Qifu Technology (QFIN) 17 Nov 232023 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Qifu Technology Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I would like to turn the conference call over to Ms. [ Karen Ji ], Senior Director of Capital Markets. Please go ahead, [ Karen ].

Desmond. you, Thank welcome Conference and Technology's Quarter Third Hello, to Earnings Call. XXXX everyone, questions

release today Our on distributed was earnings earlier website. our and IR available is

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

I call to refer financial start, Also, make forward-looking as harbor we our financial you which release, this like to earnings our contains which measures of measures. refer discussions Please statements. non-GAAP the to will measures. in press would of call applies we GAAP financial to safe release, Before statement to certain reconciliation includes this certain earnings a non-GAAP

that this otherwise RMB in please all figures unless call note are mentioned in term. Also, stated,

remarks an CEO English we delivered in voice. be AI-generated from our Before please today's start, using will also note prepared that

Now call I Wu go ahead. to Haisheng. Please Mr. will the over turn

China's start after coming with Since Thank for also year, in the [Interpreted] conference earnings Hello, consumer effective joining of call. recovery quarter everyone. our refining than the of credit all year goal the earlier We third growth weaker results in in improving strategic environment and by the adjusted macroeconomic approach with diversifying profitability. you expected. our has our efforts the of channels demand acquisition for momentum rebounding driving new yielded solid this clear customer to promptly high-quality These market and operations, QX. softened

total million RMB institutions roughly volume of origination Total By the billion, users platform facilitation lines. financial a credit than year-over-year. quarter, our reached end approved loan XXX empowered on the cumulatively platform XX% up with served of and our more XXX.X XX and

our increased approximately of XX% by the income quality for net our non-GAAP With earnings year-over-year. further improving, the quarter

we this, ultimately and operational are products, it is growth. management complex expand risk acquisition, bottom achieve by resource asset cushion macro that drive today's improving boost efficiency distribution optimizing we and allocation In customer profitability. To our across important line particularly safety environment, to

diversified the of new improved innovative this to progress quarter. of and with, some during the through notably resulted customer quality start users. you walk acquisition only To also attract regard which efficiency explore but better acquisition in deploy we I'll not Now customer made channels to in customers, continue new approaches we

optimizing and platform's channels, in we established base platform massive In through user customer leading ability with embedded third business our identify short-form of active a terms quarter, to partnership risk. acquisition our the leveraging a and profile finance the users accurately our video

a consistently platform on leading We the share have the since market maintained start.

approved in generated finance the an during number channel. acquired During the of the finance approved with increase new the through of were quarter sequential impressive new users Approximately embedded quarter, XX% lines business XX% credit our total with credit users embedded lines.

base have was the overall directly X ad also high-quality to points This mortgage performance. of risk terms expand users high-quality profile terms background, on proportion compelling to methods innovative credit clearly stability our in by conventional the existing analysis, performance those October. They user during only observed also customer than increased innovative delinquency during our we users our our short-term more strategy complements The through to July We the quarter but of in customers. first marketing by intensified months better X more customer of through place. and of contributes attract our firmly methods placements not in significantly deploying as obtained innovative efforts marketing educational approaches This outperformed marketing to percentage rates through history. acquisition done user Based with also from risk acquired reach.

by approved costs number customer lines XX% increased slightly. the initiatives, a sequentially, increased new QX As acquisition only while with of credit in result of users these unit

offering program of a demonstrated joined of to drawdown per product loans effectively increases Moving time. We value-added to we enhancing revenue a loyalty certain profit users. user of services, a loyalty borrowed who which over and By wider engagement our design. the engagement with number retention, range existing introduced the increase on Users enhance are user. period program engagement higher a double-digit of the both and and in of rate

the improved we environment. channels. to risks graph and Turning It's to we segment. a By segment sense the analyzing primarily upgraded within the changing relationships responded models. swiftly in enterprises We clear industries, risk. segment. between tightened SMEs In identify knowledge QX, and and traditional defined defined that risk this our acquired are businesses broadly to there SME SME our worth credit noting among for individuals, as market we younger gradually broadly In ability differences standards online enhanced our through closely particular, further

conducting When place credit we more assessments, as emphasis history and individual business data reference. a use risk on secondary

smaller, a usually are lines As credit to more result, associated SME manageable. extended making segment much our risk

and demand similar Compared potential consumer much with generates the segment performances. stronger to the segment, risk more growth stable SME

are growth there we significant room and that Looking identification driven our defined our value ahead, by user term accurate differentiated SME and for long the over segment, confident generation broadly is for operations.

