Financial Performance - The net profit for 2023 was RMB 4.3 billion, with a non-GAAP net profit of RMB 4.5 billion[4]. - The net income for 2023 was RMB 4,495.5 million (USD 633.2 million), compared to RMB 3,906.6 million in the same period of 2022[14]. - The fourth quarter net income totaled RMB 4.5 billion, with non-GAAP net profit reaching RMB 1.15 billion[15]. - The net income for the fourth quarter was RMB 4,495.5 million, compared to RMB 3,906.6 million in the same period of 2022[16]. - The net profit for the fiscal year 2023 was RMB 4,268,577 thousand, representing a 6.6% increase compared to RMB 4,005,568 thousand in 2022[58]. - The non-GAAP net profit for the fiscal year was RMB 4,454,181, representing a 5.9% increase from RMB 4,205,305 year-over-year[62]. - The company reported a net profit margin of 26.2%, with a non-GAAP net profit margin of 27.3%[28]. - The company’s diluted earnings per American Depositary Share (ADS) were RMB 6.88 (USD 0.96) for the period[22]. - The diluted earnings per ADS for the fiscal year ended December 31, 2023, was $3.68, compared to $3.50 for the previous year, indicating a 5.1% increase[62]. Revenue and Income Growth - The total loan facilitation and initiation scale reached RMB 475.8 billion, a year-on-year increase of approximately 15.4%[14]. - The financing income for the fourth quarter was RMB 1,485.4 million, an increase from RMB 1,002.1 million in the same period of 2022[16]. - The company reported a total financing income of RMB 5,109,921 thousand for the fiscal year 2023, a significant increase of 46.5% from RMB 3,487,951 thousand in 2022[52]. - The gross margin for the fiscal year 2023 improved to 29.8%, compared to 24.5% in 2022[52]. - The operating profit for the fiscal year ended December 31, 2023, was RMB 4,856,964, a 8.6% increase from RMB 4,472,184 in 2022[62]. Operating Metrics - The operating profit margin for 2023 was 28.5%, while the non-GAAP operating profit margin was 29.4%[14]. - The operating cash flow in the fourth quarter reached approximately RMB 2.35 billion, setting a historical high[15]. - The operating cash flow for Q4 2023 was RMB 2,351,791 thousand, up 31.2% from RMB 1,792,477 thousand in Q4 2022[54]. - The operating profit margin under GAAP for the three months ended December 31, 2023, improved to 28.5% from 24.2% in the same period of 2022[60]. - The non-GAAP operating profit margin for the same period increased to 29.4%, up from 25.5% year-over-year[60]. - The non-GAAP operating profit margin for the fiscal year improved to 31.0%, compared to 28.2% in the previous year[62]. User and Loan Metrics - As of December 31, 2023, the platform connected with 157 financial institution partners and 235.4 million potential credit demand consumers, a 12.8% increase from the previous year[6]. - The number of users with approved credit limits reached 50.9 million, up 14.4% from 44.5 million a year earlier[6]. - The total loan facilitation scale in Q4 2023 was RMB 119.0 billion, a 13.8% increase from RMB 104.6 billion in Q4 2022[6]. - The loan balance under light capital model and other technology solutions reached RMB 114.5 billion, an 18.6% increase from RMB 96.6 billion a year earlier[6]. - The 90+ days overdue rate for loans was 2.35% as of December 31, 2023[6]. Shareholder Returns - The cash dividend for 2023 is expected to be USD 170 million, with a total value of USD 132 million in share repurchases since June 2023[4]. - A new share repurchase plan of USD 350 million was announced, reaffirming the existing semi-annual dividend policy[4]. - The company plans to distribute a semi-annual dividend of USD 0.29 per A-class ordinary share or USD 0.58 per American Depositary Share, with a total dividend distribution of approximately USD 170 million for the fiscal year 2023[33]. - The company has approved a new share repurchase plan worth up to USD 350 million, effective from April 1, 2024, for a period of 12 months[36]. Cost and Expense Management - Total operating costs and expenses were RMB 3,215.9 million (USD 453.0 million), up from RMB 2,962.7 million in the same period last year[18]. - The company reported a decrease in sales and marketing expenses to RMB 1,939.9 million (USD 273.2 million) from RMB 2,206.9 million in 2022, attributed to improved marketing efficiency[27]. - The company’s total operating expenses for the fiscal year 2023 were RMB 11,433,063 thousand, a decrease of 5.4% from RMB 12,081,746 thousand in 2022[52]. Balance Sheet Highlights - Total assets increased from RMB 40,343,170 thousand to RMB 45,818,572 thousand, representing a growth of approximately 11.5% year-over-year[50]. - Total liabilities rose from RMB 21,411,873 thousand to RMB 23,808,715 thousand, an increase of approximately 11.2%[50]. - Total equity increased from RMB 18,931,297 thousand to RMB 22,009,857 thousand, reflecting a growth of approximately 16.4%[50]. - Cash and cash equivalents decreased from RMB 7,165,584 thousand to RMB 4,177,890 thousand, a decline of about 41.5%[50]. - The provision for receivables was RMB 2,151.0 million (USD 303.0 million), up from RMB 1,580.3 million in 2022, due to an increase in loan origination scale[27]. Future Outlook - The company will provide forward-looking guidance during its earnings conference call scheduled for March 12, 2024[37]. - The company plans to expand its market presence through new product launches and strategic partnerships in 2024[52].

