinese on

us. favorable or platforms regulations On believe front, minimal in environment like brought business, to the impact top the we our cases, regulatory for some recently has that out created either even

to drug guideline both marginal. ruling has business Court the more As the quite from business. The as a Supreme minimal cap lending is on removed already our new lending new on rate may for impact micro-lending and know, our our the restrictive you People’s exposure

opportunities. deleveraging and which spill from some will bring share industry giants, the hand, China’s may market us market other squeeze antitrust the over On push away

year. this share me let for our plans some Next, with you of

engineers interaction well the with past, economy our team customers. proactive our the efficiency we online senior control [indiscernible] we’ll a deployed which growth In of AI builds marketing year. With build large and the of a expanding, strategy take pandemic to this more online under system,

also impact X the contributed this XXX,XXX We merchants an virtual built to XX% of adding offline per experienced product team. borrowers QX. transaction transactions month. and out We total XXXX have card Currently, of credit target new our compared new roughly processed over million

finance KFC, model Our et customers merchants as that the such high-frequency noticed our growth. consumption in and We provided competitiveness [indiscernible], strong has McDonald’s, use product enhanced cetera. embedded

the of China for We partner area in consumption platforms of the choice are becoming traffic reasons. several this for leading

platforms other base, that options. customer we range, wide under broader-based product price medium with high serving This has capacity and been seeing compared a to us a serve low, are operate customers to a we strategic only build allowed First, setting. of spectrum have narrow price with

interest. by the platform consumption we potential Second, of that not work fact allow a with do without ourselves, scenario-based conflicts other to consumption platforms operate us

traffic strong for need have Third, typically those monetization. platforms

increase can generate returns them. very also believe makes growth partner. business are platform an embedded will management and for capabilities risk superior edge. traffic consumption finance optimistic about the the outstanding competitive in Our this we for among and need service us We ideal This our prospects the of future,

existing market platforms, to blue October XXX under [Foreign such compared transaction loans SME leading with is the So credit and growth XXXX. RMBX China barriers become of very number become players few considerable is to billion already operation RMBXX to We have of capable unmet. are pipeline, created new the a volume and market large about base that practice a consistent gradually This reached gross in policy SMEs. showed and has for far, trillion lines. also recently model In in with market Alibaba metrics approved borrowers entry, our sea services addition some with and cooperated Serving of accessibility XX% in We Language] demand the financial Both Bank JD, partnership this we size Back consumer of a finance, SME is in the promoting [Indecipherable] platform. of engine best have Telecom more and nearly as with rooted market leveraging developed with the Tantan estimated XXX,XXX with My with the one including some scale. the few China serving new Government’s with Monthly deep Unicom. market XX KCB. Bank a to this Back

this us outstanding our In customer capacity allow robust management addition to risk our acquisition competitive quickly probability, edge market. in establish funding to in

SME through For developed customer service reach three online partners, customer have including traffic acquisition lending, channels, and SaaS offline acquisition. we

we Taiwan covered around have [ph]. [indiscernible] service including India providers, far, and So leading XX SaaS

have at around plan expand X,XXX our sales now channels, For year. we this and a offline about team XXXX to

performance readily can our of Currently, the in the products the customer running have we set a well As monitoring we complete, acquisition see, established and pilot is you pilot channels we Once business the and rapidly designed loan are diversified channels process. with scale available will the SME through these funding. up business.

broader regulator year. year. updates as XXX,XXX to push with growth over share accumulated earlier, So by XXXX. billion. total XXXX over market the us increased for loan into the mentioned received we customer our this far, We and term later exploring the SME this opportunities loan new So them [Foreign model products by more And is some to line business is team billion, ongoing strategy now long Currently group. speed of some you results Language] facilitation a credit might about the the loans RMBXX.X of addition, as balance antitrust RMBX.X this our there Language] be leverage with hope to In XXX% and October our for of borrowers [Foreign it's upgrading. total catering for SME from our

