Earnings call transcript Q2 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to OneConnect Second Quarter 2023 Earnings Call. At this time, all participants are in listen-only mode. After the management's prepared remarks, we will have a question-and-session. [Operator Instructions] Please note this event is being recorded.

And I'd now like to hand the conference over to your host, Mr. Head Relations. company's the Chan, of Investor Rick

So ahead, Mr. Chan. please go

Rick Chan

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

and IR Our available and operating were earlier financial results on website. today our released currently

management Today, question-and-answer business Shen give Feng, be Mr. and into will Chong a our Afterwards, financials. hear session, CFO, you then, remarks Yongtao, who our and closer you. will from offer will to opening Chairman CEO, our an our highlights. will in Mr. And available Luo look

We have of Mr. Banking, Mr. Head our and Chief An Head OneConnect Ms. Digital Corporate Strategy, Executive, Li Michael Bank, Ping Management, Ms. of and Shen. Product CTO, Fei; Jia; Planning Ellen our Jessie Jie;

statements English. in Mandarin conference, today’s In or make our management will in team

be should Mandarin, case and the For a In discrepancy the in will statement prevail. language our translation consecutive the Mandarin provided. between in original English version any of those version,

we the Let cover me start. quickly Safe statement Harbor before

making involve that we will cause and differ note Please we uncertainties, a materially. actual present results statements, both could measures. and risks be non-IFRS may IFRS that As of to number forward-looking financial which

now our our and Mr. call Mr. to that, Chairman Feng. pleased Shen, Shen to Chong With CEO, please. I’m turn

Shen Chong Feng

[Foreign Language] [Interpreted]

the Shen in Hello, century. earnings XXXX QX release. for Feng. and Chong everyone. unseen dialing I'm HX accelerating feature XXXX you Thank in changes OneConnect continues to

is now key economy strategy upgrades. returned a the normal, as at and our China of whole As and economic a junction industry recovery to

still full to before environment macro recovery. has improving, is a the stabilizing lot it While and overcome

the and our growth led growth. six gear engagement, to months a proactively XXXX, broadening we up of and corporation, value, Stage in for on continues X business of stage first for and which adjust product OneConnect the strategy crucial focused to Committed of momentum improvement steady of development, win-win philosophy business while strong to execute structure upgrades customer quality

we narrowed shareholders attributable percentage from or million. of points the XX.X% significantly Gross XXXX. XX.X% RMBXXX Net at same solid with creation margin business X.X as small in to continue financial revenue business our structure first-half low the margin limited year, months. in performance by last the pivot delivered now proactively first towards a high value, period and by customization by gross in We dip loss saw six XX.X% up adjust to and phasing value was

standardization, X load to revenue and consistent productivity contract This work, the nevertheless will internal we means solid and a profitable travel medium efforts remain only the is hard foundation faster to At the the able in have to medium turning product this We strategy. led term. management’s execute time long-term. over it further Admittedly, as thanks and confident to short-term. improved Stage we’ll in when same of we implementation operations that be license has the efficiency all and

Next, I'll of share with you, business XXXX. highlights in the first-half

could to of page go four slides. you if Now please our three and

while expanding of to institutions, overseas. XXXX a where business is crucial ecosystem X Stage devoted engagement, our and Two we are structure year focusing on that Wings broadening strategy One is customer Body, during financial

Next, please go to page five.

off office our this Commercial Hang Wing CIO and of expanded Hong successfully Mutual, Government Old cooperation quarter [Indiscernible] customer coverage FCF, institutions OCBC kicking in including regulators, Bank, financial We Kong and with Bank.

sell execute projects. existing -- our we further new by cross-sell closely strategy, partners To customer with initiate deepening working also and are engagement to to continuing

partners. financial Daga to Bank, instance, Continent Huaxia China are signed a empower new their and OneConnect transformation to name few China, Bank institutions just with Postal digital continue will deals of journey. For Insurance Savings Insurance,

six. page on Next

incorporated Risky further efficiency enterprise retail training, expanded new customer remote is two scenarios, SaaS risk digital into has has rate which Implementation recording, XXX rich has mature within new and incorporating well Daily In desired improved identification weeks, loan Product been upgrades. our In XX%. business circle and product another in empowered credit, QX, accuracy effective delivery application. frame. to also in as service, standardization, double interview, to -- added including over continue averaged projects as is significantly. banking of improvements see which digital shortened new XX%. self-developed banks for products achieve with time XXX% log-in indicators. to coverage marketing AI has a On higher their speedy scenarios top