Financial Performance - The net profit for 2023 was RMB 4.3 billion, with a non-GAAP net profit of RMB 4.5 billion[4]. - The net income for 2023 was RMB 4,495.5 million (USD 633.2 million), compared to RMB 3,906.6 million in the same period of 2022[16]. - The fourth quarter net income was RMB 4.5 billion, with a non-GAAP net profit of RMB 1.15 billion, and the annual non-GAAP net profit reached RMB 4.45 billion[15]. - The annual net profit for 2023 was RMB 4,268,577 thousand, up 6.6% from RMB 4,005,568 thousand in 2022[58]. - The non-GAAP net profit for the fiscal year was RMB 4,454,181, up 5.9% from RMB 4,205,305 in the previous year[62]. - The company's net profit attributable to the company was RMB 4,285.3 million (USD 603.6 million), compared to RMB 4,024.2 million in 2022, representing a year-over-year increase of 6.5%[28]. - The company reported a net profit margin of 26.2%, with a non-GAAP net profit margin of 27.3%[28]. Revenue and Income Growth - In 2023, the total loan facilitation and initiation scale reached RMB 475.8 billion, a year-on-year increase of approximately 15.4%[14]. - The total financing income for Q4 was RMB 1,485.4 million (USD 209.2 million), an increase from RMB 1,002.1 million in the same period of 2022[16]. - Financing income for the year surged to RMB 5,109,921 thousand, a 46.6% increase from RMB 3,487,951 thousand in 2022[52]. - The company's operating income was RMB 4,857.0 million (USD 684.1 million), an increase from RMB 4,472.2 million in 2022, reflecting a year-over-year growth of 8.6%[27]. - The operating income for the fiscal year was RMB 4,856,964, representing an 8.6% increase from RMB 4,472,184 in 2022[62]. Shareholder Returns - The cash dividend for 2023 is expected to be USD 170 million, with a total value of USD 132 million in share repurchases since the plan's implementation[4]. - A new share repurchase plan of USD 350 million was announced, reaffirming the existing semi-annual dividend policy[4]. - The company plans to distribute a semi-annual dividend of USD 0.58 per American Depositary Share, with a total dividend payout of approximately USD 170 million for the fiscal year 2023[33]. - The company has initiated a share repurchase plan with a total value of up to USD 150 million, having repurchased approximately 8.4 million ADS at an average price of USD 15.7 per share[35]. Loan and Credit Metrics - The total loan facilitation scale in Q4 2023 was RMB 119.0 billion, a 13.8% increase from RMB 104.6 billion in Q4 2022[6]. - The loan balance under light capital model and other technology solutions reached RMB 114.5 billion, an 18.6% increase from RMB 96.6 billion a year earlier[6]. - The number of users with approved credit limits reached 50.9 million, up 14.4% from 44.5 million a year earlier[6]. - The 90+ days overdue rate for loans was 2.35% as of December 31, 2023[6]. - The weighted average contract term for loans initiated by financial institutions was approximately 11.47 months in Q4 2023[6]. Operating Costs and Expenses - Total operating costs and expenses were RMB 3,215.9 million (USD 453.0 million), compared to RMB 2,962.7 million in the same period last year[18]. - The total operating expenses for 2023 were RMB 11,433,063 thousand, down from RMB 12,081,746 thousand in 2022, reflecting a 5.4% reduction[52]. - The company's financing costs increased to RMB 645.4 million (USD 90.9 million) from RMB 504.4 million in 2022, primarily due to increased funding from asset-backed securities[26]. Asset and Liability Overview - Total assets increased from RMB 40,343,170 thousand to RMB 45,818,572 thousand, representing a growth of approximately 11.5% year-over-year[50]. - Total liabilities rose from RMB 21,411,873 thousand to RMB 23,808,715 thousand, an increase of approximately 11.2%[50]. - The company's total equity increased from RMB 18,931,297 thousand to RMB 22,009,857 thousand, reflecting a growth of around 16.4%[50]. - Cash and cash equivalents decreased from RMB 7,165,584 thousand to RMB 4,177,890 thousand, a decline of about 41.5%[50]. Strategic Initiatives - The company expanded its customer acquisition channels and established strong embedded financial partnerships with leading internet traffic platforms[14]. - The company plans to enhance its growth strategy and expand its market presence, focusing on new product development and technological advancements[47].

Financial and Operational Highlights [Fourth Quarter 2023 Highlights](index=1&type=section&id=Fourth%20Quarter%202023%20Highlights) Qifu Technology achieved solid Q4 2023 year-over-year growth in total loan volume and net revenue, reflecting improved profitability Q4 2023 Key Operational Metrics (vs. Q4 2022) | Metric | Q4 2023 (RMB) | YoY Change | | :--- | :--- | :--- | | Total Loan Volume | 119.0B | +13.8% | | Capital-Light Loan Volume | 68.2B | +16.8% | | Total Outstanding Loan Balance | 186.5B | +14.1% | | Cumulative Users with Approved Credit | 50.9M | +14.4% | | Cumulative Borrowers | 30.4M | +12.7% | | 90 day+ Delinquency Rate | 2.35% | N/A | Q4 2023 Key Financial Metrics (vs. Q4 2022) | Metric | Q4 2023 (RMB) | Q4 2022 (RMB) | YoY Change | | :--- | :--- | :--- | :--- | | Total Net Revenue | 4,495.5M | 3,906.6M | +15.1% | | Income from Operations | 1,279.6M | 943.9M | +35.6% | | Net Income | 1,107.7M | 867.9M | +27.6% | | Non-GAAP Net Income | 1,150.3M | 919.3M | +25.1% | [Full Year 2023 Highlights](index=2&type=section&id=Full%20Year%202023%20Highlights) Full year 2023 saw a 15.4% increase in total loan volume, with improved operational efficiency and profitability despite a slight revenue decrease Full Year 2023 Key Operational Metrics (vs. 2022) | Metric | 2023 (RMB) | 2022 (RMB) | YoY Change | | :--- | :--- | :--- | :--- | | Total Loan Volume | 475.8B | 412.4B | +15.4% | | Repeat Borrower Contribution | 91.6% | 88.7% | +2.9 p.p. | Full Year 2023 Key Financial Metrics (vs. 2022) | Metric | 2023 (RMB) | 2022 (RMB) | YoY Change | | :--- | :--- | :--- | :--- | | Total Net Revenue | 16,290.0M | 16,553.9M | -1.6% | | Income from Operations | 4,857.0M | 4,472.2M | +8.6% | | Net Income | 4,268.6M | 4,005.6M | +6.6% | | Non-GAAP Net Income | 4,454.2M | 4,205.3M | +5.9% | [Management Commentary](index=2&type=section&id=Management%20Commentary) Management highlighted successful operational adjustments in a challenging 2023, with a prudent 2024 strategy focused on profitability, efficiency, and risk management - CEO Haisheng Wu stated that despite a challenging 2023, the company achieved its targets by focusing on **quality and profitability**, building a solid foundation for 2024, with a plan to continue a **prudent approach** focusing on **profitability and efficiency** with **tightened risk management**[6](index=6&type=chunk)[8](index=8&type=chunk) - CFO Alex Xu highlighted **strong cash generation** in Q4 and announced a new, significantly enlarged **share repurchase plan**, demonstrating management's confidence[8](index=8&type=chunk) - CRO Yan Zheng noted Q4 was challenging for risk management, with a **Day-1 delinquency rate of 