Earnings call transcript Q2 2023

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Operator

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

At this time, I'd like to turn the conference call over to Ms. [Karin Chi], Senior Director of Capital Markets. Please go ahead, Karin.

Unidentified Company Representative

operator. you, Thank welcome conference and Technology's quarter second Hello, to earnings call. XXXX everyone, Qifu

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

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

I refer Please call reconciliation to measures GAAP that, refer start, measures. non-GAAP Also, make forward-looking as are Harbor earnings we our you a terms. which release, this like earnings discussions statements. the measures. will figures in press our note in financial which contains all would call to of call of release, please applies we in to stated, the to Safe Before this unless statement RMB mentioned non-GAAP to certain otherwise Also, includes this certain

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

Wu Haisheng

our for earnings Hello, joining call. everyone. second quarter Thanks conference

a credit facilitation up billion, our During recovery stable an macroeconomic growth volume the the and sentiment with credit and institutions compared than million and while a XX.X% XX.X% more loan XX accelerated empowered By growth, In strategy committed our risk lines. our platform to on quarter-over-quarter, users cautious origination given remain end maintaining approved performance. consumer QX, the quarter, of to reflecting QX. prudent platform pursue QX, financial XXX meaningful year-over-year we total trajectory more and among of and had operating XXX.X reached total RMB a cumulatively served softening users,

increase model environment. the profitability, steady our will growth. while the safety upgrades we our further Throughout allow the improve against strategic business and of This made of have strengthen advancing high-quality macro in margin resilience year, complex the us to progress seeking to

finance customer terms channels embedded partnering business targeted platforms users. expanded to by multiple acquisition our expand have diversify under we leading the we our to coverage model, have the credit In with continued and effectively of growth,

consumer different varied tailored providing products engines needs developed and growth also and to additional users' addressing SME have We business. profiles, our for

we reduce steps have allocation profitability, our to and In overall efficiency, optimize taken terms improved boost operational the to portfolio. improve costs of further profitability and of loan risk assessment asset capabilities funding

highlights me second share some the in quarter. of Now, our let

innovation to our while innovative including platforms, video approaches diversify customer In to payment tap providers their continue user and and tailored partnerships credit to expand Through users. massive identification we user conversion user reach efficiency. we top-tier improve platforms process targeted joint active we ability First, our into marketing and channels, enhanced base. entered strategies, leveraging boosted modeling, acquisition to the July, and with into short-form

needs, largely rates compelling appetite stable effective marketing increased more our supplement new QX, stronger flat users With to credit we drawdowns way, XX% of larger making serves Furthermore, lines, the effective also which with in for offered spending sequentially. to innovative to boost users existing base. number some engagements, high-quality and our for borrow and a credit with intention as an user experimental

needs and to continue through various address product users from and will forward, Moving diverse explore we segments, ways their acquire to innovations. effective manage

Second, engagement throughout strategies Starting and in user a and improved user we from the boost achieved lifecycle. we risks operational our our capabilities significant user product, optimized user needs, activity.

the us by to stability lines, and defined broadly leveraging as our data rates segments. competitive credit while the offer ensuring our also more performance. We SME a methods repayment to flexible various enhanced ability users to users' data well to of risk and identify enabled related PBOC as needs, more catering credit This

a new we users. saw As a among improvement notable and existing in result, drawdown intention

broader with the of again new by QX an we by programs of reborrowing X% products engagements. also offered first balance, following user existing introduced average boost drawdown from of outreach a and users' ratio engagement benefits top and borrowers, outstanding of approximately loyalty increased this, [XX%] and borrowers that the the month QX. loan meaning drawdown range existing On the user In addition, approximately and month through to our increased rates percentage from borrowers of diverse approaches,

our stable kept model. further we pricing Third, risk and economic levels, funding leveraging at our optimize performance to strength

market our institutions, During cooperation costs the quarter, far deepened to a reduction outpaced funding financial that in with further contributed our cuts. the rate

RMB ABS we overall through quarter-over-quarter and X.X the the state-owned designs, quarter, and in reduction a investments up in banks costs. issued to We billion our joint banks. innovative leading ABS funding major addition, stock product multiple of from In XXX% secured roughly further

improve, steadily institutions, capabilities broader of asset a assessment profitability. allocation optimize to spectrum with enhance credit boost our our we ability are financial collaborating As will which and

and our technology partners. optimized solutions solution of We to product the matrix begun the advanced diverse has address our steadily further needs banking to shape. business take Fourth, our and

keen the with capable to digital a the In number their banks push team forward Small tech organizational in to sizable terms institutions. transformation of providing projects our support end-to-end we solutions. of A phase. and medium-sized implementation development, assembled of professional particularly currently financial are of are service