transformation make introduce the and the us margin established to product this We so control, as the transformation delivery in competitive taskforce implementation to more aimed cost market. strengthen guidelines implementation and gross enhance quarter to improve efficiency,

page please seven. to go Next,

offering to Also series in OneConnect a management, boost of can improved and we leads also by analysis smart decision-making of less that to and frequent variance iterations functions technology. operation forecast with banks solutions and more products analysis for smart adapt commercial digital Regulatory and new for efficacy system business include transformation, segment, reviews finance the as in making, in operation fighting and banks. in than incubated market profitability example, and has continue banking the has offering through even more self-control monthly X%. Super land to This projects gone new profitability tracking. Brain decision daily

eight. page on Next

The by now experiences. brand VoLTE with remote hand other costs In enhance digital The than and core improves been operation systems survey efficiency a survey over claims the further more and which XX%. technology insurance, claims panel, has operation XX% and upgraded. cost personnel on equipped by utilizes new is customer to

smarter remote the in insurance, introduced online manner. In this more done operation also enabling module of year, platform in to be digital in we first-half addition, and a

nine. Next on page

Administration. strategy. also expanding cooperation of are with two regulators in OneConnect which Regulatory X breakthroughs our We and ecosystem new OGCIO Shannon like achieved Financial Stage initiatives launched key and overseas, meaning wings, We

projects, During including an equity private building portal and supervisory flagship mobile more IMS reporting information System. found

with and an improve FD them This efficiency operation relationship. our this Finance delivery Turning in long-term strategic to overseas, important costs. to project launched May we product cooperation cut help marks milestone

enhancing OCBC with Bank opening, lowers Hang to Wing customer establish costs, account working online also are experience. seamless We while which

page Next XX. on

our the Trade of by as quarter, SME have to Kong Award Union. XXXX been of Fintech awarded KPMG, to institutions this Asia China well including Best Federation as Certificate products XXXX National just name National Bank renowned has Excellence Hong from a Labor Award, Mayday many few. OneConnect Money from

Academy across State earlier We out than more world, architecture trend. digital Looking digital ever. year by opportunities therefore maps overarching challenges technology demand finance China, development strategic to of issued and accelerate integration of plan guidance building relevant digital both has and in the the abound become And China. Council a higher The the most and forward, become see transformation one has strategically important as the this strategic plans digital the transformation embrace by is banking to of Technology. investment. say Information could their ramp and estimate IT China's fair $X.XX an up trillion services Communications there are that from for economy in It potential in transformation the RMBXX financial to trillion according digital industry and XXXX exceed banks. institutions huge China by or upside and for digital

behind revenue our makes our the was did macro months cautiously but environment, Considering six the about business still optimistic outlook. which signs mild we us pressure, trails first business macroeconomic pick under in amid positive recovery, recovery a up

by leverage In digital the and values edge, our unique with brought will we customers. following opportunities expand offerings strategic to value continue introduced contract third-party transformation high months, in banks seize

of engagement. to engagement We also will are customer land will stickiness, more X customer able strategy Stage improve. that with be And OneConnect broadening confident targeted customer and we groups,

We us help are better quality us and committed further and achieve development vision. only that will bring our ultimately

it hand you I'll on to Yongtao Next, over Luo to brief our financials.

Luo Yongtao

in our you. achieved strong resilience evening, the operational showing second quarter, a everyone. Okay. We Good outcomes. thank

of XXXX Just as and decline Mr. to RMBXXX said, Shen the the by second decreased due XX.X%, compared delivered same last revenue primarily period to of the support we million year, transaction based revenue. quarter in in

by third-party XXXX, in The Premium number from the period decreased the activities. million RMBXXX X.X% primarily caused for to banking of year-over-year recovery fewer to to digital from segment, generated in by second same slower-than-expected customers of in XXX decreased Plus banking due XXX customers customers Revenue quarter.

loss by an the points XX.X year-over-year level. to was ratio at negative shareholders all-time to a percentage loss to million net are on shareholders attributable RMBXX We that thrilled net greatly improved X.X%. low to And corresponding basis see

customer. RMBXXX XXXX by focus second QX key revenue our Now to contributing our revenue QX last revenue year, In to turn second continue our our revenue we let's we to to total mix stage as [Technical and decreased by compared improves Difficulty] third-party of the from of -- it’s million, advance X.X% XX.X% to improve. believe a further strategy. in will Once initiatives, macro third-party quarter,