quarter, funding pricing Lastly, funding increasing basis further by points. another the banks, larger levels strengths further and stable our leveraged optimize funding our cost proportion liquidity optimized relatively the economic XX our our system reduced during With by to financial from at we in we ample structure which the model. kept

from securities In costs. ABS point in state-owned terms a we and basis quarter-over-quarter stock to of secured XX ABS, firms banks leading issuance decrease top joint and ABS multiple investments

accuracy and segments under onboard asset strengthening financial of profiling loan to financial further which ability further the risk. user mitigates continuously various serve more referral of model, partners our or ICE partners, coming with improving, identification range the we our also With expanded institution the

the engage to with ability Our user segment improved. significantly lower-tier has

further to we our improve optimize As we to continue going asset efficiency, forward. expect overall profitability allocation

the me let made progress you technology the Now on we front. with share

credit cover solutions making expand the progress, process. entire Our offer solutions array the is business we technology solid we as of to

financial and private a Internet stock, partnerships we different quarter, bank. entered institutions, additional the category: from During with joint X a into each

technology to cater diverse as solutions of partners, committed models we needs with providing adopted our well. deployment banking various the end-to-end them and are to To

extend our institution solutions financial we our Going rate scale end-to-end our run, client a the long technology forward, we solutions base. for to up steady technology take more partners expect increase In to the business. will in

we the continued and in models standard models financial for and serve language a will for in application sector. officially Communications finance. to September domestic to invest Information of as Additionally, On and large crucial language in benchmark such Academy intelligence first and large cutting-edge large with as technologies of the Technology we language unveil models. development, standard The review partnered artificial XX, China design, the reference the

process hundreds At been conducting purchased implementing AI to the time, of and graphics the advertising, we have GC throughout technology same in it cards telemarketing, or entire application collection credit of exploring efficiency and loan control. tests by improve quality the

analysis from telemarketing able For valuable to conduct our semantic conversation, system more and leads extract by is now telemarketing improving each rate X%. conversion example, our than

In marketing image-based to boost generated the language addition, In ad use around are AIGC. our and marketing future, placements effectiveness. dimensions and materials large optimize will materials of XX% from models we by rate tag multiple currently these to

market a Looking conditions back optimizing fine-tuning environment, challenging macro breakthroughs our confident about X result backdrop, past model. at vigilant make operations macro further create we multiple supporting remain Despite QX, by quarters. earnings improvement and policies. certain business for and our Since quality the Against of improved in our a this indicators are are better to with showing shareholders marginal value continuously and results. ability as our we

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

quality asset saw in to to Welcome macro X.X% negative and uptick you, from our call. to QX, strengthened reflect and earnings Haisheng. growth. evening, quarters. some service metrics QX Facing X consumer achieved Day with third Thank versus proactively best partners, was sentiment Okay. Good actions leading and product offerings, QX everyone. took delinquency relationship mainly macro risk and our toward sentiment, start uncertainties. . In QX. X.X% in historical recovery quality sustainable fluctuate we in good drive slower-than-expected aiming long-term morning, borrowers' day previous we ongoing to users in the and key key worsening The volatility optimize delinquency in levels X in quarter

versus risk among decline was have incoming QX, by XX.X% in also applications. adjusted driven September, macro Throughout credit By was rate QX late management we models modest quality standards XX.X% to our started on gradually more and stable collection XX-day QX. proactively This weakness. restrictive we new in applied see borrowers.

near ago. with declined mainly billion effort to economic decline X.X sheet loans in issuance roughly year reflected to tenors. increase ago. billion remain bps total partners and continued growth with level proactively sheet versus CNY in X.X we The in may tenor ABS. well financial balance with offset the growth for of metrics additional XX of of be loan help billion our although expected some a revenue net credit-driven As the in CNY as billion billion well year-on-year in by to on-balance The in future, mitigate sequential capital service, to X.X compared in X.X X.X partially year risk the was due as overall should fluctuation of growth risks. CNY manageable loans loans. was average CNY loan in QX volume. effective funding continued costs challenging, Overall institution of On-balance Total heavy, relationship QX for our continue strong as by further still account over CNY was these see and Revenue as improvement XX% from QX QX CNY X.X a conditions billion

