Qifu Technology (QFIN) 19 Aug 222022 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the 360 DigiTech Second Quarter 2022 Earning 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 Dong, IR Director. Please go ahead, Mandy.

you. Thank welcome quarter and call. earnings our to everyone, XXXX second 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,

our Safe plans, which refer begin includes our discussions figure current measures. ones. Please also non-GAAP our call RMB. on and this to CEO, Last, We a prepared may applies refer forward-looking this you the to now are our statement GAAP call mentioned for our reconciliation Mr. in of we certain will I’d like to Wu and all statement non-GAAP earnings the Before remind I projections. release Also, Haisheng. earnings stated, to based to estimates, in unless remarks, otherwise turn of Harbor press between over release, call.

with happy QX, facilitation another RMBXX.X balance everyone. Language] report y-o-y. Outstanding billion and strong am volatile reached the and facing solid again the performance, a once lockdown our of COVID and to macro-environment origination loan capabilities RMBXXX.X in In very up delivered multiple quarter. which volume Despite y-o-y. up demonstrated of loan XX% reliance XX% [Foreign I a risk resurgence management states, operations we billion Hello Shanghai adversity. reached total

in sent ending of platform work an regulatory all further economy. rectification is have signal a clear On developments the that are front, regulatory recent meetings the phase. there reaching The reform

through emphasize healthy development sustainable driving and on supervision. Going will normalized put forward, regulators industry

the will urge community's priorities the pledge follow-up economy, the The platform complete Central rectification predictable. work is XX, clearer supervision see set remarked this second half of project, that Bank them guidance. transparent rectification healthy, regular up Political the on it platform makers economic the the As more complete July of rectification, for the significant regulatory we China stabilized, XX, policy major promote progress and Bureau development to the of At of regular environment PBLC standardized, orderly by the whole supervision. the and of conduct to year. place meeting party the gradually a August Central on company and On

promotes boosting this job platform result, the economy a in growth creation the of consumption. As and

have including Circular earlier in on and business completed banks a have the with internet with to by In most XX. namely, July, the XX efficiency regarding one Number great credit requirements period to feedback improving loan XXXX the Circular strengthening from of since regular already according our published reporting, Number the XXXX. the of now regulatory Circular based financial stage year We CDIRC business and partners consistent and management service; XXXX dialogue in for Julian work June the document is rectification other XX, have notice on [ph], direction data maintained with report execution submitted implement agency we work and in and with our The the till guidance, to plans of started Number We regulators. of to and quality the them plan. regulators close X the commercial extended of

business. again, In internet between commercial in banks once model the related addition, business collaborated party acknowledges the document, lending and

we great operational the our strategic have pandemic In risk of tech market, this funding, year. beginning and QX, upgrading. executed volatile We already specific multiple customer resurgence, and as well product successfully in make daily the in progress strategies base, despite we In implemented unexpected the as at management extreme our this remain operations, macroeconomy the and to our committed outlined from in requirements circular, headwinds set

optimize our structure. funding the founding we On front, further

Since supply RMBX trillion more joint rural abundant. and commercial our cost XX During to points funding an basis founding loans our basis. funding a issuance banks average on shore Thanks of of more urban major which by for ABS RMBX.X ABS, X%. and funding QX, decreased the beginning XX over total banks improved of cost quarter, we with we the at of the of and makes billion supply added credit-driven have resumption AUM, issued

On optimize front, This requirements. product we the XX% our average marks portfolios our continued full and product to lowered price. regulatory of compliance

XXX% model. continued customer On the intelligent online the of user overall almost quality XX% we in improved real grant The our our channels, with coverage from the quarter XX% time the base in user user number increased quality. coverage during RTA, ratio In our QX. number users by the granted by and the high of precise acquisition high line front, advertising API targeting QX to increased from QX. expanding increased namely to of We upgrade further of market quality the

customer upgrade Looking continuously across acquisition on effectiveness credit XX% for acquisition. user continue hand, one by roughly basis, approval quality a we rate user customer increased high targeted our all screening. to enhance channels, we the On of quality meanwhile, model of sequential

