Qifu Technology (QFIN) 18 May 232023 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to Qifu Technology's First Quarter 2023 Earnings Conference Call. [Operator Instructions].

At this time, I would like to turn the conference call over to , Senior Director of Capital Markets. Please go ahead, Karen.

Thank you, operator. to First welcome Conference XXXX and Call. everyone, Qifu Quarter Technologies' Earnings Hello,

was earnings distributed. Our release

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

the harbor call certain [Technical I this of would call statements. measures release, refer financial our unless Wu which earnings Before our refer contains we ahead. non-GAAP measures. measures. please will statements to CEO, to make like the go this to start, in applies release, Also, Also, on we you includes to to discussions reconciliation safe Please as which GAAP earnings otherwise our a stated, Difficulty] forward-looking Mr. non-GAAP press note that Please all Haisheng. figures to certain

our than seen on initial in connected business, year-over-year. users the cumulatively RMB end platform By increased indicators. with was increasing financial approximately and total steadily approved better QX, XX.X% improvement including volume multiple of demand continuous Since macro across the credit recovery we [Technical in approved the trends risk our lines XXX.X with up The X.X% China's Total XX.X% of of economy. back origination our users million expectation institutions. against and a year-over-year Cumulative XXX year, beginning from users, lines this and positive Difficulty] growth credit overall by quarter-over-quarter. of reached billion, facilitation have XX the loan rate credit our and a platform

XX more the X,XXX XX,XXX time, we iteration risk upgrade been rules with version user of past to models having same months. over updates, optimized. during than our management release substantially an At our quarter stable the the credit to the of our remained models, including strategic over Pricing assessment continue base

scale. a have credit to upgraded into process further on ongoing credit last PBOC post our PBOC QX assessment started credit incorporate also year, Since large assessment our data models. we data We

production With value capabilities. XX,XXX identify to users decreased in basis derived unlock the the in improving credit over points period. XXX are by from X by the our risks, assessment ability With customer rate target, MX accurately we delinquency Supported in our constantly existing able our same XX XXXX, our points having substantially our for by increased enhanced of XXXX, April our risk data day basis acquisition rate ramping we dimensions, gradually confident more with while investments up performance to December near term. reached in are

the with and basis and Liquidity sources in points funding respectively. and the during quarter diversify further increasing ample cost sequentially. by financing our MX reduce total money us social by financial XX% This funding supply system, our made we've year-over-year, enables to XX XX.X%

allocation partners ABS from have issuance. In we more In ABS, addition, of with China. risk our from year-over-year X.X the model, for outpacing billion performance loan overall facilitation issuance thereby in of QX, issuance, our issued the up our accelerating obtained financial ABS institution in XX% we solid consumer growth loan pace of RMB

basis points XX contributing reduction Our costs. overall funding in sequentially, funding by issuance also a ABS costs to with decreased associated further

we costs. will funding forward, of and Going in edge with financial terms our strengthen our deepen institutions competitive continue to partnerships

quarters. overall next expect to stable funding the generally costs We over remain few

quarter, of customer we during of fintech its becoming marketing a X terms pilots. cooperation with batch into the In acquisition agreement in of QX, entered first

store the relevant RTA the model major app precision marketing of with model marketing improve the our marketing phones. store efficiency launched app in on Rigid help also platforms. us We will mobile

additional which business, new Within connected Difficulty] lines. our receiving embedded our we users been For credit traditional results with customer platforms, traffic credit per of cost than example, is [Technical into the Difficulty] had acquisition lower it finance model. [Technical

accounts streaming ways our expectations. to innovative official than marketing on live we Jietiao better was ICE, is exploring video product addition, have The in XXX In effect platform, new The April. for been our acquire launched customers.

our the channel existing enterprise engaging and In through user as and a strategies users the retention. expanded submission users, WeChat a to conversion introduced We our further for optimized step-by-step outreach existing which with by guide loan application, operational to new we user drives the conversion QX, offering boost and drawdown process.

of also we user the product user based than users. offerings users. with extensive and our our As more today, existing of engaged by on improved optimizing have XXX,XXX retention Furthermore, surveys experience existing we

economy improving profiling data, among this for invoice, our base. which specific As to demand, and rebounding strengthened dimension enhanced identify we has customer fast allow SME recovered, ability the within building have been the e-commerce strategically to noticed more identify We such XX% that segment, capabilities our we borrowers. accounts defined gradually industry cater credit the accurately to history, broadly transactions, by manage of which us macro defined broadly data our To customers user demand as SME current than segments.