CNY contribution a from light sequential Substantially in year service facilitation capital mainly due strong X.X Revenue billion CNY was of capital volume. X.X from in tenor ago. QX billion effective CNY and was improvement light continued to and compared QX ICE. to the The in offsetting loans the loan overall billion in decline growth platform X.X

of ICE QX, XX% capital-light in total roughly XX% facilitation, other prior account loan quarter. solutions compared For roughly loan the to for and combined tech volume

year. to expect stable around the ratio We this be roughly level for this

between nonrisk-bearing We to and mix different will and solutions and our risk-bearing conditions. macro a environment continue operational operation seek on based better components evaluate of

for saw ratio heavy we tenors extended. gradually return and early gradually to revenue QX, as repayment light take improvement and cap in In effective continued rate normal cap sequential business levels both

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

be expect Looking this forward, band we coming fluctuating around the quarters. in level pricing for a to narrow

XX% to We new million line declined but credit Q-on-Q increased acquire XX% line to compared in year-on-year. increased modestly QX. QX. expenses from Unit added a marketing XXX QX million credit in X.X over users user X.X to also and in new XXX Q-on-Q Sales cost

While in we for from our may new continue the pace time macro drive user on of acquisition efficiency operation, our conditions we based to time. will adjust to

base user diversifying noticeable historically mentioned, will existing we acquisition in we majority made as during our continue contribute borrowers channels business. our progress repeat on have of to vast As focus Meanwhile, quarter. user the Haisheng reenergizing

macro outstanding million. provision loan persist delinquent previous outstanding losses. credit total QX. risk-bearing uncertainties potential provisions billion, QX will prudent write-backs quality we were provisions Total XXX approach and ratio, were in balance X.X between were to QX XXX defined Provision which As and for provision days take loans of approximately new XXX% approximately XXX% divided by in is credit to compared fluctuate, book against and to in as coverage total XX continue

Non-GAAP CNY QX. QX of XX% CNY mainly for X.XX XX%. typical was over offshore share ETR to higher in second a our rate earnings helped million. compared Effective X.XX additional billion onshore withholding of in and XXX provision profit our by program. Please to net payments ETR to note, tax dividend compared in due QX was cash to The billion approximately tax was QX to CNY approximately quarter for from repurchase was rebate related tax also distribution

sequentially equity, in leverage X.Xx loan contribution non-GAAP actually XX% rebate, to by approximately X.Xx and low a QX, historical models, shareholders' income divided results ratio, stable net which defined Excluding cap-light balance as solid ago. near compared tax our in is grew year operating the QX. With from risk-bearing was

around expect see the ratio leverage We fluctuate in level future. this to the near

capital working from of billion was QX compared The in increased due due QX generate sequential X.X sheet QX. to and usage in the to was change billion the QX billion to billion CNY in operations position QX. in in compared X.X equivalents QX. to CNY in decline cash on-balance The cash lending. was compared X.X was in approximately cash X.X at the We X.X cash end CNY quarter. cash approximately Total Nonrestricted CNY billion decline to in cash in X.X CNY mainly our CNY mainly billion

As continue look deploy technologies we for to opportunities new initiatives, expand discussed services to to resources earlier, we develop launch offerings. will and new

buyback to support a believe to up shareholders. share XXX we announced XXXX, generate we cash position is to from return operations, business repurchase million development As we our June continue to our a to cash to our flow healthy sufficient XX-month period. program current XX, In and over

worth an XX, we bought ADS of XX.X. As of average open XXXX, November around $XX price million in have approximately USD market at

execute accordance continue will with program rules the related We and to buyback in regulations.

With ratio will the the and repurchase plan, exceed XX%. combined dividend the program execution of full payout the

Going attractive will our returns and to allocation generate make we to continue shareholders. capital timely adjustments forward, optimize to our plan

our confident slower to expected. outlook, recovery for appears remain while macro regarding operational the Finally, achieve than our year. We targets

such, we QX growth CNY to the between year-on-year XXX billion XXX be for As and be XXX full volume between representing total of and total RMB billion, year, now to XX% loan loan and XXX expect to XX%. billion billion CNY volume RMB

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

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

can your [Operator comes question kindly Chinese followed please For Xu translation. Instructions] Instructions] question Richard those [Operator first, ask of line who English The from from ask first the speak Morgan in Stanley. by Chinese,

demand [Foreign the differences from further Essentially cost to credit differences are the funding funding in typical client consumption trend between loan trends whether SME any is from the questions. demand there's and consumption moment. in base. some have the for there's is the Secondly and management? Language] the X room at What also the demand exactly risk what's the Particularly the and what's future. costs One strategy reduce

