Corporate Structure and Compliance - The company is classified as a large accelerated filer under the Securities Exchange Act[4]. - The financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP)[5]. - The company has not reported any securities under Section 12(g) of the Exchange Act[2]. - There are no outstanding securities that require reporting under Section 15(d) of the Exchange Act[2]. - The company has submitted all required reports under the Exchange Act in the past 12 months[4]. - The company has not indicated any errors in previously issued financial statements that would require restatement[5]. - The company has not been classified as a shell company under the Exchange Act[6]. - The company has established a series of contractual agreements to effectively control variable interest entities (VIEs) in China, including shareholder voting rights, equity pledge agreements, and loan agreements[17]. - The company relies on contractual arrangements with VIEs and their shareholders for all business operations, which may not be as effective as direct ownership[18]. - The company may incur substantial costs in enforcing the terms of the contractual arrangements with VIEs, which are governed by Chinese law[17]. - The company is subject to significant oversight and discretion from the Chinese government, which could adversely affect its operations and the value of its American depositary shares[69]. - The company has been recognized as a committee-designated issuer under the HFCAA, which may lead to trading prohibitions if it continues to use an accounting firm located in jurisdictions that PCAOB cannot inspect[21]. - The PCAOB has not been able to fully inspect or investigate registered accounting firms based in mainland China and Hong Kong, which poses a risk to the company's compliance with the HFCAA[21]. - The company has not received any notifications regarding its status as a "critical information infrastructure operator" under Chinese law, creating uncertainty about additional obligations[110]. Financial Performance - The total net income for 2023 was RMB 16,290,027 thousand, a slight decrease from RMB 16,553,930 thousand in 2022[37]. - Operating costs and expenses totaled RMB 11,433,063 thousand in 2023, compared to RMB 12,081,746 thousand in 2022, indicating a reduction in operational expenditures[37]. - The company reported a net operating income of RMB 4,856,964 thousand in 2023, compared to RMB 4,472,184 thousand in 2022, reflecting growth in operational performance[37]. - Net profit for 2023 reached RMB 4,268,577, a 6.6% increase from RMB 4,005,568 in 2022[38]. - Basic earnings per share for 2023 was RMB 13.36, up from RMB 12.87 in 2022, reflecting a 3.8% growth[38]. - The company’s total equity reached RMB 22,009,857 in 2023, up from RMB 18,931,297 in 2022, marking a 10.8% increase[41]. - The company reported a total liability of RMB 27,597,272 thousand, leading to total equity of RMB 19,791,799 thousand[53]. - The company’s net profit attributable to ordinary shareholders was RMB 1,077,675 thousand, reflecting a significant increase compared to previous periods[50]. - The company’s total assets reached RMB 45,818,572, an increase of 13.5% from RMB 40,343,170 in 2022[41]. - The company’s cash flow from investing activities for 2023 was a net outflow of RMB 11,147,789, compared to a net outflow of RMB 7,355,975 in 2022[43]. Market Operations and Strategy - The company operates primarily in the People's Republic of China, with significant implications for its business operations[8]. - The company aims to strengthen relationships with borrowers, financial institution partners, and data partners[11]. - The company has a significant focus on expanding its market presence and exploring potential mergers and acquisitions[11]. - The company expects growth in the Chinese credit technology industry and anticipates increased demand for its credit technology products[11]. - The company is focused on enhancing its technology and credit assessment capabilities to manage credit risk effectively and improve service offerings[74]. - The company plans to declare and distribute regular cash dividends starting from the first half of 2023, amounting to approximately 20% to 30% of the after-tax net profit for the preceding six-month period[34]. - The company has plans for market expansion and new product development, aiming to enhance its competitive position in the industry[50]. Regulatory Environment and Risks - The company faces various risks related to conducting business in China, including compliance with complex and evolving regulations, which could adversely affect its operations and the value of its American Depositary Shares (ADS)[20]. - There is significant uncertainty regarding the interpretation and enforcement of VIE contractual arrangements under current and future Chinese laws, which may impact the company's operational control[19]. - If the company or any VIE is found to violate existing or future Chinese laws or regulations, it may face severe penalties or be forced to relinquish its interests in those businesses[19]. - The Chinese government has significant power to regulate the company's operations and foreign investment, which could severely limit its ability to issue or continue issuing securities[22]. - The uncertainty surrounding the Chinese legal system and its rapid regulatory changes may lead to significant adverse impacts on the company's operations and the value of its ADS[22]. - The company faces significant risks related to regulatory uncertainties in the credit technology industry, which could adversely affect its financial condition and operational performance[65]. - The company is subject to ongoing regulatory scrutiny regarding its microfinance and financing guarantee practices, which could adversely affect