on SME which our meaningful conduct at and test users, selected is a . has the step potential segment, the products management defined next pilot aimed broadly believe growth risk business of differentiated for Our to for strategies we developing fine-tuning group drive to

Technology our on capabilities. business, QX focus For our Solutions was our enhancing in product

consumer include extended loans. loans we the of solutions Specifically, individual scope to our personal beyond business

serve to with. to method show better needs of deployment finance allow diversified institutions each we Our work the us

and developed aspect risk et acquisition, standardized accounting, technological core XX operations management, have credit created including products covering the based of we capabilities customer cetera. on and modules our standardized business, far, every So

credit they the empowers industry We the also financial which extensive our institutions modules, and expertise know-how [Technical Difficulty] moment incorporated from into onboard. algorithms

impact been has We many natural ChatGPT that has since release. technology months, AI on act various [Technical Difficulty]. few past having generative believe industries its significant the Over

collection. facilitate areas interaction ChatGPT as and AI management, deep customer identify expectations intelligent credit in in strategic risk understand information This to emotions is from technologies, In loan department. personalized can In derive various service, reports For management large and factors sector. telemarketing such users. for relevant with example, it and and dedicated generative our new can better for useful financial user models. division risk developing a we specifically and algorithm the established model April, language learning natural

have such efficiency, users clear use, first collection the launched user of variations of in user can different GPT designed version the to gradually telemarketing the our analysis of labeling, already perform to telemarketing. export We semantic also which capabilities effectiveness our intention see to financial and of labels cashing and that operational plan the AIGC and analysis for and internal applying GPT have process. from we loan our Through in enhance Apart to partners. experience we is

reform we progress steady continue make the gaining [indiscernible] in compliant front, QX. On in with to credit regulatory agency

integration systems with financial to submitted partners required regulator. the completed the plan according our the to substantially of have We we

So very far, [indiscernible] and our model loan has facilitation been progress through the smooth.

believe the will Given on in the deliver be a economic developments, promoting regulatory healthy to current regulatory environment. stable industry growth we able focus

but Looking early gradually We recovery environment ahead, while due the is throughout trend improve will that in believe the stage, clear. year. the the the economic for of its recovery is macroeconomic remainder

confident also on our effectively. and to our momentum are recovery ability on growth the capitalize the delivery We in

Finally, some I have with you. news to share

about this to and market believe the will a this listen and we drive Difficulty] to company. the us Board payout also growth value Our We enable enhance [Technical our share resolution later. Directors shareholder passed the growth create of ratio have as to within shareholders. important share is increase our value quality continue Alex to dividend to of balance our more just will

the now will with call this I who our that, to our walk With financial will for over you Alex, turn CFO, results through quarter.

call. you, quarter first Haisheng. Good morning earnings Welcome good evening. Thank and to our

months, in the a aspects First in improvement recent year many recovery positive continued Difficulty] operations. our seasonality. quarter [Technical set from levels aside normal User activity to improve of

we a want bit a saw. modest Although the indeed better are to little we things than still initially recovery call one, trending

we to deploy conditions our asset focus on earlier, improving to throughout As with our growth resources and intend while Haisheng quality. maintaining XXXX, discussed macro drive desirable efforts

further base improvement QX day high-quality indicators X.X% steady and declined Key been risk declining in QX recent delinquency QX, X.X% in in to leading in user quarters, X in In and X% in April. was low-risk a versus performance. further targets on drive approximately has trend and

versus reflect back disrupted macro reflect mainly normal as operations. to improvement rate rebound The from X our in mainly collection well sharp QX improvements XX-day in This COVID continued as the algorithm. was collection XX.X% XX.X% optimization further day in QX of the delinquency QX.

By recovery further see in economic we collection improvement continues, XX-day April, rate metrics. late these As near XX%. at already

X.X from was Total versus as Difficulty]. X.X [Technical adjustments in and CNY QX for CNY Difficulty] [Technical X.X billion Revenue QX revenue CNY well ago. net billion a year further as billion

from Chinese Year, beginning New the see effect oversupply already and early year. still at increase the of During repayment mortgage liquidity of momentum [Technical the we Difficulty] quarter,

for account we loans of QX micro XX% Looking pace drive easing. ahead, as to level grow On for volume at faster and a were expect matters as stabilize to as loan early above-mentioned the license. gradually of factors or utilization sheet lending well in we better to continue balance repayment total capital continue our our nearly

platform CNY expected adjustment QX as expected from sequential existing loans and loans decline light to was service billion mainly billion in average CNY Revenue QX tenor of due to capital in compared The well and year-on-year million X.X year XXX tenor. overall a decline to CNY ago. as further was X.X new also in

combined the For total other the loan roughly prior volume, versus facilitation, QX, account capitalized quarter. roughly technology for solutions flat ICE of and loan XX%

a to run, year. ratio various among balance expect stable continue forms environment nonrisk-bearing throughout based risk We seeking this the pursue business solutions to long relatively on conditions. while tech-driven operational be and In macro model the of we'll

