Qifu Technology (QFIN) 28 May 212021 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the 360 DigiTech First Quarter 2021 Earnings Conference Call. Please also note today's event is being recorded. At this time, I would like to turn the conference call over to Ms. Mandy Dole, IR Director. Please go ahead, Mandy.

you. Thank welcome quarter and call. earnings our to everyone XXXX first conference Hello

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

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

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

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

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

growth expectations happy the Language] exceeded operational and quarter everyone, set therefore a a Board. another seen of our XXXX we that [Foreign record-breaking stellar results. in Hello, The quarter report to the first have very I'm strong in momentum continued across QX we had

increased loan was revenue XXX% XX% the total up quarter, XX% for billion, was net balance Outstanding the loan RMBXXX.X During by Non-GAAP income billion, year-over-year. billion billion, facilitation year-over-year. RMBX.X RMBXX.X Total year-over-year. RMBXXX up XX% year-over-year was time. first billion RMBX.X exceeding up

in market growth various to strategy we to we continues As demand momentum maintain recover, this on initiatives and expect our overall robust XXXX. execute

XX% we multiple to loan under change exceeded maintaining months. business made upgrading in tech This total tech the fundamental marks business our capital-light and progress for transition, In addition, fronts. strategy our first solution our This to the model facilitation models a other of the the significant strong in further ratio advanced and technology-driven nature growth, XX% increased empowered on recent of time. line While

product, Credit rapid growth key transaction from In credit balance the end end XXXX of as from a Our in the an levels. ICE, users year in rapidly. XXX% volume, Engine, Intelligence April the particular, CE approved with doubled such marketing up metrics operating and expanded lines, year smart service levels. monthly volume management, risk transaction Moreover impressive outstanding April, went our SaaS product XXXX delivered RM by

in institutions with established this now financial with and have collaboration another model under XX We nine the pipeline.

strategy pleased In as short, the and collaboration diversified terms operations. remarkable we KCB. engines upgraded believe report we model, such growth embedded with of with more very growth API initiatives, Tianjin, progress SME of finance, finance drivers, successfully We our in have Bank key core in and are Kincheng to comprehensive

Our API model and among connected more our finance, platform business embedded traffic the popular during with quarter. remains very partners

and customer further channels. with So XX have established traffic partnership far, the an diversified leading our acquisition platforms we

SME true QX, contributed the of over finance, with overall the is sales products already balance new and RM lending. consumer in management entrepreneur our management, both efficiency million enterprise. growth lift evaluated model, [ph] the of finance risk has our model. unique capability this + SME current over pocket an owner -- to improves This continues launched last in SME core Under RM business in the SME and dual base. substantially business product as As significant our an customer transaction will hotel, on beverage, approved leveraging F&B, our segment sequential engagement We wholesale, increased RMBX.X model Most risk of now, of XX% XX% delivered our and first and volume. in segments thickness lines monthly the acquisition. during In and credit of of level quarter credit the customer X.XX we finance around manufacturing. new year The the expertise SME our SME merchants food a quarter, new embedded This amount in our million borrowers and basis. retail, added engaged total card are

offline addition, channels In our and online expanded borrower rapidly. acquisition

favorite rates So loan [ph] broadest Pricing the our among far, leading of below SME market for products products is results better our of attractive risk XX roughly believe which performance, more of have longer return. established very long-term generally protect quickly huge higher economy X% and regulatory XX% amount in tax around platforms loans, a with opportunity we These consumer became and a We supportive growth. SME coverage in potential, SME with and tenors, collaboration promising partners. with with size presents channel one the larger SME ticket the partners. environment,

quarter. in Our first KCB the collaboration with kicked centrally off

Our facilitation of volume relationship has months, just result. with scale balance at reached billion, than the partner our of yet RMBXX KCB RMBXX strategic deep billion. volume, rooted accumulative a total loan has KCB the strategy now from our largest more terms strong business. around is in into Within strong few the translated around business become loan just partnership

a financial More importantly, to improve work trusted we institutions. serves when has for other partnership showcase with efficiency parties and both help and operational in efficiency this boosted as turn, us