5.0%** and a **30-day collection rate of 84.9%**, with actions taken to mitigate risks showing positive impacts in early 2024[8](index=8&type=chunk) Detailed Financial Results [Fourth Quarter 2023 Financial Results](index=3&type=section&id=Fourth%20Quarter%202023%20Financial%20Results) Q4 2023 total net revenue increased 15.1% to RMB 4.5 billion, driven by Credit Driven Services, with income from operations rising 35.6% due to lower contingent liability provisions Q4 2023 Revenue Breakdown (RMB in millions) | Revenue Source | Q4 2023 (RMB) | Q4 2022 (RMB) | YoY Change | | :--- | :--- | :--- | :--- | | **Credit Driven Services** | **3,248.3M** | **2,776.7M** | **+17.0%** | | - Financing income | 1,485.4M | 1,002.1M | +48.2% | | - Releasing of guarantee liabilities | 1,211.8M | 1,377.0M | -12.0% | | **Platform Services** | **1,247.2M** | **1,129.8M** | **+10.4%** | | - Loan facilitation fees-capital light | 697.0M | 955.6M | -27.1% | | - Referral services fees | 446.5M | 93.3M | +378.4% | | **Total Net Revenue** | **4,495.5M** | **3,906.6M** | **+15.1%** | Q4 2023 Operating Costs & Expenses (RMB in millions) | Expense Item | Q4 2023 (RMB) | Q4 2022 (RMB) | YoY Change | | :--- | :--- | :--- | :--- | | Facilitation, origination and servicing | 731.8M | 585.6M | +25.0% | | Sales and marketing | 551.6M | 415.2M | +32.8% | | Provision for loans receivable | 639.9M | 481.4M | +32.9% | | Provision for contingent liability | 784.3M | 1,062.3M | -26.2% | | **Total operating costs and expenses** | **3,215.9M** | **2,962.7M** | **+8.5%** | [Full Year 2023 Financial Results](index=5&type=section&id=Full%20Year%202023%20Financial%20Results) Full year 2023 total net revenue slightly decreased by 1.6% to RMB 16.3 billion, but income from operations increased 8.6% due to reduced operating costs Full Year 2023 Revenue Breakdown (RMB in millions) | Revenue Source | 2023 (RMB) | 2022 (RMB) | YoY Change | | :--- | :--- | :--- | :--- | | **Credit Driven Services** | **11,738.6M** | **11,586.3M** | **+1.3%** | | - Financing income | 5,109.9M | 3,488.0M | +46.5% | | - Releasing of guarantee liabilities | 4,745.9M | 5,899.2M | -19.5% | | **Platform Services** | **4,551.5M** | **4,967.7M** | **-8.4%** | | - Loan facilitation fees-capital light | 3,214.0M | 4,124.7M | -22.1% | | - Referral services fees | 950.0M | 561.4M | +69.2% | | **Total Net Revenue** | **16,290.0M** | **16,553.9M** | **-1.6%** | Full Year 2023 Operating Costs & Expenses (RMB in millions) | Expense Item | 2023 (RMB) | 2022 (RMB) | YoY Change | | :--- | :--- | :--- | :--- | | Sales and marketing | 1,939.9M | 2,206.9M | -12.1% | | Provision for loans receivable | 2,151.0M | 1,580.3M | +36.1% | | Provision for contingent liability | 3,053.8M | 4,367.8M | -30.1% | | **Total operating costs and expenses** | **11,433.1M** | **12,081.7M** | **-5.4%** | Risk Metrics [Delinquency Rates](index=7&type=section&id=Delinquency%20Rates) Q4 saw signs of risk stress with a 90 day+ delinquency rate of 2.35% and challenging Day-1 and 30-day collection rates - The 90 day+ delinquency rate for loans originated across the platform was **2.35%** as of December 31, 2023[2](index=2&type=chunk) - In the fourth quarter, the **Day-1 delinquency rate was 5.0%** and the **30-day collection rate was 84.9%**, indicating a challenging period for risk management[8](index=8&type=chunk) Shareholder Returns [Dividend Policy](index=8&type=section&id=Dividend%20Policy) The company declared a US$0.58 per ADS dividend for H2 2023, totaling US$170 million for the year, reaffirming its 20-30% GAAP net income payout policy - The Board approved a dividend of **US$0.29 per Class A ordinary share (US$0.58 per ADS)** for the second half of 2023[25](index=25&type=chunk) - The total dividend distribution for fiscal year 2023 is estimated to be approximately **US$170 million**[25](index=25&type=chunk) - The company reaffirmed its semi-annual cash dividend policy to distribute an amount equivalent to approximately **20% to 30%** of its GAAP net income after tax for the previous six-month period[26](index=26&type=chunk) [Share Repurchase Plans](index=9&type=section&id=Share%20Repurchase%20Plans) Qifu Technology repurchased US$132 million under its 2023 plan and approved a new US$350 million share repurchase plan for 2024 - From June 20, 2023, to March 12, 2024, the company repurchased approximately **8.4 million ADSs** for a total of **US$132 million** under its **2023 plan**[28](index=28&type=chunk) - A new share repurchase plan of up to **US$350 million** was approved by the Board, effective for 12 months starting from **April 1, 2024**[29](index=29&type=chunk) Financial Statements [Consolidated Balance Sheets](index=11&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2023, total assets increased to RMB 45.8 billion, driven by net loans receivable, with corresponding growth in liabilities and equity Selected Balance Sheet Items (RMB in millions) | Item | Dec 31, 2023 (RMB) | Dec 31, 2022 (RMB) | | :--- | :--- | :--- | | Cash and cash equivalents | 4,177.9M | 7,165.6M | | Loans receivable, net (current & non-current) | 27,502.5M | 18,484.7M | | **Total Assets** | **45,818.6M** | **40,343.2M** | | **Total Liabilities** | **23,808.7M** | **21,411.9M** | | **Total Equity** | **22,009.9M** | **18,931.3M** | [Consolidated Statements of Comprehensive Income](index=12&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Full year 2023 total net revenue was RMB 16.3 billion, with net income attributable to shareholders increasing to RMB 4.3 billion due to controlled expenses Full Year Income Statement Highlights (RMB in millions) | Item | 2023 (RMB) | 2022 (RMB) | | :--- | :--- | :--- | | Total net revenue | 16,290.0M | 16,553.9M | | Income from operations | 4,857.0M | 4,472.2M | | Net income | 4,268.6M | 4,005.6M | | Net income attributable to shareholders | 4,285.3M | 4,024.2M | | Diluted Net income per ADS | 26.08 | 25.00 | [Consolidated Statements of Cash Flows](index=13&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Full year 2023 saw net cash from operating activities of RMB 7.1 billion, but increased investing activities led to a net decrease in cash of RMB 3.0 billion Full Year Cash Flow Summary (RMB in millions) | Item | 2023 (RMB) | 2022 (RMB) | | :--- | :--- | :--- | | Net cash provided by operating activities | 7,118.4M | 5,922.5M | | Net cash used in investing activities | (11,147.8M) | (7,356.0M) | | Net cash provided by financing activities | 1,066.5M | 3,204.1M | | **Net (decrease) in cash and cash equivalents** | **(2,953.4M)** | **1,752.4M** | [Unaudited Reconciliations of GAAP and Non-GAAP Results](index=15&type=section&id=Unaudited%20Reconciliations%20of%20GAAP%20and%20Non-GAAP%20Results) Non-GAAP adjustments for share-based compensation provide a clearer view of underlying trends, with full year 2023 non-GAAP net income at RMB 4.45 billion Full Year 2023 GAAP to Non-GAAP Reconciliation (RMB in millions) | Metric | GAAP (RMB) | Share-based Compensation (RMB) | Non-GAAP (RMB) | | :--- | :--- | :--- | :--- | | Income from operations | 4,857.0M | 0.19M | 5,042.6M | | Net income | 4,268.6M | 0.19M | 4,454.2M | Q4 2023 GAAP to Non-GAAP Reconciliation (RMB in millions) | Metric | GAAP (RMB) | Share-based Compensation (RMB) | Non-GAAP (RMB) | | :--- | :--- | :--- | :--- | | Income from operations | 1,279.6M | 0.04M | 1,322.1M | | Net income | 1,107.7M | 0.04M | 1,150.3M |