Our with our the into empowered model, Internet corporate credit development. natural Under an a model capitalized the QX have region we facilitation company where the institutions our exceeds are XX in another and XX and working take was ratio of transition this pipeline. we credit in XX%. evolution accounted currently a recently this for is loan risk tech in total platform and In XX%

ratio X%, Intelligence number our also the in of hit keep We main ICE, institutions Credit this we marketing aim throughout volume. of with at also customers Meanwhile, the change. rapid and to year. of for capital-light this financial smart a transaction products growth expect Engine, even around experienced to continue service our terms rate trending

there product in income Language] from our small are our signed management volume contracts risk XX and exceeded transactional service service have synergies services KCB, supporting With this of partnership provides already institutions we we XX% Our our operations. growth, accumulated total. At non-financial to significant with out [Foreign RM about believe the areas SaaS key strategic by with $XX.X billion. of regards

KCB us contractual capital-light, the us First, help model. increase but better through the capital-light may will help only the other This the terms with partners. of reach attempt partnership, overall of scale not also extend

SaaS trying to capability management KCB RM Currently, good risk attracting needed at our of set non but only of also in and other much with tech provide a drive related income, volume success is couple in may a RM SaaS SaaS RM will potential [indiscernible] they're KCB major of the clients. The example platforms. business. RM not SaaS driven our growth working Second, KCB their our

volume competitive under RMBX.XX SME bring our To KCB of sum certain Since data. provides has synergy working model, and reached billion. KCB balance Third, with up, RM with billion of and outstanding proprietary began capital-light together, edge us SaaS reached X.XX partnership significant a lending. loan accumulated areas in will loan in the the we value unique SME loans access the our

We even test, as before. are highly we actively year-long advancing year. other extreme fronts a unusual After well. [Foreign stronger than stress was XXXX on collaboration Language] emerged

relationships ever have primary as Our our trend than and more expanded.

ever. are We than stronger market in position now a

will Xu our opportunities over on scale with and [Foreign our ahead Language] business CFO, capitalize we to to then I the market hand shareholders will Now, Looking better return XXXX, Alex quality. unprecedented and

Thank earnings you, call. our to and quarterly evening, Haisheng. good morning everyone. Good Welcome

will momentum our Please release steady on details. line the interest remain call. in QX and and the in trend. over Year, into not confidence refer consumer New for all the I to continued economic a upward items Strong business the of So the as activities time, on go financial earnings

Total in our QX, in experienced along RMBX.XX cap-lite QX billion to sequential billion Revenue year And take billion, asset Supreme decline versus to QX The was a for ago. RMBX.X credit consumer significantly. to demand in driven the compared in robust part RMBX.XX credit, XX.X% billion revenue billion volume Court We was as facilitation for in rate QX RMBX.XX rate, was we ruling QX. improvement from a mix with XX.X% the in average as and in in late have further quality. cap-heavy August. service, RMBX.X net lowered increased due following interest change, contribution decline for

early are to according the to lending the repayment gradually Supreme service, cap of no services is throughout Revenue Revenue reassessment institutional latest driven million However, interest RMBXXX somewhat RMBXXX interpretation. applicable expecting rate recover in rates to was Court XXXX XxLPR from as was from one credit to compared we judicial platform discount. million impacted by negatively a also off QX. cap-lite longer

there RMBXXX set related If loans, versus charges sharing you us in reversal our performance of revenue the previous [ph] partners. QX, million risk one-time recall, and benchmark, between to performance agreement was certain by

apple-to-apple in platform for model contribution as well in service QX. sequential was charge the to higher reversal approximately underlying model The take volume due in mainly ICE this revenue growth from as QX, was better Aside rate the QX service for comparison, growth cap-lite the from improved of also and platform the XX%. under

increase year-over-year. acquisition Q-on-Q QX, about was costs in percentage revenue was Average in QX. doubled. X.X% marketing per total expenses, excluding For credit Total and service to to essentially volume expenses. sequential operating volume year facilitation XX% line platform non-GAAP were XXXX, grew provisions, to contribution flat was sales customer cap-lite about in proven user up compared RMBXXX the due and as The nearly mainly RMBXXX full increase

for Double seasonally as As events, economy traffic, particularly online XX. shopping significantly around was recovers, period micro QX increased intense for and the high demand demand online traffic online a such