to that have demonstration overall notable We have led seen our in efficiency. improvements effects positive

downward improve funding diversified sources. as more efficiency the last to or has quarters build and gradual our We few costs optimize asset quality funding we continued trend all been over bounding of

this CBRC issued me set of a this by some point, reached indicators average market in further facilitation specific year, have issued leading facilitation of further of the provided environment dropped July regarding our the few online X.X%, business. XXXX of lending in rate the basic ABS, a far At for we rate It practice delinquency that loan history. ever. total XX% and collection framework to best Key X.X%. very quality best in regulatory examples let record to thoughts improved bank's increase the loan of set an the and current asset a of a model. four rate Last, share new RMBX.X practice Day-X MX guideline coupon commercial regulatory over billion So ranking with number

We well in model is this facilitation have compliance by always institutions why reasons accepted is That strict our framework. of loan with one almost conducted our business the XXX partners. financial

We in have and a lending exposure student as role stick joint our lending loan legal a facilitator. empowered to tech and

issue do We also ABS leveraged not make limit. sure the over we

acknowledged were of industry, the our role supervision FinTech regulatory clarity major promote among regulatory relatively of you the in promote Compared direction and healthy and As apply of will to improving company consolidated to to straightforward. meet demand Strengthening service importance a was of and regulatory and supervision the that space. regulator know, platforms simple At players fill to overhead, regulator the development service, platform our the participants leading transaction at meeting, balance and we the invited the the providing We recently. reducing to necessary healthy believe of the XX increase FinTech internet market other reduce economy. are the business market the more the the in the the our meeting, efficiency financial costs. a the meeting to may step models

confident Therefore, We we very have standards. the operations regulatory consistently any of held our requirements can compliance meet we this are to applied highest industry. to

we will we that a strong embrace that we very Overall, to clear, XXXX. off more leading a very in becomes ourselves framework firms of like regulatory start believe FinTech growth. historical era excited are are the As

time half first and the of books. the RMBXXX over For more contributed loan our topped loan than balance billion capital-light model

expected than and better results regulatory delivered initiatives leading strategic the Our is there clarity for FinTech platforms. more

confidence our and full this development beyond. XXXX for of give us in All

our let turn Now, run Alex it me detail CFO, through over info. to to more

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

I interest on line earnings Please the financial time, of details. will for refer items all to go For over release not the call. our the the

improvements consumers robust in RMBX.XX upward net ago. related we demand on asset quality mentioned, Haisheng Chinese than the in further economy Chinese As was muted QX the RMBX.X had billion normal. and along a for seasonality was fear continued versus with billion credit, revenue as steady QX for trend The a Total to and was experienced decline change, mix significantly. contribution million as RMBX.XX and was credit-driven heavy billion facilitation cap and the RMBX.XX due service part from in and QX to compared Revenue decreased sequential in in QX volume year-on-year billion ago. year year RMBX.XX billion RMBX.XX capital-heavy a

some pricing recovery the impact a basis. offsets sequential in of average a negative Although on

During quarter, pricing average compared and XX.X% ago. in QX the was to year about XX.X% XX.X% a

service a in forward, year cap-light, environment we cap-light was throughout Revenue Going and stable and facilitation robust in RMBXXX compared solutions. driven technology million sequential ICE, a by from platform QX a from billion, million mainly other RMBX.XX was XX% growth ago. to expecting are The RMBXXX XXXX. growth volume relatively pricing

and increase volume the majority platform the relatively percentage for expect a eventually accounting rate While, clear for we by continue end. the underlying XXXX contribution total to our take were stable, service cap-light throughout year of

As recover internet macroeconomic along activities also in continued China, demand to increased traffic way. the significantly for

experienced a RMBXXX was pickup also to prude during cost we was QX in clear credit customers' result, line in in uptick activity user sales the quarter. Meanwhile, per drawdown in have acquisition expenses, we As marketing customer average noticed compared some RMBXXX QX. a

were increases despite we customer the As in to stable a able cost. a ROI satisfied maintain result, acquisition and

determine use our to continue and will to strategy. pace key metrics acquisition ROI the a as scope We lifecycle customer

our noticeable more versus We year volume by we again conditions to time, and quarterly proactive million new set profitability, in asset quality. higher billion a improvement the market accelerate of income once RMBX.XX QX a and ago. point this business. Non-GAAP at in QX in net driven XXXX, For billion in believe RMBX.XX was a current RMBXXX facilitation record in growth approach support

a changed. As of communicated our a structure we model to model, the financial with has market, technology-driven more gradually the to business previously transition