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to by highlight large now remarks . Q&A the the answer language part, team. I Richard. you, our prepared just generated model Thank Okay. question was for [Interpreted] delivered will still But in want I Chinese. that

stable stepping October, mainly soft the trending and to holiday, question, your was maintained the that, credit after Regarding have slightly into demand QX, seasonality observed demand we November. factor In due it credit in down. national the particular, into during

SME some divergence our the segment segment's better from defined slightly and industry demand perspective. credit is From user perspective, sector, from broadly consumer than do see we

the sports, and better entertainment technology example, the For are sector service also others. sector, than the like

more and the consumer stable has credit generates segments, to Compared broadly segment SME defined higher value. demand

enhance improve We and well. to and their as group our identify customers' products diversified and expect experience our the to services use ability stickiness user to

SME profiles information supplementary Here, the more data defined much users we different size would like emphasize of the to ticket and SME much model users business better. traditional are defined performance based totally our are on broadly is risk are their as smaller broadly risk individual with SMEs therefore, from our and our and

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invite would on [Interpreted] part. to And add I like Yan, to our CIO, Mr. risk Zheng the

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mentioned, can is business so on users' just the evaluate cash better data the the sophisticated approval, secondary on traditional credit owner input. borrowers. invoice, Upon SME layer Haisheng the of in we SME-specific sector tax, information enterprise the As with of [Interpreted] the we our et risk the that defined algorithm, SME segment the data personal model based management creditworthiness primarily cetera risk for flow, integrated mechanism data as personal our SME example, of broadly billings, source, the the sense based is data from for with our different

of combined fixed of we in line As the serve on segment ] kinds credit normally with urgent and this so all to amount, we has cetera, temporary certain users. relation needs seasonal et like higher lines the festival can events credit credit [ additional XX, June shopping XX better Double so SME

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the theoretically, down declined eventually QX the similar by ABS the with real XX cutting [Interpreted] can financial quite current cost a costs down bps by cost cost, Regarding benefit and From is bps. rate-cutting of issuance of our funding drive rate economy. cost our funding funding And in QX our the institutions XX level. perspective, funding to sequentially

environment complex year, see due the to in it help However, that this much. didn't we macro

as costs the allocated funding Our consumer assets and year year. this loan supply loan funding by underperforming to decline demand this mortgage was when market dynamics driven mainly the more partners is in resources the the

managed in to our of year. scarcity funding to the our optimize we Given assets, this continue costs

other funding sectors our pressure of are flows, September, the put financing, there government on some reduction cost. including attracting is may since factors, funding property further However, also which

-- competitive a the our at structure and we will even We to our or ABS maintain pace to to continue maintain advantage our the from funding expand will optimize funding keep our part stable funding and continue going issuance forward, cost level.

to on from next move from Alex questions now the Ye I'll UBS.

driven fluctuations latest most the collection your [Foreign about Language] the months? So Can QX the more in such industry-specific first in Is reasons my it is question as in quality you terms more the for reason environment outlook. the QX? give efficiency? causing some or And us asset in what's trend recent the macro of by color of

question loan the pricing second on the is outlook. And

lowering So in mortgages. mortgage seen China September, the existing the we have rate for

of loan also of that So in do future? pressure a the rate kind environment pricing lower to expect the current interest translate the into downward backdrop, some you our to in

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our will adding fluctuation I the quality in a factors together. X Okay. QX was do of mainly result The translation. asset of

key from perspective, the macro The a first the are below indicators is, macro expectation.

seasonality that in better reason liquidity our in second is first in the The fluctuation the quality is asset the of the the to half, led some that which sense credit half QX. typically than of industry second

especially liquidity the improve in our new year, situation, risk may performance However, in will next which we of expect situation, issued loans help early QX. improve the the

Accordingly, September, swiftly improved new the we assessment credit [ expect At our our our loans in borrowers criteria to to it risk our early say for the operations existing same adjusted sequentially of continue in our user QX. ] we upgrading reducing by October. X% and and base, time, indicators exposure by our tightening since FPDX improve

risk aspects. our tools strengthened further from And in QX, management we have X

scorecard with those platforms. Internet and build model the platforms from we leading X joint First, incorporated data

further regular app upgrade further and construct B our scorecard using to B-scorecard integrated deep by by our risk, models improved dive sequence aiming and to PBOC for algorithm data we models the large leveraging end into data capability November. internal and large Second, data, our of language -- and an sub-analysis screening

rating primarily risk Third, upgrade scorecard to for us which identify we end new based our risks. helpful more B by of will December, fast recent generate models responding and post-lending system samples, on is

these together loans of the originated stabilize. efforts, will we December performance in and expect new risk all November Putting the