For the was acquisition about customer average RMBXXX. cost year, full

billion return in enabled scope RMBXXX QX We risks. pace the to major volume in income profitability, to record will a of quality, a lifecycle and ROI and net We set million privileged satisfied and of potential billion QX in new once again This metrics approach provisions. customer RMBX.XX year versus the and use to generate by determine the was us process. higher has a mitigate Non-GAAP ago. our driven in as write-back subsequent improvement continue noticeable quarterly facilitating key RMBX.XX and acquisition asset

full the was XXXX. RMBX.X income non-GAAP billion, For XX% from up year, net

more challenging technology of as the our Please demonstrates proud We This early a our note, towards particularly of of change. in the are structure very the execution. XXXX. resilience given also gradually driven model and the we transition achievement, our our model, management, the of business market the will business condition risk of consistency financial further effectiveness model,

as Capital growth, Light cap-lite the contribution methodology maybe booking increasing technologies growth, revenue facilitation and different solutions, given total between as the not volume revenue and other the from With cap-heavy. fast

of quality way. improve margin expand the and the should However, operating gradually will along revenue the

the in such, is results overall pace divided should early which defined more declined with in growth model growth. and from and from times X.X increased leverage our facilitation profitability -- contribution by further operational As loan times risk-bearing QX, volume X.X% XXXX. balance less to keep With be strong QX, as X.X times ratio, shareholders' cap-lite equity or X.X in

and results. XXX% history, see highest improvement quality to by prudent approach driven was This corporate in XXX% and [ph] reflecting solid deleveraging in expect in continued in provision coverage estimating coverage QX, QX to significant XXXX. cap-lite and our in accelerating asset ratio business ratio in our compared early our in We XXX% model toward reached operating our provisions. the movement Meanwhile, provision

quarter, the ABS billion and micro RMBX.X lending at cash three from During to billion. operation, under approximately fund assets. generate approximately origination cash we deployed to loan fourth of flow strong during RMBX.X we continued quarter, our operations the addition Also,

the such, approximately billion equivalent billion slightly was in total QX. cash cash declined QX. cash in in RMBX.X from RMBX.X Non-restricted billion billion versus QX RMBX.X to and As RMBX.X QX in

operation. As cash with our the our you significant allocated our capital entities the partners, different know, institutional and portion registered a to was deposit to daily of support security of

changing deploy also proactively expand recovery. business, position us opportunity to to our operations, While and position flows ever cash key believe market we satisfy We through also requirements. strong cash only us will regulatory invest potential in that capture cash continue to market, in not the technologies sufficient we to generally will compete potential but enable in growth

about our Finally, color for XXXX. you some let me give outlook

making far in a encouraged our on path, and to economy clarity along we XXXX growth steady regulatory intend planning, strong as of micro we business keep decision tradition continuous While prudent by are momentum so businesses some with continues emerges.

total facilitation to growth XXXX now loan to volume billion, such, billion we expect of RMBXXX year-on-year RMBXXX XX% between for XX%. As and representing be

reflects company's change. some current which to prepared preliminary As our is With subject to like view, we that, now always, this questions. take conclude forecast remarks. and the can would Operator, I

Jacky, Thank your you. [Operator please? Instructions] China First, question Zuo, we have Renaissance. Jacky

translate me Language] my [Foreign So questions. let

about ask. I on our to strong have the questions congrats So, results. three loan guidance. Number one is

guidance, we the I'm traffic Trying a Heavy larger MSE take leading so is understand Capital for rate the quarter. just from Do a take sales the as want the acquisition about the budget second to about channels, for understand was rate very traditional try far? gave how terms contribution be well the So the the in what much much to rationale first to channels. with marketing? in lower offline our run year also full surprised online first lending from strong guidance. our of the will behind rates. a were is question customer we as and cooperation is How And quarter internet third expect the the bit channels? question the platforms, And and sales model

Thank probably outlook I APR year you. XXXX? the is and just the late the [ph] the for understand So and impact rate lower saw take payment want also what's lower to this impact. rationale from about I

first [Foreign two question. address for question. Xu, Language] Thank handle your and to you, Alex your Jacky try I very will much CFO, third the our

the in you and years this we [ph] a policy for XX% guidance. question these achieved guidance the and development. macro For That's decent considering the will have fundamentals we past industry growth, our whole industry loan guidance, environments building developed we how loan XX% tell first the the of to are few the as considering successfully year origination

channel Language] customer cost. largely Well, which point, terms traffic first the online we number maintaining -- channels acquisition will skill for acquisition increase stable this [Foreign customer year is of in existing while

our in remarks, we base. whole the the more we market, existing this number we the channel year cost, is year customers, from growth. from edge one high this channel for very new acquisition this this we XX% have There benchmark customers, new SME individual will parts finance peers transition our quality brand. will year, some Language] year. spend this [Foreign your fast with this The our this last in customer thanks [Foreign from strategy to on will rapid contribute third as of customer of existing two on driver well growth growth channel Second our my year on customer is competitive embedded If embrace Language] are that The efforts across consumers our loans. mentioned strong as point, CPS input disclosed