Financial Data and Key Metrics Changes - Total loan facilitation and origination volume reached RMB 123.1 billion, up approximately 11% year-over-year [5] - Non-GAAP net income for the quarter increased by approximately 14% year-over-year [5] - Total net revenue for Q3 was RMB 4.3 billion, compared to RMB 3.9 billion in Q2 and RMB 4.1 billion a year ago [19] - Non-GAAP net profit was RMB 1.18 billion in Q3, compared to RMB 1.15 billion in Q2 [23] - Cash from operations was approximately RMB 1.2 billion in Q3, down from RMB 1.8 billion in Q2 [24] Business Line Data and Key Metrics Changes - Revenue from credit-driven services was RMB 3.1 billion in Q3, compared to RMB 2.8 billion in Q2 [19] - Revenue from platform services was RMB 1.2 billion in Q3, compared to RMB 1.1 billion in Q2 [20] - Capital-light loan facilitation accounted for roughly 56% of total loan volume in Q3, down from approximately 58% in the prior quarter [20] Market Data and Key Metrics Changes - Day 1 delinquency increased to 4.6% in Q3 from 4.2% in Q2, reflecting borrowers' negative sentiment due to macro uncertainties [17] - The 30-day collection rate was 86.7% in Q3, down from 87.2% in Q2 [18] Company Strategy and Development Direction - The company is diversifying customer acquisition channels and refining operations to drive high-quality growth and improve profitability [4] - A partnership with a leading short-form video platform was established to enhance customer acquisition [7] - The company is focusing on optimizing resource allocation across customer acquisition, products, risk management, and asset distribution [6] Management's Comments on Operating Environment and Future Outlook - The macroeconomic recovery in China has softened, leading to weaker-than-expected demand for consumer credit [4] - Management is confident in the long-term growth potential of the broadly defined SME segment, driven by accurate user identification and differentiated operations [12] - The company expects Q4 total loan volume to be between RMB 116 billion and RMB 126 billion, representing year-on-year growth of 15% to 17% [26] Other Important Information - The company has implemented a loyalty program to enhance user engagement, resulting in a double-digit increase in loan drawdown rates [10] - The effective tax rate for Q3 was over 22%, primarily due to additional withholding tax provisions [23] - The company has initiated a share buyback program, repurchasing approximately $80 million worth of ADS [25] Q&A Session Summary Question: What is the current credit demand trend, especially from the SME client base? - Management observed a slight downward trend in credit demand entering Q4, with the broadly defined SME segment showing slightly better demand than the consumer sector [29][30] Question: What is the outlook for asset quality and the reasons for fluctuations in Q3? - Fluctuations in asset quality were mainly due to macroeconomic factors and seasonal liquidity issues, with expectations for improvement in early next year [37] Question: What is the company's strategy regarding funding costs? - The company reported a decline in funding costs by 20 basis points in Q3 and plans to continue optimizing its funding structure [33][34] Question: Will the company continue its share buyback program? - The company confirmed it will continue executing the current buyback program and will review future cash deployment strategies after its completion [42][43] Question: How does the company view the profitability of capital-light versus capital-heavy loans? - Both capital-heavy and capital-light models generate a roughly 3% net take rate, with a focus on balancing profitability and the long-term health of the loan portfolio [47][48]

November 2023 3Q2023 Result Presentation ...

香港交易及結算所有限公司及香港聯合交易所有限公司對本公告的內容概不負責，對其準確性 或完整性亦不發表任何聲明，並明確表示概不會就本公告全部或任何部分內容而產生或因倚賴 該等內容而引致的任何損失承擔任何責任。 Qifu Technology, Inc. 奇富科技股份有限公司 （於開曼群島註冊成立的有限公司） （股份代號：3660） 2023年第三季度財務業績公告 我們謹此公佈截至2023年9月30日止第三季度的未經審核財務業績（「2023年第三 季度財務業績」）。 2023年第三季度財務業績可於香港聯合交易所有限公司網站 www.hkexnews.hk及 我們的網站ir.qifu.tech查閱。 承董事會命 奇富科技股份有限公司 主席 周鴻禕 香港，2023年11月17日 於本公告日期，本公司董事會包括董事周鴻禕先生、吳海生先生、徐祚立先生、 ...

[Executive Summary & Business Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Highlights) Qifu Technology demonstrated robust business and financial growth in Q3 2023, driven by expanding user base, increased loan facilitation, and strong profitability, despite macroeconomic uncertainties [Third Quarter 2023 Business Highlights](index=1&type=section&id=Third%20Quarter%202023%20Business%20Highlights) Qifu Technology achieved robust Q3 2023 business growth, driven by increasing partners and consumers, with significant light-capital model contributions and a 1.82% over-90-day delinquency rate **Platform User and Loan Data (As of September 30, 2023):** | Metric | Sep 30, 2023 | Sep 30, 2022 | YoY Growth | | :--- | :--- | :--- | :--- | | Cumulative Connected Consumers | 227.9 Million | 203.5 Million | 12.0% | | Cumulative Approved Credit Line Users | 49.2 Million | 43.0 Million | 14.4% | | Cumulative Successful Borrower Withdrawals | 29.4 Million | 26.3 Million | 11.9% | | Loan Facilitation and Origination Volume (Q3 2023) | RMB 123,148 Million | RMB 110,675 Million | 11.3% | | Light-Capital Model Loan Volume (Q3 2023) | RMB 69,579 Million (56.5% of total) | RMB 64,583 Million | 7.7% | | Loan Balance | RMB 189,100 Million | RMB 160,020 Million | 18.2% | | Light-Capital Model Loan Balance | RMB 116,283 Million | RMB 91,196 Million | 27.5% | | Weighted Average Contract Term (Q3 2023) | 11.23 Months | 12.27 Months | - | | Over-90-Day Delinquency Rate (As of Sep 30, 2023) | 1.82% | - | - | | Repeat Borrower Contribution Rate (Q3 2023) | 91.5% | - | - | [Third Quarter 2023 Financial Highlights](index=2&type=section&id=Third%20Quarter%202023%20Financial%20Highlights) The company achieved significant financial growth in Q3 2023, with total net revenue, operating income, and net income all increasing year-over-year, demonstrating strong profitability and operational efficiency **Key Financial Data for Q3 2023:** | Metric | Q3 2023 (RMB Million) | Q3 2023 (US$ Million) | Q3 2022 (RMB Million) | | :--- | :--- | :--- | :--- | | Total Net Revenue | 4,281.0 | 586.8 | 4,144.1 | | Operating Income | 1,388.9 | 190.4 | 1,158.3 | | Non-GAAP Operating Income | 1,432.2 | 196.3 | 1,207.8 | | Operating Margin | 32.4% | - | - | | Non-GAAP Operating Margin | 33.5% | - | - | | Net Income | 1,137.7 | 155.9 | 988.4 | | Non-GAAP Net Income | 1,181.0 | 161.9 | 1,037.9 | | Net Income Attributable to the Company | 1,142.0 | 156.5 | 992.8 | | Net Income Margin | 26.6% | - | - | | Non-GAAP Net Income Margin | 27.6% | - | - | [Management