X.X% XX.X% operation decreased mainly management RMBXX quarter, to contributed revenue and The support our Lufax million Lufax resulting second services. for in risk was decline revenue lower total optimization, of business demands operation from due revenue. from to the our and In Lufax

An a of financial XX.X% An An our was from revenue. Group time. Group’s bit embedded The important daily decline OneConnect as been flagship volume Group XX.X% decreased client. Ping due overall core Revenue primarily institutions most a which deeply services An as million to from RMBXXX operations. in Revenue of into technology to recovery contributed and to are An Ping takes solutions, transaction decline Group Ping provided total Ping regards our have Group Ping

success. to observed recovery have optimistic. some An proven us services record level of macro Ping that a We Group leave Our also cautiously

the from from XXXX, and the Group XXXX. corresponding in dropped Revenue customer Ping decreased revenue Lufax revenue from An of third-party XX.X%, for the X.X% In decreased first-half, X%. by periods

mix business by revenue Moving on type. to

Implementation revenue efforts customers, XX.X% look second RMBXXX increased a by consistent contracts, take quarter. Let's new million, our first. as on digitalized for year-over-year in demand by to results contributed expanding on existing basis especially from the as customer projects product management well QX at a mainly delivery

to of by by marketing services from activities due reduced volume Revenue million, to transaction million, transaction to channel products. banking decreased risk banking year-over-year second RMBXX in decreased related analytics from the mainly volumes RMBXX business quarter. in management declined XX.X% risk origination solutions, of Revenue recovery lower-than-expected to services year-over-year because primarily due XX.X% in

and primarily XX.X% operations support services quarter. to from banking which a services the in million, by decreased was second ecosystem RMBXXX basis caused products customer year-over-year on reduced by service demand on auto Revenue

basis, Revenue transaction focus on forward. million of taking to cloud our it from cloud was the services chunk up the reduced development from services mainly platform going Revenue platform biggest revenue, of remains RMBXXX a usage. volume our and by due continued total decreased XX.X% of year-over-year

decline RMBXX was Kong Revenue from million, second Revenue Hong to as PAOB, The support services by implementation virtual last primarily lower due in year. compared auto second from demand business XX.X% XX.X% the million to the other services. quarter. banking increased ecosystem post to to our year-over-year for in quarter decreased RMBXX and by

XX.X%. implementation dropped revenue services X.X%. decreased If of Revenue support XX%. XX.X%. increased increased Risk look from declined other and from first-half revenue services post Revenue XXXX, from decreased management Revenue platform XX.X%, revenue operations at XX.X%. business Cloud we origination and XX.X%. dropped PAOB implementation

see, infrastructure. more technology can developing you solutions we’re As around

We will new projects. product remain model. our expand committed acquiring and and business to strive to a and stock-based mix stable adopting we our sustainable more charge diversifying Meanwhile, by customers

to turn cloud million biggest XX.X% sector, services by in accounted sectors. recent of Gamma focus platform second by the was chunk reduced of declined usage. mix RMBXXX XXXX of to total revenue the revenue. product revenue of caused mainly quarter our contributed product The innovation transaction years, X.X% of Let's for in and decline volume

Digital volume risk our Banking unfavorable reduced in related to origination were value of to by XX.X% sector, and revenue, transaction basis circumstances. which on for accounted and phase that initiatives a out was products of million, services, business macro XX.X% lower to mainly RMBXXX by caused year-over-year which our management total reduction

products XX.X% for for technological accounted out phased which in limited value primarily to in revenue, quarter million demand by each as RMBXXX well of sector, growth sector, XXXX, the those we to insurance second total with ecosystem with product In reduced services. products due X.X% of or the decreased margins, no potential Digital standardization. as added, no revenue auto with

before, for visual saw the I accounting of revenue in X.X% In sector, as addition, total our mentioned just second quarter. expansion banking continued

number XXX of recovery base customer expand our we activities. period take XXXX, a the look advance of caused customers. we year, slower-than-expected use same fewer We now expect primarily continue to believe with and for last XXX, products banking as plus customers of compared our We Let's customer our initiatives, in numbers. decreased banking premium first-half more Premium In digital the to at sector, due to services. as the by Plus and customers further

margin. gross a take let's look Now at

our We margin see are second million XXXX. our profit and margin we deepening RMBXXX the Plus in On very continue gross XX.X%, Premium with of stable Gross quarter customers. gross reached was remained to XX.X%. at integration glad non-IFRS as product basis, engagement

an X.X the this In XX.X%. XX.X% gross first-half margin points and to was our margin of average year, improved gross percentage

in integration quality our and execution growth, the helped on together mentioned, Shen profit gross second quarter efficiency in product As of Mr. efforts margin. improve continued XXXX, with the delivery

the achieving to profitability. and will interval continue strategy that stick We of

on Moving expenses to attributable shareholders. loss net to and our

are our well track You can we target. to on see that mid-term breakeven

of development XX.X$ down RMBXXX all, First research year. RMBXXX of and came million to last expenses same the in million our from period

it revenue, of XX.X% in the percentage a to decreased compared As XX.X%, prior year. with

the second on implementing strategy product we that Phase quarter, a our focus In continued -- our X integration.