the institutions of despite our to through bottom-line growth financial partnerships topline half, user the second macroeconomic to allocation XXXX, results. softening at will and channel optimize expand we risks with and environment, asset offerings first stickiness, closer further prudent our practice operational presence and In back and the Looking enhance the and our our delivered half performance. we balanced solid improve product forge

landscape. of our company model enhance Our our the and upgrade business ongoing to today's will efforts macro in refine resilience

deliver in We and the market and resources sustain long-term. are robust the to confident enable and position will tech growth in unique position industry leadership more us that capabilities even our credit our

program, the the XXth, repurchase the program. USD over to been repurchase million announced of a worth Since actively have On shares which up share XXX June executing XX under we we next months. the we may announcement,

returns We have profitability and rewarding those flow for in confidence through long-term committed company's initiatives. to value strong and cash shareholders performance remain and the creating our shareholder

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

Alex Xu

Okay. we modest see and Thank throughout morning of evening, improvement to slower-than-expected aspects first call. our in good year. many second Haisheng. operations to earnings everyone. Welcome continue the quarter Good of market the half our Despite the you, recovery,

Users' activity in months, continue growth drawdown levels accelerated recent the QX. to improve loan in volume led which ratios measured by to

market of still recovery pace some to long-term growth. are key service the uncertain, quality offerings, with partners relationship sustainable we our Although, and is optimize drive product proactively to and ultimately taking strengthen actions

X.X% solid. in sentiment X relatively day In reflects macro Key the setting the user of slight best risk quality indicators quarters. X.X% was were in towards base QX versus somewhat of uptick recent stable, QX, borrowers' remains record the delinquency delinquency The leading Day in QX. X ongoing near level our uncertainties.

seasonal was XX-day collection improved factors, in versus in mainly XX.X% as rate rebound well collection XX.X% sharp some as QX efficiency. reflects This the QX.

recovery economic we future. may in near remains continue the these metrics As to uncertain, some see fluctuation of

effort be Although, relatively our continued to in stable proactively risk level risks. overall should mitigate

was RMB billion Total loans, to RMB for in tenors. QX Early overall QX a capital-heavy as stable of in X.X X.X X.X RMB sequential net volume growth credit driven decline relatively from was RMB ago. billion billion capital-heavy in QX. revenue levels versus year stable RMB year-on-year billion tenor under in year QX loan decline QX and service to due expected a repayment were ago. increase QX compared The was in X.X in Revenue The RMB effective X.X new versus rates. average and X.X billion well reflects interest and mainly as lower average relatively billion

helped X.X On-balance sheet and RMB We billion for further overall us ABS, account for the and and total issued which a drive cost XXX% volume. nicely of record loans our loan licenses. to year-on-year XXX% continued better grow and utilization of our nearly microlending funding respectively, lower XX% sequentially, up

expected to XXX X.XX RMB million billion The service in average loans QX and also in mainly year tenor the the average decline due of compared year-on-year to platform decline pricing. X.XX RMB a RMB QX Revenue billion decline modest from overall was in ago. capital-light was and in

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

and for of a bearing non-risk the environment year operational mix remainder We on conditions. expect to we to the gradually operations bearing a trending between are different risk macro be level. normalized and our and seeking this based ratio solutions Also, of evaluating components better down

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

to -- to pricing be stable coming be quarters. continue expect we the forward, relatively for Looking

macro line Sales flat approximately users new We and in costs marketing acquisition expense credit Q-on-Q on user may roughly we for and existing of we historically XXX. X.X to remained acquisition, increased marginally Where pace prudent our increased as slightly repeat to base, a efficiency based user continued of QX, we Q-on-Q user borrowers quarter. RMB growth. we'll operations, new on user throughout added continue in focus acquire credit will continue our million drive as also to majority at Unit the XXXX. first versus Meanwhile, new adjust our approximately conditions contribute vast diversify to channels. re-energizing

been against as prudent portfolios the continue improving. provisions losses, we of of to booking potential in provisions Although, further has the we will periods, expect take loan to write-back stabilizing previous credit a profile should our approach overall from risk

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

which stable our ago. compared With a capital-light model, to again balance contribution risk loan low in ratio, results as was X.Xx shareholders' is QX equity, solid of leverage bearing historical operating from divided at and by defined Xx year

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

our due cash approximately RMB roughly increase Total RMB QX. in QX X.X cash RMB in billion Non-restricted to compared flat RMB cash the generated in position, X X.X billion operations from RMB equivalent was QX Q-on-Q. lending. sequential compared QX, X.X to was cash was billion cash billion approximately cash QX. mainly X.X in in balance in to of billion and We sheet usage decline in The

to offerings. to to initiatives, As develop we're expand we earlier, large new discussed continuing deploy for new service look and technology opportunities resources

profit net QX. RMB billion RMB in was XXX X.XXX million in to compared Non-GAAP QX