Commentary](index=2&type=section&id=Management%20Commentary) Management emphasized strategic adjustments towards refined operations to enhance profitability and high-quality growth amidst a stalled macroeconomic recovery and weak consumer sentiment, while proactively managing asset quality fluctuations - CEO Haisheng Wu stated the company adjusted its strategy to focus on refined operations for better profitability and high-quality growth, with Q3 loan facilitation and origination volume increasing by **11.3% YoY**, approximately **56%** of which was facilitated through the light-capital model, while also reducing overall funding costs through optimized customer acquisition and new ABS issuance[7](index=7&type=chunk) - CFO Guojiang Xu noted robust Q3 financial performance with **RMB 4.28 billion** in total revenue and **RMB 1.18 billion** in non-GAAP net income despite macroeconomic uncertainties, supported by continuous operational efficiency improvements and strong cash reserves of approximately **RMB 8.2 billion** in cash and cash equivalents and **RMB 1.2 billion** in operating cash flow[8](index=8&type=chunk) - CRO Yan Zheng indicated that key risk indicators fluctuated in Q3 due to macroeconomic uncertainties, prompting the company to swiftly tighten credit assessment standards, resulting in a Day-1 delinquency rate of **4.6%** and a 30-day collection rate of approximately **87%**, with a commitment to prudent risk management[8](index=8&type=chunk) [Detailed Financial Performance (Q3 2023)](index=3&type=section&id=Detailed%20Financial%20Performance%20(Q3%202023)) The company's Q3 2023 financial performance shows continued revenue growth across credit-driven and platform services, alongside strategic adjustments in operating costs and expenses to maintain profitability [Total Net Revenue](index=3&type=section&id=Total%20Net%20Revenue) Total net revenue reached RMB 4.281 billion in Q3 2023, demonstrating sustained revenue growth both year-over-year and quarter-over-quarter **Total Net Revenue (RMB Million):** | Period | Q3 2023 | Q3 2022 | QoQ (Q2 2023) | | :--- | :--- | :--- | :--- | | Total Net Revenue | 4,281.0 | 4,144.1 | 3,914.3 | | YoY Growth | 3.3% | - | - | | QoQ Growth | 9.4% | - | - | [Net Revenue from Credit Driven Services](index=3&type=section&id=Net%20Revenue%20from%20Credit%20Driven%20Services) Net revenue from credit-driven services increased both year-over-year and quarter-over-quarter, primarily driven by significant growth in financing income, despite a decrease in loan facilitation and service fees under the heavy-capital model and guarantee liability release income **Net Revenue from Credit Driven Services (RMB Million):** | Revenue Category | Q3 2023 | Q3 2022 | QoQ (Q2 2023) | | :--- | :--- | :--- | :--- | | Net Revenue from Credit Driven Services | 3,071.0 | 2,941.1 | 2,788.7 | | Loan Facilitation and Service Fees - Heavy Capital | 479.2 | 582.9 | 395.5 | | Financing Income | 1,369.9 | 877.1 | 1,188.7 | | Guarantee Liability Release Income | 1,165.7 | 1,447.6 | 1,158.6 | | Other Service Fees | 56.1 | 33.6 | 45.9 | - Loan facilitation and service fees under the heavy-capital model decreased YoY primarily due to shorter loan terms, while the QoQ increase was mainly due to higher heavy-capital loan volume and extended effective terms[9](index=9&type=chunk) - Financing income increased both YoY and QoQ, primarily driven by the growth in the average balance of on-balance sheet loans[10](index=10&type=chunk) [Net Revenue from Platform Services](index=3&type=section&id=Net%20Revenue%20from%20Platform%20Services) Net revenue from platform services increased both year-over-year and quarter-over-quarter, primarily due to a significant rise in referral service fees and other service fees, offsetting a decline in loan facilitation and service fees under the light-capital model **Net Revenue from Platform Services (RMB Million):** | Revenue Category | Q3 2023 | Q3 2022 | QoQ (Q2 2023) | | :--- | :--- | :--- | :--- | | Net Revenue from Platform Services | 1,210.1 | 1,203.0 | 1,125.6 | | Loan Facilitation and Service Fees - Light Capital | 863.9 | 1,040.2 | 887.8 | | Referral Service Fees | 234.2 | 85.4 | 160.9 | | Other Service Fees | 112.0 | 77.4 | 76.9 | - Loan facilitation and service fees under the light-capital model decreased YoY due to lower light-capital loan volume and shorter effective terms, and QoQ due to reduced light-capital loan volume[11](index=11&type=chunk) - Referral service fees significantly increased both YoY and QoQ, primarily driven by higher loan volume facilitated through ICE[11](index=11&type=chunk) [Total Operating Costs and Expenses](index=3&type=section&id=Total%20Operating%20Costs%20and%20Expenses) Total operating costs and expenses decreased year-over-year but increased quarter-over-quarter in Q3 2023, primarily influenced by lower sales and marketing expenses, higher financing costs, and increased provisions for loans and contingent liabilities **Total Operating Costs and Expenses (RMB Million):** | Expense Category | Q3 2023 | Q3 2022 | QoQ (Q2 2023) | | :--- | :--- | :--- | :--- | | Total Operating Costs and Expenses | 2,892.2 | 2,985.9 | 2,732.8 | | Facilitation, Origination and Servicing Expenses | 639.8 | 617.3 | 648.0 | | Financing Costs | 160.2 | 138.5 | 165.2 | | Sales and Marketing Expenses | 529.6 | 624.1 | 436.5 | | General and Administrative Expenses | 95.4 | 102.7 | 112.8 | | Provision for Loans Receivable | 509.0 | 191.5 | 483.3 | | Provision for Contingent Liabilities | 831.6 | 1,142.8 | 757.6 | - Sales and marketing expenses decreased YoY primarily due to lower unit customer acquisition costs, while the QoQ increase was mainly due to a higher number of new users and a slight increase in unit costs[13](index=13&type=chunk) - Provision for loans receivable increased both YoY and QoQ, primarily due to the growth in on-balance sheet loan origination volume[15](index=15&type=chunk) - Provision for contingent liabilities decreased YoY but increased QoQ, reflecting the company's consistent approach to assessing provisions and an increase in off-balance sheet loan facilitation volume[16](index=16&type=chunk) [Income from Operations & Net Income](index=4&type=section&id=Income%20from%20Operations%20%26%20Net%20Income) The company achieved significant growth in operating income and net income in Q3 2023, with strong performance across both GAAP and non-GAAP metrics, reflecting successful efforts to enhance profitability in a challenging macroeconomic environment **Operating Income and Net Income (RMB Million):** | Metric | Q3 2023 | Q3 2022 | QoQ (Q2 2023) | | :--- | :--- | :--- | :--- | | Operating Income | 1,388.9 | 1,158.3 | 1,181.5 | | Non-GAAP Operating Income | 1,432.2 | 1,207.8 | 1,234.7 | | Operating Margin | 32.4% | 27.9% | - | | Non-GAAP Operating Margin | 33.5% | 29.1% | - | | Net Income | 1,137.7 | 988.4 | 1,093.4 | | Non-GAAP Net Income | 1,181.0 | 1,037.9 | 1,146.6 | | Net Income Attributable to the Company | 1,142.0 | 992.8 | 1,097.4 | | Diluted Net Income per ADS | 6.94 | 6.18 | - | | Non-GAAP Diluted