As improved our we and integrated, productive further efficiency. our upgraded products were delivery

investing Looking ahead, we at and competitiveness a measured in will reasonable and pace in keep research enhance our more to development the market. product

marketing QX million, XXXX. of second quarter RMBXX RMBXXX to compared and for million XX.X% Our in decreased expenses sales with the

advertising improving efficiency improvement and and sales sales As decreased and and in mainly marketing in percentage revenue, of decrease expenses from X.X%. from marketing activities. X.X% continued The expenses benefited marketing efforts our to

million and administrative the year. in RMBXXX prior decreased general from RMBXXX to million Our XX.X% expenses

decreased As in measures reduced and stringent expenses. XX.X%. to was and from general revenue, a of decline The XX.X% administrative cost a primarily percentage cost it employee expenses to benefits due labor of control

It's negative year million RMBXX negative and worth loss in improved from mentioning the negative million negative from environment, attributable to percentage net the XX.X% X.X%. XX.X our that period business margin under substantially corresponding same to improved shareholders net challenging by last significantly shareholders to to RMBXXX points again

The profitability page this past margin trend net to next page, X.X years. years. the of path of our a you see to trajectory our the shareholders can improvements the clear over in demonstrates From

past our cost accompanied of control disciplined reflect results the breakeven. another efficiency, operational that execution of year marking by in improved the efforts to first-half milestone Our

In of strive product efficiency and continue will operating business the our we second-half XXXX, improve integration efforts margin. to and

rest year, a level. the unpredictability continue of to to we see the of at ahead although Looking degree macro

revenue. improving focus Our on remains third-party

control improvement to We gross focus cost track stay on to well profitability. profit to will operational enhance efficiency margin, continue on and

XXXX. Next of key second list page, metrics of we financial quarter and the the first-half

gross summarized reference margin in adjustments IFRS Thank. the the we Lastly, for you. your

Rick Chan

you, Luo. questions. Operator, Shen. line. Thank you for Please Thank Mr. are Mr. ready the we open

Operator

Instructions] first comes please [Operator Goldman ahead. Timothy, from question Sachs. Thank Our Zhao today you. from Timothy go

open. is line Your

Timothy Zhao

Hello [Foreign Language]

Could in translate July recovery industry the IT also mid-August? quickly will in for quarter on the share color management spending to I myself. second financial some and

by second could My Thank question second-half and you. the product? revenue XXXX is outlook key for in share third-party management some drivers also

Rick Chan

question. Thank you for your

Shen. taken question Shen, first Mr. question the will the For -- be by Mr. please.

Shen Chong Feng

[Foreign Language] [Interpreted]

question banks short are -- first are in to the demands well, about IT with in but prudent On rise. digital XXXX, spending your are short-term, second-half prioritize IT efficiencies, reduced but longer recovery more from spend, spending medium the medium on IT run, in of this the the the over cost council IT which banks the the out February. lower In means over and solid some especially the regulators state long-term, support higher rolled financial plan institutions provide the development spending, to

So clear we see digital for demands transformation.

matured. operations, risk These home management Overall, weather and heavily banking products in segment investments. OneConnect's and applications key transformation readily with digital Dev technology offerings technology Digital data the focus increasing another we value use solutions the security invest bank's not. capabilities aspects in on. technology area also on or control which is following future, and will are most that self-controlled

We for IT developed budget have increasing requirements noticed home technology. their financial that to institutions the are satisfy

the third-party second-half product of on and question Next, about your in drivers for growth revenue drivers growth XXXX.

contracts ended So of the several we first-half high-value in XXXX.

new X focus relationships, customer well as engagement functionalities, upgrades improving integration expanding customer new to cross-selling continue customer Stage and deepening coverage. execute deepening products, We by products as will product strategy and on and of upgrading

remain new all credit good engines growth to our Gamma expected consistent digital from insurance drivers are to Life banking overseas as digital innovations, digital be for By platform we thanks well volume, and and insurance and foundation. as drive solid segment, segments. business see momentum product growth. insurance By retail and to digital

insurance. short-term, growth and Gamma comes second third-party our the and in For by primarily in overseas, drivers digital banking growth revenue from

Over Group were integration to cases technologies, previous insurance in insurance, the growth from drivers all segments of likely see longer that our experiences all run, Ping with replication our An growth. overseas advanced drive and includes banking, digital we rich life

you. Thank

Operator

Lin question please go Thank from Instructions] Lydia you. Stanley. Our Morgan from [Operator next is Lydia, ahead.