U.S. QX's increase and schedule. $X.XX dividend represent is XX%, As to support per ADS, business per in current XX% cash or development we to to the believe to In our distribution a ratio. call, declare payout ratio dividend approximately from continue switch our share Today, shareholders. we $X.XX a which to generate ordinary semi-annual healthy our announced of to flow sufficient to we're to glad both, operations, cash semi-annual payout position to XX% dollar of dividend we return earnings and our

June XX-month $XXX to XX, up we to repurchase over in plan share million buyback XXXX, Also, announced a period.

open in price As of we at bought approximately XXXX, already an [$XX.XX]. have XX ADS average million XX, worth our market USD August of of

will half we the and execution return in our to accordance execute program program the continue relative dividend with We of may of a more the plan, than the fully buyback With and rules net shareholders. our profit to regulations. repurchase

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

our macro macro the economy. we At outlook, somewhat conditions in Finally, easy growth in We growth regarding the slow QX, see credit, which accelerated a continued in of comp. loan rest this volume driven juncture, by year. consumer with see well, in do is notice in still on we depending recovery for part rate year-on-year the uncertainty

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

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

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

Operator

Ye question from [Operator UBS. from Instructions] of First Alex the comes line

Alex Ye

there to strong my So the so be less growth strong the and growth X appears past dislocation quarters. is, volume revenue question between the in some

some that So, to how expect rate change going the repayments to So, changes? led the is forward? higher or is such it there trend take revenue mainly should issue we due mix product

Alex Xu

Sure.

loans growth is mainly the I because the is so in year which and think, as grows first reason the the the of duration this part are well will shortening, than of grows far probably because the the revenue I take we encountered quarter that the as loan this issue loan you're early the balance right, slower of basically, one, of in And repayment. volume Alex.

of we're duration early the sort early still there and gradually, impact a kind saw pretty in in repayment the for seeing the because quarter, but on of the trending second If average, a around you has timeframe of April the though, started quarter, of that was shorter of although to peaked stream, recall, marginally kind significant still right to historical direction the revenue repayments. book. Even we sort of compared the that us, to first loan

of accumulation kind slower result loan of would and a Now, balance revenue, the a kind that shorter loan of to or the the in definitely in a duration relative slower volume. also slower growth

product -- they to impact, durational are guess, bunch factor it's of more shorter don't didn't to kind significant the perspective, that taking We I have I a and significant so think mix of new from mentioned I products a say, much too a No, has issue happened duration. that's with we're do be earlier.

some we -- going move kind kind loans second the Then, quarter, taking the of longer forward, of tenor the the of period. gradually move measures duration to are since to we ever are or a

the half, of second May improvement we from continue the far. -- July, since you to actions gradual will the for what take some you mentioned, half a bit take first and, -- compared duration will And half. or see second hopefully, the May to rate, little increase manage to saw the the see As so improvement kind we revenue -- to I a in

Operator

comes question Suisse. from Frank line Zheng the of from Next Credit

Frank Zheng

Credit Suisse. is Frank This from

to duration the step portfolio, forward, for do coverage based extra of room up risk need latest considering we foresee any any and take taken we loans? XXX% there And in the more is duration just to the this And improve question us first provision the the on just previous second environment credit The shorter especially provision extra another the is that measures question. going write-back the or specific the the over ratio recorded macro performance we give follow-up a are question longer want current -- of to is to I Can more quarter? environment, macro curious management or of preferring duration?

Alex Xu

Okay.

answer first and Zheng, let I then second part. Mr. take our part will think, I CRO, I'll the the

provisions provisions, been enough terms in than the very all you potential sure only cover to And of to policy -- are have make book that we provisions as the and So, our know, consistent conservatively there. financial basically majority look at special risks period, the of a you we other report or if of quarters, the for write-backs the X previous X quarter, the very of from have kind provisions. historical than the the us, more

risk when a continue quarters, coming all multiple, the As remarks, in write-back right think, in so I relatively at will this prepared see although you profile, write-backs we write-backs to stable, a now, -- third-party the in see and manufacturers. my mentioned know, in of up should can a size point, I continue determine we you coming fluctuation to to evaluation the you the the some we the it's also see quarters. But directionally although

will if to where -- on book And our macro in more risks. of additional provision, observation we prudent take necessary, continued feel we of the and we environment, potential booking approach, based we terms and provisions the will more will counter

on. have you ratio that's coverage a provision the we than, something, The target a metrics -- number. rather a it's last calculated versus more mentioned, It's a quarter's not XXX% XXX% than

then or the the higher when So and that coverage happened parties' so provision XXX% and basically on something, more we it targeting book to a -- indication third we're and do provision based we calculation, something not volume that a no. loan be quarter's we that's evaluation. book It's ratio

of stop second part over Mr. here. And to Zheng. will I question, I'll the hand

Yan Zheng

of result duration contractual is repayment. tenor We a combined believe early loan and