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users satisfaction. improve we groups [Interpreted] we our own intention for perspective, various Regarding stickiness user pricing, and we I will say, to different to our pricing more Combined, are our raise users. conduct to Meanwhile, also would quality for pricing user tests able average also keep acquire continue attractive mix. from our will stable. customer improve pricing, new pricing higher-risk to Through will

also dynamics Under consumption of our consumption And Under this boost the multilayer on and and environment, on the based is help current demand consumer system, macro one and SME system credit industry. also and the the based supply finance regulatory drive actively we means for price a that, is consumer to economy. current players. supply role to set will play

question of from of Securities. the America Next of Emma comes line Bank Xu

is of launch your It's back And program, whether will continue [Foreign the my you in shareholder completion shares at continue you that do to encouraging program your buyback. the buy question current about And you return. buyback buyback the see Language] the really will more So want I after future? just to ask capital current to to level.

question. Emma, take Okay. I will this

to the repurchase between buyback of cash this generated time resource program cash, return the throughout the of use we additional the year. We Through compare operations -- reinvestment obviously, and kind the the ahead of expected best continue from will is well comprehensive already deploy execute very repurchase did as periodically a the year the of and said, as which in return the try since additional a in the way we the the kind or future. So cash remainder payment. into to our a position current either well efficient internally review, June determine dividend million line. the usage as or XX, the to will we you And system review also $XX already structured next to

this as position highest review or the of return. at that So will whichever cash a based the dividend return program we on dividend In make of as can well cash method through the some to a or new shareholder necessary the direction. the buyback kind and -- plan, buyback after the that we basically, year's we we through combination deployment behind use summary, program shareholder current changes complete do to either a a will future on is generate logic Then, through cash our based both. the point

from have question, line we Renaissance. Wang Cindy the Next from China

future? Language] question the down capital-heavy the is the of us current management be light loan with on in So and will break more view and proportion loans help capital-light about in Can So focused the capital does you the And capital of [Foreign the and management for heavy profit XXXX? the assets. of capital-light compared margins the company profitability strategy loans? how capital-heavy growth my volume,

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Cindy. Thanks, [Interpreted] Okay.

Regarding capital-light than capital-heavy, and little capital-heavy model to lower rate of pretty roughly higher bit a business close a say the facilitation and X% the our capital X%. loan generates both capital-light but heavy bit light little profitability a model, capital with X% I net would take

terms categories. loan portfolio these mix, loan will and the between and In long-term the dynamic of balance our balance a healthiness X profitability keep we of

we it not just loan like either pursue we is loan improvement. volume profitability, all profitability, priority as would business probability platforms. say Regarding If only I growth to a importance pursue our versus the other some heavy do of pursue can or

sustainability of our loan portfolio. and But long-term our healthiness target the to the and is profitability balance

loan So foreseeable stable we future. in expect will largely maintain mix the

terms you the the want to of already year. is last Yes. this I one us. because tough is slower macro that, the also and half are And of for add because profitability related the factors year, growth year, loan pricing factors say, these negative is than comp XXXX. here, growth the XXXX profitability volume of facing in we point would in behind kind That's first see to a versus why probably I little

some the same between future. pace If of we operating profitability. years, we maintain volume least leverages So additional the and try the also to in to . at in try in future drive anything, terms the the will

question comes from of Yada the Our Li line next from CICC.

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understand your go question, Okay. ahead answer so this we and Because we question. can

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[Interpreted] Okay.

the rate, credit would we regard, the funding costs of I we run, in and see further some will take terms costs. short Regarding fine-tune funding our this fluctuation and will in more our say, invest those our improve R&D costs. fluctuation. will and largely and With the we operations, operational resources into structure optimize efficiency to efficiency improved, cost our In mitigate funding

will see stable the So the take in rate maintain we short term.

program, Actually, expanded if looks our dividend you last our related from look services offered QX perspective additional customer diversified take outreach allocation. at we the with quarter. in actually our QX in rate to costs the and buyback adding But improved on -- in QX, our to our our take it's users and rate share maintained asset from like apple-to-apple and tax sequentially it optimizing stable because

take From rate. a to in operational hope long-term our perspective, see we will steady further efficiency, a improve we our increase do and

back management line. questions I would phone more closing see remarks. to the the call from like no for I hand to

Okay. for the Thanks again us for call. everyone joining

If additional free you. please questions, you day. have Have Thank good off-line. to a us contact feel

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

now that by an [Interpreted] call.] marked on interpreter are may lines. [Portions this spoken the transcript disconnect your of present You live were