For from QX, other cap-light lead increasing and as significant margin contribution solutions in we to improvement generally will seen operating technologies higher have structure. margins

-- increased overall more profitability to in be the to times ago. strong operating growth defined declined less and divided X.X leverage shareholders' equity, contribution QX for With continue as growth by XXXX. as the from with facilitation and times X.X expect X.X model further capital-light We loan a pace key which is ratio, QX, results in risk-bearing balance volume year keep a times our from a to or

We was cap-light SME continued and QX highest our our in compared solid This ago. year model provisions. a by towards history, asset in our in in accelerating the XXX% expect conservative and approach provision QX XXX% to to improvement reached results. operating and driven provision ratio corporate our coverage movement ratio coverage deleveraging reflecting quality in see business Meanwhile, significant XXX% in to

cash from we and However, to the zone the the as majority provision metrics and our nature QX versus of A in are Non-restricted cash deposit operations. in billion in future in we billion our our RMBX.X relevant of terms this -- in clear operations our future. RMBX coverage, reflect deeply RMBX.X cap-light the billion approximately business RMBX.X billion in cash different of to in to become the of become capitals QX partners to Total was security believe the a portion safe in our increased less our cash equivalent daily institutional of and QX. registered was QX. with support allocated entities significant

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

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

year, we than approach we business of overall stronger forward While been expected intend guidance. this to providing tradition so conservative keep has in far our trend

we now, gross As year-on-year representing RMBXX volume billion to of for facilitation guidance XXXX XX% of XX% in RMBXXX total our RMBXX maintain volume to total billion the representing Meanwhile, billion, for growth. we XX% sequential expect between like to RMBXXX QX to be should such, to XX%. would billion, of range

QX guidance year We our four will report results. reevaluate when we

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

Thank you.

now question-and-answer session. the Thank will Instructions] We [Operator you. begin

ahead. go Jacky first from Please is question China Our Zuo Renaissance.

thanks and financing. we one about Number congrats our two SME strong have Language] have [Foreign my questions questions. results. I for for taking So, SME loan very the our growth Q strong is products, in

take our And So, year? mentioned volume what products? is what APR just this size SME financing the also is unique for to [ph] Mr. about Wu, now about our think SME the is loan want this And I understand loan CEO that target economies X%. rate

with compare how tech about ICE. XX% our And exports take secondly loan overall So, which business is our rates. the is

the volume. volume quarter take for So, our think, and what loan loan this observed between our -- year what reported products, ICE that loan So, this what ICE and partners just want the include rates understand definition change this the to start to bank other difference I is this product? is capital-light I are

is volume you. to quarter? what quarter last So, Thank for just want check the loan this ICE and

Sure, Language] your growth significant Jacky, in [Foreign a see Well, SME handle question. you're first business we the first let me quarter. in right, absolutely our

there of the you -- As know actually market. two types are SME in product two

type pursuing. some first actually more related their -- the finance consumer management The products. not has owner to anyone of finance the extended Most actually are This the -- similar -- are with or product product. view SME. consumer economy existing This consumer who finance we unit we lot is a to to to peers of own -- is quite they of

better leverage of products, on truly the APR consumer -- existing risk this directly This economy it also owner or products. SME the model SME means, our uniquely is XX%. better both companies. the is consumer owner operational risk we measurement developed are is shows actually dual we larger By SME is itself general related loan Sure, or focus finance, this, average SME returns. has of more SME we as economy than size RMBXXX,XXX. a and those for in focus we is to actually of unit doing because The SME enterprise. itself. invoice-related, expertise of directly loan second SME enterprise second core management as that are the average more evaluate unit [ph] on We more observation The product much is the potential as market pursuing around to this now, related tax-related related XX% metrics SME type Ticket APR the loan the the more what