Early due I repayment macro to was So operational the changes and steadily the talk first, reason environment early the efforts. our will is mainly about second repayment. declining,

off. sentiment repayment the a From macro was early perspective, cooling

been refined for that operation our April loan perspective, ratio X consecutive observed months the strategy ways. reduce decreasing from in historical X July. early repayment have from operation have the has for we And to early our to We repayment portfolio

first to salesperson The applied telemarketing this KPI the control a we is, into ratio. to rule, ratio the of the new the incorporate early so repayment tends salespersons,

free the Second, some repayment seen for the coupon we we on X-day we optimizations, when to have repayments. users, early those have intention those in benefits improvement reduced offer they short-term retain borrowers. Three, avoid to the interest Based our situation. early

vice offer we contractual the tenor the We shorter user's for based As the or won't profile. better versa. say tenor, on

For those a longer and the less who we reduce income pressure. we shorten example, But have and repayment to lower long-term the tenor tend creditworthiness, visibility, to risk tend their stable higher have for to for those offer tenor to exposure control risk. the who

user different have So, profile the the different risks. long-term short-term and ticket will size, credit impact the on and

fitness to model, model, of the tenor upgrade Gradient will the self-developed We balance GBST long and improve and Tree further the our risks. profitability Survival

decline in expect loan and further the we effective increase In management, our conditions proactive repayment conclusion, in macro duration will and early current the ratio our QX. will

Hope your answered question? this

Operator

on Xu America Securities. questions from next from move Bank Emma the to of the We'll line of

Emma Xu

I questions. So, two have

one and We loan The consumption consumption billion consumption short-term is third loan household it declined the recovery -- the see RMB quarter. in first about XX the lackluster. remained demand July in seems

your how loan at And you question loan So -- -- see -- loan the is about side? second pricing. what your what's the do demand

will your pricing? do And cut loan with need to LPR being lackluster for So adjust June, the pricing? also since you twice demand loan impact your down the loan

Wu Haisheng

[Foreign Language]

will answer question. your I

our July. short-term citizens' this We in has of that unlike and citizens' the August, also loan the our -- to in the trend balance increase declining noticed in July loan short-term From perspective, loan continued balance. decreased

catering the the broadly improvement industries. repay more we of And the than efficiency lower beginning in gained users highest we the consumer for hotel segment. this SME transportation, relatively seen have perspective, managing users, the quality users of the earlier, have the the efforts, users loan users demand. in defined structural some quality user especially SME since are to terms operational demand. changes perspective, from Plus, demand defined From the those year, while quality have From in tend broadly the stable and usage credit perspective, tourism, active construction, our

consumer the to on demand, spending broadly expect the Given defined softer credit users. our we increase SME

will the our will improve in quality And to service our broadly defined user customer -- segments the improve existing stickiness. for new our will user's We acquisition. increase we penetration users, the further, increase we in

impact the pricing, very past we LPR expect cuts, pricing. our will of terms stable future. rise, pricing our In From be experience, little the had or the the in on

this mainly pricing supply demand Our is the by in and determined market.

Operator

moment One the question. for next

of Next the Yada CICC. line from is Li question from

Yada Li

just I $XXX Yada the it share behind do way question. have I'll I program quick elaborate value wondering is this This regular today to million the and more please could should consider with to consideration about time? one my translation. CICC repurchase we the shareholders? you And return as was a

Wu Haisheng

[Foreign Language]

Alex Xu

Yada, Basically, every cash when as form making position Okay. And consider cash that our too there that without a return, question. we would reviewing allocation well of of thanks the in are capital of we free -- we as actual the our like of either the determine okay. kind buyback, quarter, dividends deploy strategy. sitting we the for much are cash idle the a in form the or to then there

-- optimal a to that's it's, as ongoing say, between balance return process well. is dividend, the the And an an in and shareholders. we quarters best consider way I So to future a would the buyback

along will some XXX said, our combination I program determine I longer kind to of term, we first say the to between million need what do dividend. thing to we the first, the complete and, there. and this But, review like afterwards do a So USD periodical would the buyback way, buyback

Operator

interest questions. management closing hand the like session. time, In I to for now the conclude for of remarks. call will to back the I you Thank the would Q&A

Alex Xu

we Since everyone courtesy, right we call their in for us the earnings have so Thanks conference. Okay. conclude our behind joining just our here. call, their to peers

please questions, us additional contact have you. you offline. Thank If

Operator

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

may disconnect. You now

Qifu Technology (QFIN) 21 Aug 232023 Q2 Earnings call transcript