Net Income per ADS | 7.20 | 6.48 | - | [Operational Metrics & Asset Quality](index=1&type=section&id=Operational%20Metrics%20%26%20Asset%20Quality) Qifu Technology continued to expand its user base and loan facilitation scale in Q3 2023, with the light-capital model dominating loan volume and outstanding balances, while proactively managing asset quality fluctuations [Loan Facilitation & User Growth](index=1&type=section&id=Loan%20Facilitation%20%26%20User%20Growth) The company continued to expand its user base and loan facilitation scale in Q3 2023, with the light-capital model dominating loan volume and outstanding balances and achieving strong growth **User and Loan Scale Growth (As of September 30, 2023):** | Metric | Sep 30, 2023 | Sep 30, 2022 | YoY Growth | | :--- | :--- | :--- | :--- | | Cumulative Connected Financial Institution Partners | 155 | - | - | | Cumulative Connected Consumers | 227.9 Million | 203.5 Million | 12.0% | | Cumulative Approved Credit Line Users | 49.2 Million | 43.0 Million | 14.4% | | Cumulative Successful Borrower Withdrawals | 29.4 Million | 26.3 Million | 11.9% | | Loan Facilitation and Origination Volume (Q3 2023) | RMB 123,148 Million | RMB 110,675 Million | 11.3% | | Light-Capital Model Loan Volume (Q3 2023) | RMB 69,579 Million | RMB 64,583 Million | 7.7% | | Loan Balance (As of Sep 30, 2023) | RMB 189,100 Million | RMB 160,020 Million | 18.2% | | Light-Capital Model Loan Balance (As of Sep 30, 2023) | RMB 116,283 Million | RMB 91,196 Million | 27.5% | [Asset Quality & Delinquency Rates](index=5&type=section&id=Asset%20Quality%20%26%20Delinquency%20Rates) Affected by macroeconomic uncertainties, the company's asset quality experienced fluctuations, prompting management to swiftly tighten credit assessment standards, with a 1.82% over-90-day delinquency rate, a 4.6% Day-1 delinquency rate, and an approximately 87% 30-day collection rate in Q3, while repeat borrower contribution remained high at 91.5% **Asset Quality Metrics (Q3 2023):** | Metric | Value | | :--- | :--- | | Over-90-Day Delinquency Rate (As of Sep 30, 2023) | 1.82% | | Day-1 Delinquency Rate (Q3 2023) | 4.6% | | 30-Day Collection Rate (Q3 2023) | Approx. 87% | | Repeat Borrower Contribution Rate (Q3 2023) | 91.5% | - Management stated that key risk indicators fluctuated in Q3 due to macroeconomic uncertainties impacting consumer sentiment and financial conditions, leading the company to swiftly tighten credit assessment standards[8](index=8&type=chunk) - The report includes charts for over-30-day and over-180-day delinquency rates by loan origination year, excluding loans under "ICE" and other technology solutions[19](index=19&type=chunk) [Corporate Actions & Business Outlook](index=6&type=section&id=Corporate%20Actions%20%26%20Business%20Outlook) The company is committed to enhancing shareholder value through share repurchases and has adjusted its Q4 and full-year 2023 loan volume outlook, reflecting a cautious approach to business planning and risk management amidst slower-than-expected macroeconomic recovery [Update on Share Repurchase](index=6&type=section&id=Update%20on%20Share%20Repurchase) The company has executed approximately $80 million of its $150 million share repurchase program initiated in June 2023, demonstrating its commitment to enhancing shareholder value through buybacks - The company announced a 12-month share repurchase program of up to **$150 million** on June 20, 2023[22](index=22&type=chunk) **Share Repurchase Status (As of November 16, 2023):** | Metric | Value | | :--- | :--- | | Number of ADSs Repurchased | Approx. 4.9 Million | | Total Cost | Approx. $80 Million | | Average Repurchase Price | Approx. $16.2 per ADS | [Business Outlook](index=6&type=section&id=Business%20Outlook) Given the slower-than-expected macroeconomic recovery and ongoing uncertainties, the company has adopted a prudent approach to business planning and risk management, adjusting its total loan volume expectations for Q4 and full-year 2023 - The company expects total loan volume for Q4 2023 to be between **RMB 116 billion** and **RMB 126 billion**[23](index=23&type=chunk) - The company anticipates total loan volume for the full year 2023 to be between **RMB 473 billion** and **RMB 483 billion**, representing a YoY increase of **15%-17%**[23](index=23&type=chunk) - This outlook reflects the company's current and preliminary views and may be subject to significant changes due to a slower-than-expected macroeconomic recovery and ongoing uncertainties[23](index=23&type=chunk) [Company Information & Disclosures](index=6&type=section&id=Company%20Information%20%26%20Disclosures) This section provides essential information about Qifu Technology, its mission, the use of non-GAAP financial measures, and important disclaimers regarding exchange rates and forward-looking statements [About Qifu Technology](index=6&type=section&id=About%20Qifu%20Technology) Qifu Technology is a leading credit-tech platform in China, dedicated to providing comprehensive technology services that assist financial institutions, consumers, and small and medium-sized enterprises throughout the loan lifecycle, making credit services more accessible and personalized - Qifu Technology is a leading credit-tech platform in China, offering comprehensive technology services to financial institutions, consumers, and small and medium-sized enterprises[1](index=1&type=chunk)[25](index=25&type=chunk) - Services cover the entire loan lifecycle, including borrower acquisition, initial credit assessment, funding matching, and post-lending services[25](index=25&type=chunk) - The company aims to make credit services more accessible and personalized for consumers and SMEs through its credit-tech offerings[25](index=25&type=chunk) [Use of Non-GAAP Financial Measures Statement](index=6&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures%20Statement) The company utilizes non-GAAP financial measures, adjusted for share-based compensation expenses, to supplement US GAAP financial results, aiming to better identify underlying business trends, enhance understanding of past performance and future prospects, and aid management decision-making, while emphasizing that these non-GAAP metrics are not substitutes for or superior to GAAP results and may differ from those of other companies - The company uses non-GAAP financial measures to supplement US GAAP financial results, adjusted by excluding share-based compensation expenses[26](index=26&type=chunk)[28](index=28&type=chunk) - Non-GAAP metrics include operating income, operating margin, net income, net income margin, net income attributable to the company, and diluted net income per ADS[28](index=28&type=chunk) - The company believes non-GAAP measures help identify underlying business trends, enhance understanding of operating results, and provide useful information for management decisions, but stresses they should not be considered as substitutes for or superior to GAAP results[28](index=28&type=chunk) [Exchange Rate Information & Safe Harbor