On the media new expanded network such Price and joint modeling as partner, we onboarded partner other Deck. hand, our for

existing as partners, [indiscernible]. such our Baidu For

other to optimize continue by platform. of areas, acquisition marketing We our upgrading upgrade cost efficiency user our we the intelligent models. In

our and gradually adjusted we We pandemic, customers acquiring resurgence to acquisition Baidu new also strategies total resource, quality to quickly including response RTA users. cutting and connected such QX, open user higher resource. risk app higher the in as of off screen In risk

completed leverage data. We to further major our on models also risk of user upgrade

performance loan of new As result, a origination great. was risk

then the days In the delinquency delinquency one X.XX% in would loan dropped down customers won first continued First X.XX% day collection to positive from that payment, into delinquency March. gradually trended risk March. QX the for dropped impact book adjustments of QX effectiveness QX, of to make they current with delinquency loan went in of further expect rate quality. the pandemic into in the and year, in we in rate loan QX. in new June challenges. meantime, of the reflected our new XX.X% quality to in Such of related origination. X.XX% the June payment bring This especially asset circumstances Despite from we the overall XX.X% current pandemic, counter compared up our X.XX% management rate our improvement trends improved one in rate stabilize macro strategy book to XX to of MX asset If to X.XX% rest The our day ability X.XX%. for July further and to

maintain diverse better institutions. was financial tech XX.X% more into QX. our tech terms to the In plan facilitated the upgrading loans leading and the other In technology originated we solutions of modularize that run, model under capital-light and we long strategy, of serve products and in

of city-wide including CAICT This namely companies extreme was navigated among [indiscernible]. BSI, of us strong pandemic China and we first Mobile situation results. QX, multiple In with Group through Baidu statement and Academy a and financial Security Information macro industry joined our technology. the and under capabilities addition, Business of the Technology, and strong Communication together and China fluctuations In namely the the Initiative, granted of other business in security lockdown management operational batch

the we industry are Meanwhile, Looking QX, we ahead development. ecosystem. environment increasingly on a into policy an stay pandemic healthier environment and the seeing macroeconomy and stable will vigilant

upgrade to finish tasks. We strategy, our maintain continue customer will reification prudent technology base our operational a and and

Haisheng. everyone. Okay. morning. Thank our you, to Thank earnings quarter second Welcome call. Good you,

in recovery As overall to challenging the be some Early the optimization we lockdowns removed declining perspective. expected confidence June, QX during borrowers borrowers. from Then the XX% and borrowers micro COVID quarter push observed rate quality April point sequentially we rather quarter per collection clear hampered impact operation in period improvement quality have QX. many. for and the above of and in hit the recover collection Haisheng from was XX%. outperformance this year. already XX%, July, pace one macroenvironment, economic one time peak the around new even day gradual delinquency to discussed, new a other cycle new each consumption X% QX we Despite in in been the the steady overall significantly existing weakened Since in highest the quality continue well and to noticeably indicating by the a in quarter, of in this start are credit; XX throughout of generally stable since versus delivered for another although lockdowns see regions in May. below COVID high year. and from existing in consumer's better altered nation soft has every demand clear Again, COVID recovery for July. and Shanghai the this May. X.X% risk and contribution for rate asset X.X% COVID solid X.X% of at model in of was further the remains to day month lockdown versus lockdown With consumer's the of It QX modest. at by was we for pattern far our and versus April the than in so of and less borrowers. day collection point beginning in delinquency and Particularly year April declined XX-day it lowest early borrowers,