The two total loan around RM is comes book In [indiscernible]. and the parts XX% year. [Foreign these adding fourth second SaaS this part driver Language] newly total, contribute SME The the will products. of service up acquired growth from

the we more up of the two financial As the your [Foreign XX% question. customer management an remarks, XX% base team As finance Language] path address acquisition the same we with embedded offline SME Xu, is three one mentioned cooperation our the channels, the year. more third traffic currently acquisition. additional Alex with and KCB contribute offline our of number service be Our CFO, teams, the assumptions contributes customer that customer customer narrow new two Number Number is this and Language] Besides custom, to acquisition. channel. that, kind risk [ph] and [ph] are these acquisition, this embedded will will in is smart diversified for institutions. [Foreign expanding online ramping

customer the acquisition thank the to questions costs. small want add Haisheng. just I one to regarding you earlier Okay, color

cost the calculate logic of and methodology same look it. the and same their to at Some CPS our we disclosed peers

just cost. roughly acquisition color running so on small customer XX% that are that's number, below We a that

rate QX QX, take interest was cap so of rate, terms remarks, maybe yes rate on XX.X% causing major that or the the One cap-heavy the really items. is particularly cap-heavy versus basically QX, to lowered as rate, I by we side for prepared on in three the In the take take in mentioned lower impacted XX.X% side. the two the hurt rate

a is off item. The one more other like one

regulator in of early ruling to penalty meaningful a recall, or you put the allow requirement November make around customers XXXX, basically any repayment without If there. out

to the this So of much XXXX, QX we this at into adopt along don't the industry will But and when know impact like other be. of to change the, with many started how early we that. QX exactly our in get practice we or companies how repayment of time, the

the term months, our performance previous whole Once discount we somewhere in higher then particular So ratio in from we the we best need perspective, be. a accounting for loan quarter, ratio, saw to is estimate fully repayment we was then about of average as fourth to XX% planning the impact the a will real nine finish put we mind quarter, financial what the batch estimate Back and the we wait quarters. for batch realized early to out early so we discount fourth of have of kind around in repayment there. the loan get of understand back or into estimate customers ratio in customer. a actual keep put discount a the, to or of the than this the was get cycle once And about our entire full

RMBXXX like of accounted So roughly we repayment a take million This charge to ratio. million. for amount almost a charge the take need RMBXXX actual from QX basically reflect kind an in to to discount accounting perspective,

line one envelope third to from that the there. contribution and top contribution increased do mix the back is the decreased it's hit cap-heavy. change, to calculation. would like the a So overall line meaning impact of really from a a the then off the And cap-lite I top We the kind say of

model, For the need $X we $X bottom make under want only if facilitation. about make every in the $X we we But same in in $XX bottom cap-heavy line, to can we line. facilitate cap-lite the roughly

earnings growth is do will just year you if mix for to get fast. XXXX, reach let's we growth It need say So, only XX% quick XX% pretty that. because the continue change revenue you this calculation, can throughout if and the actually

I a revenue improving why growth. investors as growth, model. versus growth that's the all relatively driven in as toward versus It's cap-lite the well but moved asked change kind of analysts the my remarks that comparable volume So financial volume margin your more gradually low model slower prepared earnings drive to growth with

That's very clear. Thank you, Haisheng [Indiscernible]

Thank you.

you, Thank Jacky.