-- we IRR well quarter, cap requirement within remained prices stable rate the loans average originated the cap requirements. regulatory of Q-on-Q facilitated During and/or

the user marketing user Year. approximately credit seasonal [Technical increased marginally. Chinese line be in of relatively users QX, forward, was as to million flat impact offset QX. by stable versus marginally Q-on-Q coming we new Difficulty] acquire for line a our and in recovery pricing added to Looking We quarters. X.X expect increased also New Sales credit activity new expenses

will efficiency our operations, adjust will acquisition user of user base throughout in we XXXX. focus reenergizing contributed may on we economic continue vast new as majority existing to the continues we for of as growth. recovery repeat a to our Meanwhile, pace historically While continue borrowers drive

risk will prudent with portfolio approach should to continue gradually loss, provision as improve loan we credit our write-backs along overall we increasing to against expect a of profile conditions. book provisions take prior Although macro from periods from potential

write-back QX. and the risk-bearing by is which approximately outstanding or XXX% defined and between $XXX $X.X XX total compared of new loan QX million. approximately coverage provision the XXX% total loans QX balance in provisions for billion, ratio, outstanding days to Provision were Total as delinquent XXX provisions previous was provided in in

for results growth by X.Xx of resume low shareholders' in our in Total leverage ago. leverage generate defined as year solid approximately contribution QX to stable X.Xx contribution balance is cash operating loan compared to QX, a cash flat billion equity until QX and risk-bearing Rather roughly capital-light a stable X.X historical which at in ratio the from being ratio, With QX. from divided model, was operations XX.X billion CNY in and future. equivalents time was the CNY billion We in CNY Q-on-Q. compared X to cash

CNY CNY to lending. usage year in cash QX. in was a approximately our compared billion X.X to position due X.X QX was billion cash cash sheet increased in decline Nonrestricted in sequential The mainly had balance

earlier, may conditions offerings. with our discussed for new technologies initiatives look and new we launch to As resources opportunities and we deploy improving, expand develop to economic service

CNY million CNY was QX XXX QX. compared net XXX profit to million Non-GAAP in in

to business continue development our current position is healthy flow cash shareholders. and operations, from we believe return our to As sufficient generate cash to we support our to

for to XX% the The the semiannual of the new quarterly dividend reduce the Since out of to shareholders our new solidify ratio XX% shareholders, payout dividend our quarters. distribution Directors old dividend XXXX, yesterday. a to in XX% of plan and dividend replace cost net profit. paid new expand plan billion our to plan from long-term plan. X have dividend approved generate previous Also schedule our QX increase investors To cash company's to of to consecutive returns approved X.XX the XX% our a a to base, of and high total Board transaction investor schedule CNY we

our dividend semiannual be will first declared QX earnings payout in The release.

recovery thought we our for business still started regarding and to still a take see extra rate year. At for accelerating potentially the consumer and may are activities XXXX, of Finally, trending where economy we returned previously normal. and throughout growth in a behavior a also recovery junction, macro consumers' demand confidence than bit credit outlook modest to our with this gradual see time better

XX%. we full would to XXX between total such, year to like billion RMB representing year-on-year growth target loan XXX volume As XXXX maintain RMB XX% and for billion, our of at

subject is forecast preliminary view, current this the always, reflects and material change. which to As company's

With some can that, we our I would like prepared remarks. to take Operator, conclude questions. now

[Operator Instructions].

comes Credit Zheng from of line question from the Suisse. Frank first Our

This have questions. from two is Credit I Frank Suisse.

the strategic instance, Could the and client one the first optimization of upgrading more on rest clients segments? color is measures, for existing for management The year. on the focus of client potentially aggressive further provide acquisition, more

And measures be second the question of the company operationally more is on efficient? to are operating some is What taking expenses.

I I second Frank. your to Thanks, And first question answer and will will the pass question, Alex.