year of QX the impact heavy to Total XX% the to and For decline segment sequential year-on-year These in take to the risk loan due kept QX. billion Capital billion the billion compared new ago. tenor high modestly billion compared billion of versus strategy, capital of billion net versus and offsetting RMBX QX than year-on-year to average growth rate XX-day in due facilitation price Revenue the our continue was support volume decline platform year RMBX.X and RMBX.X RMBX.X RMBX.X to QX rate, from average service tenure. The average loans. in quality collection on declining was service market. was borrowers, was billion and loan RMBX.X billion mainly acquisition the was mainly due for from current above negative loan also in ago. of credit-driven RMBX.X volume the year QX, longer focus improved was RMBX.X heavy Revenue which in in metrics and actually the ago. revenues billion in QX a longer a growth facilitation. loans, a light prices more The capital-light user from revenue to and RMBX.X loan

During facilitation technology combined volume. and account solution the XX% total quarter loan capital light other loan roughly of the for

services regular potential we processed business and technology far the have to expect loans solutions technology this terms we year. microenvironment, and and capitalized in majority portion run, light significant a solution become compared of the Given eventually Such of Overall increased business. the other the purposely typically to commercial long will mitigate so to through challenging capital pursue to different continue light loan further facilitation. model risks technology-driven other our

average within the well further facilitated, cap we the quarter, prices the loans XX% dropped XX%, XX% IRR originated and between and/or During rate of to requirement.

XX% approximately of sequentially for to quality QX, stable expect in We Sales mainly increase and the marketing because in increased acquisition. high be user pricing quarters. relatively coming expenses the

if sources expenses, third Specifically, exclude the user in acquire increase new increase a party line credit we lines. the credit backend roughly was the the through size traffic in average cost with XXX new of in line to average

Q-on-Q. new stable As per such, line the cost dollar relatively credit average remained amount

use a the we acquisition As the strategy lifecycle pace to the user our will metrics operations. LTV sustainability and always, our and of to determine continue key to profitability as of scope ROI and the ensure

provisions new Although Therefore, uncertainty approach existing the still our continue from old to contribution high loan from on users. potential apparent booking micro in quality loans were prudent to COVID profile and we take from the loss. users, overall in continue risk new QX credit improve of to portfolio loans against from due impacts

divided for was With model, as year times provisions which QX and liability strong is equity the ago. stable defined approximately X.X risk-bearing operation compared shareholder's contribution for X.X loans to times billion. leverage at a was RMBX.X by New capital-light results facilitated our historical of balance low ratio, quarter from loan in contingent in

some other reopened until in operating and what financial decline in COVID-related QX, cash generate delays the procedures the system be, within from future. causing and cash to RMBXX.X see bigger was in as from gradually late billion the We flow ratio of should QX. being expect RMBX.X in We a in become some billion Shanghai the approximately was were issue business some QX stable rather to part technology was solution time billion some operation administrative in the in QX to versus as The QX. billion still RMBX.X for sequential QX. in collecting financial therefore billion receivables cash partners. cash portion compared business as in QX timing contribution cash institution RMBX billion of Non-restricted due leverage efficient not RMBX.X compared normally Capital in our Light in RMBX.X to and Total running equivalent being

our of business the security normally with course. always, allocated institution in portion As support will to deposit significant a our partners cash normal be

the cash approved flow represent return our to earnings. to The to As to of another QX position we potential sufficient of operations, cash declared approximately the and XX% dividends business is invest current our generate we technologies believe ADS continue by and year, in healthy regulatory from for requirement to support key shareholders. growth our satisfy to USDX.XX our we board policy cash dividends In according per QX. quarterly last our of dividend to

regarding our XXXX, fairly industry. believe challenging we the Finally, for discussed as a outlook we will for previously, year be XXXX

a like soft to the to in an operation, maintain and unchanged strengthen RMBXXX risk. Therefore as and loan to of of mitigate guidance keep for a and to us off technology control approach we build outbreak optimize would on an our in even volume XX%. as opportunity uncertainties plan further transitional future RMBXXX for point full billion an business want outbreak and XX% meanwhile, additional customer already As we stronger year-on-year the base our to settling new the this representing added prudent to time, growth. our participants our year are environment, measures growth between year platform associated We as this potential to At upgrading foundation our of regulatory macroeconomy. COVID well view billion to