the double consumer X% take As remarks, -- is is almost loans. the around which of the size prepared we mentioned in twice the finance rate

is For you the Intelligence see on products, can as your focused name full second Engine ICE products, more service. marketing question about its the Credit smarter

institutions their very as have As we them layers capability due financial to into long-term we see preference you accumulated very -- according their and XXX management. know of well them, we to different a around cooperation divided with the risk

which have we the focused who rate ICE improve have intention their management they already management to those will is deliver strong the provided acquisition model the service. service, product For it on very just we to or to risk ICE risk probability comparatively them, the model, capability, as customer compare just customer acquisition lower. capital-light take Therefore the

type finance, we of the we much not among difference As that banks, to assets cetera, them. consumer various financial allocated institution et are corporate low there covered like --

compared this billion As we quarter remarks, last last of in with the -- sites [Indiscernible] mentioned reached RMBX.X quarter. ICE from

Thank you.

Hope, we already--

Jacky. you, Thank

Please Richard a is from go Morgan question ahead. Stanley. Next Xu

among [Foreign and with any rate. loan major One allocation the Language] funding questions. cooperation differences terms the how funding different in the do Basically two we on our few increasing of take We're Kincheng is but going forward certainly Bank, allocate partners. partners

allocation of and between terms different. certainly is volume ICE product, take product in other rate is Secondly

strategic what applications? loan will So, thinking the be on Thank long-term you. the

Sure funding Richard, let your question. me address

the funding all, source is we the that. of pursuing of always keep goal First we're and will diversification

and Secondly, it's for as showcase institutions. better you relationship have that it's a know other as KCB, KCB, to KCB financial demonstrate we -- to very with prudent

catch-up other the is between institutions fundamental work a explore it's be longer partners all this are terms, to cooperate out Even due reason institutions, with business take financial rate will carry other showcase with KCB KCB the rooted at definitely in our The other very it as KCB, when will product the a you view, term. difference loan difference business the year, in we lot deep [Indiscernible] but be with it Yes, might short-term the In we can take with long-term institution for to easier business collaboration. the term market. there with us [Indiscernible]. compared see relationship competitive financial will our there short-term financial to addition, strategy the and KCB with products terms initiative new we

team allocate effort business business financial needs look -- of these becoming from always real no process every institutions, at operations. the whole top for we question -- how covered different assets or actually spend every function Therefore, As the we among XXX products or partners. as clearing your the funding the we that

a on to in based For of example, partners. then if the provide funding risk we hope very point. RM products. Thank only have then product we product. -- needs got smart they Richard, a our If business funding partner, marketing they your All-in-all, very need then our service strong provide we If comprehensive customers, are they I a them. already strong capital-light the provide partner you, product the of provide we SaaS funding source management,

Thank you, Richard.

CICC. [Indiscernible] from Please go is question ahead. Next

translate [Foreign question to thanks our Language] my management, question. Okay, solid then Hello my I'll for taking results. and congrats

So, today the great I partnership and first two one is regarding strategic KCB. with had our questions

that partner become will of institution in volume. notice I largest the loan has terms KCB facilitation the So, the

please you from question about second how on actually progress could in of terms the more loan XXXX? origination us SME So, KCB comes much our information business. share the contribution in is the XQ the And on loan with

So, Thanks it on loan you could contribution on will please track, -- more been given the so of it this year? XXXX? loan SME And how so will by end has the in be terms contribution XQ elaborate comes SME the in business way of much much from loan how much. our the origination be

Yes, you're [Foreign Language] right.

in become business KCB partner. already volume, of see can terms our you largest As

RMBXX.X balance the As billion. with RMBXX in mentioned cooperated loan QX with billion GMV prepared totaled [ph] remarks, in KCB

we initiative this question going about definitions the the we further following-- number to about as two in advanced that up the there SME. we Second see SME As are loan, KCB, mentioned with expect our business

that part the loan see number For to broader consumer related to this rising this in SME XX% end. and XX% expect we last contributes quarter, around around definition is to management, finance XX% to to XX% at the year up

guidance end second RMBXXX volume can -- billion is target more that is contribution of goal related year you definitely is For at are billion roughly loan pursuing strict that SME enterprise reach the you billion end, year the the definition We of our the get you we ratio. to RMBXX are if more at SME to RMBXXX recall balance to as itself. total