Xu, Stanley. Morgan from your Xu have we please? question Next

guidance clear much rates for environment, rebound, the to guess Basically sustainable long-term growth, Secondly, the Language] rates, window how questions, the There's the volume interest still longer-term? the some will thinking? what and the given interest the consumer of on the proper want some, whether will regulatory focus on two Thank the, I stuff with and like growth, more the also know credit will on rates [Foreign I rate guess, what level interest that? interest I there's the just basically be will pace be proper clarity loan what you. for be pace

[Foreign you, on a for answer after question. see will Supreme at of XXXX, the your little of of Language] did your product new interest we Court our Richard first end bit year Yes, level. some, the I last rebound rate ruling question. Thank

regulatory and carry out showed initiatives. social trend our Yes, environment society or the responsibility, you on with as price. [Foreign in whole the Language] be long-term can mentioned, -- new a it company as intend considering business we to downward However, we several

and comprehensive customer. a to value [Foreign facilitation while the better we local demand some are the compared we products balance, we have a business. consideration as them. they Well of clients, prime and our will to not quality This for the still you geography loan into progress industry lower antitrust visibility to is already year. price why [ph]. [ph] business trillion are SME they institutions. focused There regulate range as remarks, more with the in we range very in the operating. we of at -- financial between our as comparatively are Language] the need different cover to as loan existing exploring of [Foreign operating Language] both lifetime loan is driver SMEs. a for higher [Foreign terms the range, attitude where example, consistent we target provide Actually, just take service for borrowers price heading policy more second and products we more [Foreign have rate loans a SME at Language] institutions stage your of us the the covering Thank are new giants, purpose early brand. Therefore, Language] Language] well one compared you. financial As the The had diversification financial demand considering compared facilitate Yes, to products. will across we pricing important promoting that's take see we broader is we and products in government the question the interest view business, Yes, mentioned a very are a are on platform For regulators that the of the our development to regulators who China, [Foreign very are this

Thank you.

Next we Steven from Steven, Haitong. Chan question please? line your on the have

Kong TEU off plan to case believe that things, in is cash what years, balance of And some increase with Thanks. of Hong The of the see the I dividends is, likely first about may current question what be like Light. moving that's increasing returning one there leasing? for the what demand question towards will cash My pay our position, in we back Capital your coming can cash Language] focus cash could [Foreign now like second to especially is potential the reduce for and position, probably the restricted question. plan be on peers we're if did? the as two that's our big

[Foreign question. will your answer I first Language]

comes of will our cash, very terms the the Language] that book Well, there loan customer In number aggressively in business players. a we will as growing of are new cost for the aspect, own business transitional invest financed. will expect And the a model, there a model. loans as be very [Foreign for third are increase the with major facilitation [Foreign it well, be areas, sheet investments. The capital-light there own balanced important we of the ROE about loan high returns Language] and mix the [Foreign be equity balance the for development be long product number important one a few their -- from these the will There new we one majority business; There self still in Language] portion balanced of example, cash use acquisition. reasons use fintech of XX%. the of will will to portion some mix clients, term, is be

the our example, consider at favorite, as to into the company regarding with looking of we and internet The prospects; or investment There be For rejection license, one well micro-lending we actively may secondly, license more [Foreign license. might insurance Language] our license. is repurchase guarantor some capital targets third rapid potential target are growth use promising with okay. to cash of the aspect Yes, great Language] synergy. [Foreign as

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think we're of time. more I running almost one take can We out question.

you. Thank

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break translation heard Alex. I'll voice. is the just for again audience. We've the a little this down the of sorry, bit Hi do

collection out. we the of best of history. to about this are lower So we XX-day in by definition now level slightly is obviously The about relatively in quarter X.X%, kind assets our cap-lite kind corporate Right kind we cap-heavy, point quality between a XX%. difference basically, improve rate from level. And offloading and the our to cap-lite the DX standard try continuing that of first which were the then delinquency at is

a cap-lite worse difference than the was but not there slightly the delinquencies basically. So huge cap-heavy,

Yes, the they add how the [Foreign investors Language] do some them MX want matters delinquency management will for want our asset rate. to delinquency our just or Well, what delinquency I at color or quality. look risk to market

of have they other approved acquire at In to that with less rates, in acquisition we look to then of how customers I acquire short, However, plus, higher credit logic a very risk and you rate. operating naturally a the metrics. And because how customer performance. how have performance. lower customer out many the better growth business still much, some asset maintain stable we the then maybe point more channels, they and together asset customer metrics. got then and considering want have customers line, management management risk, they that from whole picture superior much quality better our we acquire approval Considering Compared risk quality we peers,

that it got towards I balance. Sure, and

--thank you. us for I call. the Thank that you conference joining for everyone Okay, think

feel If us our additional through good day. you. free a and team you questions, have thank please to Have contact IR

this gentlemen, Thank and your call. for concludes Ladies participation. today's you conference

disconnect. You may now