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

[Operator ahead. question is go Please first CICC. instructions] Lee, Our Yao

[Foreign then, I'll Language] the part. Okay do translation

the after has and acquisition adjustments. encountered institutions of the as we under current pressure, providers, pricing saw the financial so customer's customer the certain the challenges of microeconomic So the prepayment, certainties, pandemic early credit most such generally increase the retail service

changes some in are cost wondering customer acquisition and also the funding customers? management. changes, our there how context and we And any the challenges, to was our our going cost potential of there in overcome it? what uncertainties, certain were to Thanks there us the demand bank are these to actual I of any with So partners of willingness operate plans and are if the

other pressures number is consumer in costs loan then market, answer your institutions from in Due That are thanks costs cost seeing however, down we and high macroeconomy, discussed. asset will accumulated that Number under to the Yao. financial pressure first credibility correct. our I July from observation business. Yes. August, question, financial of in financial already job QX, that the actually the your our further. to impact is institutions reflected institutions consumer one, quality assets our in high are our loan trending the two, some funding funding we by demand In is from

Thanks series activity activities, due For that massively draw apply of as some to that activities more users question, offline are activities, precise pandemic your customer counter our targeting customer second of customer lockdown the extent the task for impacted. to down of is drawdown our we boosting. acquisition to measures of our the

a QX. lot done have work We in

expecting see in are We the fruit to QX. bearing work

Thomas Jefferies. is question from Next Chong

is management about about, the taking questions. team ticket given and, the My SME second is our question as Thanks of the the well our size. macro as for my pace back backdrops, offline SME first will question my business we current sales scale average strategies,

seeing lower Given ticket and the the more you. macroenvironments, are are getting a a borders the they size Thank uncertainties prudent. we of are bit getting

Yes.

loan business this than on a Regarding naturally, take signaling this SME called more prudent that business. more our business; is we consumer approach

business. standard tightened for have credit We this our

dropped can in SME loan big. facilitation the is in This business QX one. origination offer you number total As see

point, external customer team have acquisition. less focus the channel, sales the control for on we more we that and acquisition as For second back channels volume, of for scale the customer direct our

[Foreign Language]

Yes consumption due Thomas, the jobs the that is the pandemic wellness customer correct. vision of to impact

to business, the tighten focus which rate lower. one Number that Number two, -- counter more high we is we a ticket stable. is few together means more relatively approve size two That rather customers, However, the makes measures. value the standards. the on released our bring we measures quality make we credit

about more billion on bit is that the this billion. SME originated over a was RMBX.X our just if quarter Okay. couple long and Haisheng RMBX.X to granted Thomas, the mentioned, point line facilitator actual as line, credit or earnings release, you a billion add at to One credit SME is look is about the roughly. there. volume little the two RMBXX quarter, loan Compared SME last new

are to narrowly But we So that's rather numbers sure about we when talk there. make defined SME, talking just want the about I SME.

real like players the talking of defined to meaning some opposed SME. about that's So more SME broadly as

difference. that's -- the So that makes a

look ticket look QX, example by is Secondly, the you we roughly X% increased down draw if sequentially. at, for regarding size, at for average

we So, we period, -- ticket actually to that's added see pretty point consumption. terms you. of just Once in size lockdown Thank growth pass see Haisheng's in still noticeable comments. pretty through the

question is Alex instructions] next [Operator UBS. Ye from Our

mainly your [Foreign Language] is So my on rate outlook. question for tech

So mentioned XX% that and also you the your during funding remain performance IRR during quarter And have cost you to was stabilizing. that going your also and is is expect stable credit XX% improving that mentioned forward. average your -- to

to expect wondering stabilization could improvement or if Thank going I'm some forward. your we you. So takeaway