Your line is open.

Lydia Lin

Language] [Foreign

Okay.

to translate to going English. I'm So

marketing question on cost company for at also will current sales the is the company understand stage, are is So we first priority expand and how expenses but we major when the control the to manage base that curious customer to the and to improve the cutting significantly? ARPU,

or their whether efforts you. products is to is company in banks providing increasing the providing that the Thank improve help question can sales? second the And

Rick Chan

for you your Thank question.

be the first taken be Shen. by and second will Jessie by The Jesse one will question taken Mr. please.

Jessie Shen

Language] [Foreign [Interpreted]

your to Stage following our increase customer continue months X will of ARPU, how as of well engagement. strategy our product first to execute upgrades about for on question as six we So deepening the and XXXX,

-- So improve to product our our the so to function increase upgrade first for our be as first customers. premium will product effort our products,

second add our modules to products. will more be Our effort to

improve more instance, will products. For ARPU cross-selling we by our

For Gamma instance, from cloud also we -- and other from will sell try when segments. product our segments cross-sell banking to we for platform platform,

Rick Chan

Thank the Smart mainly an you. serves Mr. In Shen improve help them branches relationship This to better question your we banking maybe offer retail managers named take segment, to app bank offering their retail for services digital Banker. second please. customers.

is Banker is This role retail a banking. Thank the in -- of digital very also Smart the effective you. transformation

Operator

is Instructions] is open. Laura CGS-CIMB. [Operator go from Thank Lee line next your you. Our Please from question ahead. Laura,

Laura Lee

[Foreign Language]

questions. translate me my Let

with my revenue the question. want controlling area the will forward? to is, primary revenue cost moving Second program, the advantage be current about key question controlling Thanks. competitive I specific currently. about ensure is a focus That's which third-party the for efforts question to know cost First status of

Rick Chan

your Thank Laura. question, you for

by second Luo Shen. Mr. taken The first taken question be one will Mr. the and by

Luo Yongtao

[Interpreted] Language] [Foreign

happy achieved that are report success we we cost reduction. in Firstly, to significant have

As you the of by this progress year. market can see in first-half loss reduction

have a costs, So big margin. by and expenses reducing operating by optimizing decreased headcount our

stage, on to our investments that For allocation, for next about save our return resource can we maintain and improving will be our cost priorities will discipline prudent better development. more costs. firstly Whereas enhance business productivity

terms with specific our on deliberate be we will To development make of and choices R&D research more the to products in reasonable quality. skew expenses, of higher more and resources

of will sustainable and sales our you. for ensure healthy Thank are ensure provided expenses, marketing we growth business. enough As to resources and

Shen Chong Feng

[Interpreted] Language] [Foreign

Next, I'll answer your questions peers. on edge our competitive over our

technology AI-powered financial our services collection to which experiences, service, plus optimized scenario we AI marketing. and compared the So competitors, reach and business provide include customer

We also platform offer risk wholesale and for banking security. mature management instance, products and solutions, for and retail data

business by Ping These to replicated Our recognition. by institutions. external internally financial readily wildly be proven have can limited other workflow been by with and Group An financial Ping institutions been customization An market Group has and high used

to model, itself addition developed satisfy our by making for technologies has In through the implementation self-control in technology consulting OneConnect sure for own shift requirements also banks. many plus home offerings involved in

the Also banks to their also their add to helps by only business costs OneConnect can management. another risk we empower their not efficiency, comment to more lower in banks expand and question credit improve previous raised analyst, and on retail,

Thank you.

Operator

We will call, to back closing remarks. hand will I now so conclude for any today's Rick

Rick Chan

out. speaking please us everyone, and free in following to with you Time's the team, our much, us Thank your interest Thank feel call again. joining questions, operator. look you forward IR running and very on contact for you, to If appreciate we any today.

Operator

Thank you, today's joining for everyone, call.

lovely a You disconnect and lines, day. your may now have

OneConnect Financial Technology (OCFT) 16 Aug 232023 Q2 Earnings call transcript