Statement](index=7&type=section&id=Exchange%20Rate%20Information%20%26%20Safe%20Harbor%20Statement) The report specifies the RMB to USD exchange rate and includes a standard safe harbor statement, cautioning that forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from expectations - Unless otherwise stated, all RMB to US$ conversions use the exchange rate of **US$1.00 to RMB 7.2960** as published in the H.10 statistical release of the Federal Reserve Board on September 29, 2023[29](index=29&type=chunk) - Forward-looking statements in the report are protected by the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995, involving inherent risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements[30](index=30&type=chunk) - Factors influencing results include the company's growth strategies, collaboration with 360 Group, changes in laws and regulations, brand recognition, market acceptance, industry trends, government policies, and macroeconomic conditions in China and globally[30](index=30&type=chunk) [Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, cash flows, and comprehensive income, providing a snapshot of the company's financial position and performance [Unaudited Condensed Consolidated Balance Sheets](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2023, the company's total assets and total liabilities both increased compared to the end of 2022, with a significant rise in net loans receivable and a decrease in cash and cash equivalents **Key Balance Sheet Data (RMB Thousand):** | Metric | Dec 31, 2022 | Sep 30, 2023 | | :--- | :--- | :--- | | Total Assets | 40,343,170 | 46,039,070 | | Total Liabilities | 21,411,873 | 24,909,430 | | Total Equity Attributable to Qifu Technology | 18,847,156 | 21,053,214 | | Cash and Cash Equivalents | 7,165,584 | 4,938,298 | | Net Loans Receivable | 15,347,662 | 23,469,654 | [Unaudited Condensed Consolidated Statements of Operations](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) For Q3 2023 and the first nine months, the company's total net revenue and net income both increased year-over-year, demonstrating sustained profitability, with diluted net income per ADS also showing improvement **Key Statements of Operations Data (RMB Thousand):** | Metric | Q3 2022 | Q3 2023 | First 9 Months 2022 | First 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Net Revenue | 4,144,129 | 4,281,026 | 12,647,375 | 11,794,524 | | Operating Income | 1,158,250 | 1,388,873 | 3,528,303 | 3,577,403 | | Net Income | 988,354 | 1,137,690 | 3,137,667 | 3,160,889 | | Net Income Attributable to the Company | 992,835 | 1,142,047 | 3,152,172 | 3,173,596 | | Diluted Net Income per ADS | 6.18 | 6.94 | 19.62 | 19.22 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash generated from operating activities decreased year-over-year in Q3 2023 but increased for the first nine months, while net cash used in investing activities significantly increased for the first nine months, and net cash from financing activities decreased **Key Cash Flow Statement Data (RMB Thousand):** | Metric | Q3 2022 | Q3 2023 | First 9 Months 2022 | First 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | 1,592,127 | 1,243,893 | 4,130,038 | 4,766,559 | | Net Cash from Investing Activities | (2,981,196) | (2,260,922) | (5,675,628) | (9,262,095) | | Net Cash from Financing Activities | 881,092 | 702,952 | 3,010,269 | 1,978,079 | | Net (Decrease) Increase in Cash and Cash Equivalents | (500,896) | (309,143) | 1,469,383 | (2,506,965) | [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=11&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income increased year-over-year in Q3 2023, but slightly decreased for the first nine months, primarily influenced by net income and foreign currency translation adjustments **Key Comprehensive Income Statement Data (RMB Thousand):** | Metric | Q3 2022 | Q3 2023 | First 9 Months 2022 | First 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income | 988,354 | 1,137,690 | 3,137,667 | 3,160,889 | | Other Comprehensive Income | 36,950 | 4,051 | 80,270 | 20,724 | | Total Comprehensive Income | 1,025,304 | 1,141,741 | 3,217,937 | 3,181,613 | | Comprehensive Income Attributable to Ordinary Shareholders | 1,029,785 | 1,146,098 | 3,232,442 | 3,194,320 | [Unaudited Reconciliations of GAAP and Non-GAAP Results](index=12&type=section&id=Unaudited%20Reconciliations%20of%20GAAP%20and%20Non-GAAP%20Results) This section provides unaudited reconciliations between GAAP and non-GAAP financial results, highlighting the impact of adjustments, primarily share-based compensation expenses, on key performance indicators [Non-GAAP Net Income Reconciliation](index=12&type=section&id=Non-GAAP%20Net%20Income%20Reconciliation) By excluding share-based compensation expenses, the company's non-GAAP net income and non-GAAP net income attributable to shareholders are higher than their GAAP counterparts, leading to improved non-GAAP net income margins and diluted net income per ADS **Non-GAAP Net Income Reconciliation (RMB Thousand):** | Metric | Q3 2022 | Q3 2023 | First 9 Months 2022 | First 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income (GAAP) | 988,354 | 1,137,690 | 3,137,667 | 3,160,889 | | Add: Share-based Compensation Expenses | 49,550 | 43,289 | 148,383 | 143,032 | | Non-GAAP Net Income | 1,037,904 | 1,180,979 | 3,286,050 | 3,303,921 | | GAAP Net Income Margin | 23.8% | 26.6% | 24.8% | 26.8% | | Non-GAAP Net Income Margin | 25.0% | 27.6% | 26.0% | 28.0% | | Net Income Attributable to the Company (GAAP) | 992,835 | 1,142,047 | 3,152,172 | 3,173,596 | | Non-GAAP Net Income Attributable to the Company | 1,042,385 | 1,185,336 | 3,300,555 | 3,316,628 | | Diluted Net Income per ADS (GAAP) | 6.18 | 6.94 | 19.62 | 19.22 | | Diluted Net Income per ADS (Non-GAAP) | 6.48 | 7.20 | 20.55 | 20.08 | [Non-GAAP Income from Operations Reconciliation](index=12&type=section&id=Non-GAAP%20Income%20from%20Operations%20Reconciliation) By excluding share-based compensation expenses from GAAP operating income, the company's non-GAAP operating income is higher than its GAAP counterpart, resulting in an improved non-GAAP operating margin **Non-GAAP Income from Operations Reconciliation (RMB Thousand):** | Metric | Q3 2022 | Q3 2023 | First 9 Months 2022 | First 9 Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Operating Income (GAAP) | 1,158,250 | 1,388,873 | 3,528,303 | 3,577,403 | | Add: Share-based Compensation Expenses | 49,550 | 43,289 | 148,383 | 143,032 | | Non-GAAP Operating Income | 1,207,800 | 1,432,162 | 3,676,686 | 3,720,435 | | GAAP Operating Margin | 27.9% | 32.4% | 27.9% | 30.3% | | Non-GAAP Operating Margin | 29.1% | 33.5% | 29.1% | 31.5% |

Qifu Technology Inc. (NASDAQ:QFIN) Q2 2023 Results Conference Call August 21, 2023 8:00 PM ET Company Participants Wu Haisheng - CEO & Director Alex Xu - CFO & Director Yan Zheng - Chief Risk Officer Conference Call Participants Alex Ye - UBS Frank Zheng - Credit Suisse Emma Xu - Bank of America Securities Yada Li - CICC 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 ...