Sure. Alex.

here. question Let me take your

You you're are generally, right.

regulatory pricing we that Given point a in goal, already based reached are terms the on guidelines. of

number the the front, than if and will rate. probably From are see rate there. have usual. improvement the we we will of the question than will improve can the X.X%. one, there assumptions about we factors that, would rate. at take then I unexpected happening impact say other we're funding course, microenvironment another X.X%. trend sitting there, right is but other And But cost, something, a consider much And be a be need to stable have stable be some some take If the more really overall stable maybe you will modestly rather second of assume see that quarter as to a could If more it take we on too with you micro anything, microenvironment So now downward remainder pricing there mentioned, forward sure, Haisheng for don't going year. would I say

I current still still lowering bit So, given from the take say there's may perspective, add rather to model in supply stable money it be available go, we -- of would some conservatively, There pretty but modelling our funding some overall to to little a go if some room to are is can also cost, you want fine. a out that's maybe then you room rate, there. modestly, terms

Is Morgan question. Next Stanley. Richard from [ph]

Language] by the aiming is overlap competitive the for banks moment DigiTech my China given the bars, targeted XXX is low at like, [Foreign risk on it's question Basically customer also etcetera. also basically and in from environment with

what's So landscape the competitive moment? the at

we Yes, are overlap our of drawings, and you mentioned, Language] like product After banks right. a you [Foreign average that target other bit. little the markets lower increased with price,

direct we the market multilayers. competition see is few with a reasons. them. market the There are head-to-head consumer not with grant However, do the loan one, Number

product banks, example, has For XX% they and have price XX%.

different and if based unique ecosystem. we XX%. for unique we XX% as tripled their discussed prosper Number bring arrive range price competence, believe example, Our to their we previously, on companies has and can two,

the Therefore, eCommerce all of platform have with not collaborate customer and market we do or full we eCommerce the us, ecosystem. the spectrum cover groups. platform For any can in

our question next CLSA. is And [indiscernible]

one, bumpy going expect pass mentioned [Foreign my about that's we indicator. risk question half, question And the it flare-ups ratio this we're to especially the options, more is second see Is Thank delinquency the how My, pick? regarding COVID improvement improvement? is recently of many overall Management we my looking do a notable gradual or also quality. Language] just So more see the XX-day in do in like when across to like you. to cities. a question. that Yeah,

[Foreign Language] Okay.

working second the adjustments team been management in other make our to with So teams has risk quarter. closely several

cautiously. of customers improving the of Firstly, identification, has set of the the first up offer credit with Report, and of variables we of the career secondly, of quality optimization acquired bad been comprehensive the model, doubled customers data Bank model, a our XX,XXX the customers joint identification, report, and effective we with mining model. project and nearly etcetera. in The customers competitive several of the China quality And And covering meanwhile with best number Quality compared from poor quarter. quality duration income exploration, team including the have models, the improving liability RTA more quality derived People's in high customers evaluate coverage performance

improved the resource on lines to allocation quality pricing the Thirdly, credit operation side, we promotions. customers high and including

transactions actions, the new credit With performance has been these improved. of

QX August. a have first in quarter that downward XX FTD days, trend it's compares about seen We dropped XX% maintained July by and with and

lower With outbreak, which of team see and the resilience can the academic demonstrates asset. truly we our rates, our

are actions term have these not Now we the retain adoptions over the performance with long risk need above been some stable very results of we actions are mentioned to future. fully to absorb of some fully actions, pilot, in performance. confident in as reflected Therefore,

XX-day for it rates, will third quarter. lower be in As delinquency

As we to our your and the clarify more it future X.X% on lowest focus Hope in be rates, has within will July can delinquency this question. target X%. been XX-day

back I our end for of the this your is question-and-answer hand sections. conclusion. now And to And management

for conference us again the Thanks joining Okay. call.

feel additional any contact question, have to please you us you. Thank If offline. free