First, about sorry. the --

will important and trends. customers year, new we equally customer this the say For existing are

So in customer aspects. new will focused efforts terms of be our X the acquisition, on

increase our will we the expand partnership and First, depth of partnership. continue different the to with channels

expectation. utilize Store we live streaming have we marketing. been example, For into than result video better and IT on the short-form The is platforms, innovatively App trying our initial some the our model

users' about the to borrow. ICE to we part, our recognition the increase second willingness the And model used

increase offer users. of conversion ratio. our So we optimize can the can our users' Therefore, our we LTV and increase

will about terms in of customer -- is customer customer the This acquisition increase we part. our new new acquisition. competitiveness So

existing a very existing we actually, users. our our Regarding significant users, base have user of

for the effectiveness. conversion So the it's very efforts -- us for important increase to on users to existing improve our

have our we different models users. we enterprise example, existing of our better effectiveness and for to us identify tried to profile our existing increase WeChat understand users management outreach to users And risk For to to users. cover our our refine use

For [Technical example, XX%. Difficulty]

our engagement existing better our long-term later, offer to and process can the to So we improve improve their optimize value. users engage user

to economy very increase for efficiency macro believe stage. it's environment, important moderate we this at us point this our at So recovery

we So we so efficiency. terms our better and coverage our of marketing will the partnership, increase can in improve channel

-- believe base are Difficulty] further we user testing, and we [Technical when -- and So actually Difficulty]. the our enjoyed we macro further will to [Technical increase

one -- the when costs, forward, So are of variable basically, for sending we used a scores expenses do cost some transaction are the credit for expenses the to few trend the the aspects. the we message SMS, you year get operating One, variable there going or or that operating basis, with example, bit the every long-term -- can for squeeze cost those always a really on costs those but is that base relationship unit And the the have room we much. little not suppliers. a from a and

And then big the acquisition. the really other variable cost customer of is part

credit we RMB Last about RMB intend users that year, XXX. think or our customer I had this year cost we This kind unit or earlier per to user. acquisition of discussion per was number unit before. lower or to XXX line RMB XXX cost somewhere around

RMB quarter first XXX, was XXX. less The than only about RMB

So pretty back-office-related basis, lower the quarters acquisition towards of Other in unit we also and increase the -- credit a pace there. following overall, spending. you increased per will on kind headcount full including customer we users internal But of acquisition, spendings control, the cost. have see some see a year line fixed marketing cost, the a cost IT with may tight

UBS. from of Ye comes Alex question line next Our the from

is my outlook. on mainly So pricing question the loan

consumption quite terms and data competitive have has landscape, April. modest credit in the overall consumer firstly, seen the we been recovery of in So

you share from some trend of what's the the different could you regarding capacity current terms have So in seen pressure players. color

And secondly, lowering in stimulate drawdown demand would base. pricing existing your loan consider some customer order your you to from loan

from impact Thanks, competition. important the credit Alex. think the the the competition. more perspective, from user demand for the for recovery important of of is the The that competition of more we demand is industry, From our impact the recovery

On very of hand, at industry stage. clear we believe the other segmentation this this the is

the targeting also the large the We segments. differentiated players. from customers are We're different target banks smaller and actually pricing quite and

competitors. overlapping So there limited the among is

wide users higher the think we We our users. can coverage we hand, different users. have of the can lower a of also service capability, the cover on and kind pricing for And other pricing

to So we management better our users. provide offerings can our risk differentiated to further models refine serve products and

as can periodically, model very long So accurate as is we enough, competitiveness. our have strong

of engage to serve value And accurate, perspective, reduced we better can pricing them model -- activate some pricing users and some our this on our increased as is of sort long increase and strategy. we try from can as as better actually,

future perspective, current pricing a overall the level think level -- we maintain will to from compared at maintain So stable the will the pricing current level.

Xu from line Richard Our Morgan of the Stanley. next question from comes

So divergent change the particularly borrowers loan demand, question quality. any loan essentially the growth the region months trends income demand, on among in borrowers sequential my groups potential on is and from recent credit different of terms in and

divergent X In the recovery, trends: recovery, moderate terms one other credit we of have is seen demand recovery. is

than of faster Shanghai, we are is , region a with So diversified by regions, several terms the social published in the in regions which would in this financing From perspective, recovering government in other at those line incremental recovery, look region QX. by aspects. the problem

seen group segment especially credit on recovering hand, from the broadly From service faster, customer have increasing we the have recovering other with faster we seen higher-quality And a perspective, the size. users relatively industries. SME relatively defined

reached question-and-answer back turn questions. have for end remarks. the management to your I'll session. all much closing of for conference We the Thank you the now very the team

Okay. Thank you. joining Thanks to us. everyone for

additional good have you. discuss day. bye. Bye, we Have you offline. Thank a If questions, can

Thank conference you. This you participating. concludes today's for Thank call.

now may You disconnect.