Financial Performance - Total revenue for the second quarter was RMB 3,914.3 million (USD 539.8 million), a decrease from RMB 4,183.2 million in the same period last year[11]. - Non-GAAP net profit was RMB 1,146.6 million (USD 158.1 million), compared to RMB 1,021.7 million in the same period last year, reflecting a year-over-year increase of approximately 12.2%[11]. - The company reported a decrease in revenue from credit-driven services to RMB 2,788.7 million (USD 384.6 million), down from RMB 2,947.8 million in the same period last year[11]. - Operating income was RMB 1,181.5 million (USD 162.9 million), up from RMB 1,010.8 million in the same period last year, with an operating margin of 30.2%[15]. - Net profit reached RMB 1,093.4 million (USD 150.8 million), compared to RMB 975.0 million year-over-year, resulting in a net profit margin of 27.9%[16]. - The company reported a total net revenue of RMB 7,513,498 thousand for the six months ended June 30, 2023, down 11.6% from RMB 8,503,246 thousand in the same period of 2022[37]. - The company’s financing income for the six months ended June 30, 2023, was RMB 2,254,620 thousand, an increase of 40.2% compared to RMB 1,608,820 thousand in the same period of 2022[37]. - The company reported an operating profit of RMB 2,453,932,000 for the six months ended June 30, 2023, compared to RMB 2,370,053,000 for the same period in 2022, marking an increase of about 3.5%[56]. Loan and Credit Metrics - As of June 30, 2023, the platform has connected with 153 financial institution partners and 220.6 million consumers with potential credit needs, an increase of 11.5% from 197.9 million a year ago[7]. - The number of users with approved credit limits reached 47.4 million, up 14.9% from 41.3 million as of June 30, 2022[7]. - The total loan amount facilitated and initiated through the platform in Q2 2023 was RMB 124.225 billion, a 26.4% increase from RMB 98.281 billion in the same period last year[7]. - The total outstanding loan balance was RMB 184.459 billion, up 22.6% from RMB 150.490 billion as of June 30, 2022[7]. - The loan balance under light capital models, ICE, and other technological solutions increased by 39.1% to RMB 114.835 billion compared to RMB 82.580 billion a year ago[7]. - The 90-day+ overdue rate for loans on the platform was 1.84% as of June 30, 2023[7]. - The D1 overdue rate was 4.2%, and the 30-day repayment rate was approximately 87%, both nearing recent best levels, indicating improved customer confidence[10]. - The provision for loans receivable was RMB 483.3 million (USD 66.7 million), an increase from RMB 416.1 million year-over-year, reflecting growth in loan origination[14]. Cash Flow and Financial Position - Operating cash flow for the quarter was approximately RMB 1,800 million, indicating strong cash management despite macroeconomic uncertainties[10]. - The total cash and cash equivalents amounted to approximately RMB 8.5 billion, providing a solid financial foundation for future growth initiatives[10]. - Cash and cash equivalents decreased from RMB 7,165,584 thousand to RMB 5,256,375 thousand, a decline of 26.6%[35]. - Operating cash flow for the six months ended June 30, 2023, was RMB 3,522,666, up 38.9% from RMB 2,537,911 in the same period of 2022[39]. - The company reported a cash and cash equivalents balance of RMB 8,314,541 at the end of June 30, 2023, down from RMB 10,730,226 at the end of June 30, 2022[39]. Expenses and Cost Management - Sales and marketing expenses were RMB 436.5 million (USD 60.2 million), down from RMB 615.1 million in the same period last year, reflecting a change in customer acquisition costs[14]. - General and administrative expenses increased to RMB 112.8 million (USD 15.6 million) from RMB 93.9 million year-over-year, primarily due to higher professional service fees[14]. - Operating costs and expenses totaled RMB 5,324,968 thousand for the six months ended June 30, 2023, a decrease of 13.2% from RMB 6,133,193 thousand in the same period of 2022[37]. - The non-GAAP operating profit margin for the six months ended June 30, 2023, was 30.5%, compared to 29.0% in the same period of 2022[47]. Shareholder Returns and Repurchase Plans - The company announced a share repurchase plan with a limit of USD 150 million over the next 12 months, which is currently progressing steadily[10]. - The company has approved a dividend of USD 0.25 per A-class ordinary share and USD 0.50 per American Depositary Share for the first half of 2023[21]. - As of August 18, 2023, the company repurchased approximately 1.6 million American Depositary Shares at a total cost of about USD 28.3 million[22]. Future Outlook and Strategic Initiatives - The company expects loan volume for 2023 to be between RMB 470 billion and RMB 485 billion, representing a year-over-year growth of 14% to 18%[23]. - The company emphasizes the importance of its growth strategy and collaboration with 360 Group in its future outlook[32]. - Future outlook includes a focus on improving operational efficiency and exploring new market opportunities, although specific numerical guidance was not provided in the content[56]. - The company continues to invest in technology and product development to drive growth and enhance customer experience, although specific new products or technologies were not detailed in the provided content[56]. Asset and Liability Management - Total assets increased from RMB 40,343,170 thousand as of December 31, 2022, to RMB 43,402,113 thousand as of June 30, 2023, representing a growth of 7.5%[35]. - Total liabilities rose from RMB 21,411,873 thousand to RMB 22,516,546 thousand, an increase of 5.2%[35]. - The company’s total equity increased from RMB 18,931,297 thousand to RMB 20,885,567 thousand, a growth of 10.3%[35]. - Total liabilities as of June 30, 2023, were RMB 22,516,546, indicating a decrease of RMB 3,530,847 compared to the last report[62]. - Total equity as of June 30, 2023, amounted to RMB 21,671,891,000, reflecting an increase from RMB 20,809,775,000[63]. Compliance and Reporting Standards - The company is committed to enhancing its financial reporting standards and ensuring compliance with both US GAAP and IFRS, as indicated by the engagement of Deloitte for limited assurance services[52]. - The adjustments made to reconcile the financial statements under US GAAP and IFRS were noted, with significant differences in the treatment of credit losses and provisions[56]. - The expected credit loss under US GAAP was recognized based on the CECL model, impacting the financial statements significantly[64]. - Financial guarantees were accounted for under both US GAAP and IFRS, with differences in the recognition of liabilities impacting the financial position[64].