Let me trying this although, directions in further are early it's we add more this multiple about to color very of product, stage SME, develop product.

very out. may enterprise we RMBX we example, with and product For we see share more more borrower, coming premium SME ticket around results million or -- when granting expect size to

Sorry. add of questions. I'll -- a Alex to couple your CFO, probably details

volume to as RMBXX First of all, billion. roughly accumulated KCB's up regarding is the I is the April, is from your But QX, about QX, Haisheng mentioned, KCB's roughly of the KCB RMBXX.X for volume about volume, month guess speaking. billion, question

information, use -- That's enterprises actual enterprise, sort with So, the a operation, the SME, the the more billion receipt, mentioned, one you RMBXX.X definitions. definition there. taxation there's two broad calculate as with because for other the percentage One the definition for And narrowly is sales to can SME is kind Haisheng with use definition. the those the defined, of loans restrictive that issued ratio regarding most there, SME. more then -- narrowest We things. with of a kinds for of with those meaning to

-- much add consumer of longer this balance couple a result typically has goes. at that so of is my total Keep billion. restricted -- X, billion in than RMBX.X SME -- points end as the first loan the billion. you. the sorry, of definition that, not a it's pretty of will first quarter balance mind loans defined April, at roughly is which there. sort April RMBX.X The quarter. That's loans, loan volume Yes, narrowly RMBX.X of it's to buildup the For duration fast the time a in already this the for sort is sort Thank up

[Indiscernible]. you, Thank

question Next Please Steven International. ahead. is from Haitong go

understand done the SME questions you we secure of in our have it. SME That's is, to Thanks. translate say XXXX? would finance loans we I tell one the how customer on about of up asset on in And why in the compare quality acquisition Two loan rest SME unsecured business, [Foreign do have loans is question loans question costs like what consumer SME asset or and secured And April? Language] the and of -- rise indicators? for first with cost the relative the to loan sale just facilitation a Q-o-Q different a could far be sale collateral acquisition the SME the trend of quality so us follow-up basis to loans I'll customer QX question. on outlook will maybe second

XX% the fact, obviously the overall use managing class that business. individuals enterprise is customers, is overall XX% market, in which Language] and the the for [Foreign [Indiscernible] and control income of the product individual business door we operate than more So, but our and this lower owner will we to of SME that use a SME owners difference customer product means levels otherwise the small between to about

As we show when of that, we are at, real if easy at. operations, ROI, looking conduct we -- actually not way are look because the investment, it's return we the customers on our we before as

first the and ticket in higher customer the which successfully ROI. acquisition believe larger turn customer we better conducted approval in by we quarter, is size for improve the As demonstrated rate strategy

size, the up and turn, they business, number. ticket purely As longer look APR this the lower we metrics, will we have is SME it safety on since larger level, push if expect the the CAC at

our economy. us better actually believe for SME better is unit as decision business better in and much ROI business quality though asset However, we operation, and is in higher expanding

Alex, point Haisheng's is point. follow-up add Steven, just from to one this want

And higher as guess duration nature acquisition also business more, business with large higher, mentioned is credit line I into that proactively, loans, bit much a of, SME in change longer expand one also size, that ticket cost, we kind -- mix so which As a of the okay. customer Haisheng result -- acquisition SME because growing that per we cost SME, a QX it. the kind that of ticket per are as associated put little -- in we customer

if the So, was change sort reported -- the the just portion, of portion, were rid not at high as number. the you consumer SME get of look as

you. So, Thank just add up to the point.

Due back hand constrains, Please Thank management closing the will Steven. I time session go to now to you, for debrief. ahead.

Okay. call. for Thank you, the for joining conference everyone, us

If you free have questions, please And additional you. feel it call, us. for contact thank to the that's

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

You may now disconnect.