its financial condition and operational performance[86]. - The company may face significant negative impacts if regulatory authorities deem its rectification efforts insufficient or unsatisfactory[81]. - The company is subject to the new financing guarantee regulations, which restrict unapproved entities from providing guarantee services, affecting its operational strategies[78]. Credit and Loan Management - The variable interest entities' revenue accounted for 94% of the total net revenue in 2023, up from 92% in both 2021 and 2022[16]. - The company reported a 180-day+ historical overdue rate, which is a percentage of loans overdue for more than 180 days, calculated based on the total principal amount of loans facilitated during a fiscal quarter[10]. - The company reported a recovery rate of overdue principal amounts within 30 days, calculated as a percentage of the total overdue principal[10]. - The company aims to maintain a low overdue rate for loans facilitated through its platform while expanding its borrower base and improving product utilization[72]. - The company relies on proprietary credit analysis models to assess borrower creditworthiness, and any flaws in these models could severely impact its reputation and market share[66]. - The company has implemented comprehensive collection policies and procedures to ensure compliance with current laws and regulations[154]. - The company relies on various collection methods for overdue loans, and any failure in these methods could lead to a decline in recovery rates[150]. Technology and Data Security - The company utilizes a light capital model, which involves technology-enabled services throughout the loan lifecycle without assuming credit risk[10]. - The deployment of AI-enabled tools, such as the Argus engine, is essential for accurate credit scoring and risk modeling, with potential inaccuracies impacting partnerships with financial institutions[146]. - The company faces inherent risks in protecting user privacy and complying with evolving regulatory frameworks regarding personal data collection and security[106]. - The company has taken measures to protect personal information but still faces challenges related to data security and compliance with applicable laws[106]. - The company is closely monitoring regulatory requirements and seeking guidance from regulatory authorities to ensure compliance with applicable laws and regulations[90]. Financial Partnerships and Funding - The company has established trust arrangements with financial institution partners for loan facilitation, which may impact its financial condition if expected returns are not met[175]. - The company relies on partnerships with several trust companies and asset management firms to secure funding through trust and asset management plans[131]. - The company’s largest financial institution partner, Jincheng Bank, is crucial for exploring innovative collaborations, with potential risks if its business or reputation deteriorates[130]. - The company cannot guarantee sustainable funding from financial institution partners, which may impact reputation, operational performance, and financial condition[125]. - The company may lose funding sources if it fails to effectively match regional banks with local borrowers, which could significantly impact operational performance and profitability[127]. Human Resources and Management - The company’s ability to attract and retain talented employees is crucial for supporting business growth and operational efficiency[73]. - The company may face significant challenges in retaining key management personnel, which could disrupt operations and negatively impact financial performance[177]. - The company’s operations depend heavily on the continued service of its management team, particularly in risk management and product development[177]. Legal and Compliance Issues - The company faces potential negative impacts on its reputation and business performance due to improper actions by third-party collection service providers[154]. - The company may incur substantial costs and resource expenditures to comply with the Sarbanes-Oxley Act, which could affect its financial performance[180]. - The company is unable to ensure that it can renew contracts with service providers on favorable terms, which may affect its operational capabilities[158]. - The company has not tested its disaster recovery plan under actual disaster conditions, which may hinder its ability to recover data and services during interruptions[166]. Economic and Market Conditions - The overall scale may be affected by various factors, including brand awareness, market interest rates, and macroeconomic conditions, which could negatively impact loan matching growth and revenue[120]. - The company’s revenue from loan products may decline due to reduced discretionary spending among consumers and small businesses amid economic downturns[191]. - The competitive landscape in China's credit technology industry is intensifying, with competitors potentially having more financial, technical, and marketing resources, which could adversely affect the company's business performance and financial condition[147]. - The average wage in China is expected to continue rising, impacting labor costs and potentially affecting the company's financial performance unless costs can be controlled or passed on to users[184]. Environmental, Social, and Governance (ESG) Considerations - The company is increasingly sensitive to ESG issues due to heightened attention from the Chinese government and investors, which may impact financing and compliance costs[190]. - The company may face additional costs and risks related to environmental, social, and governance matters, which could adversely affect its business and financial performance[189]. - The company’s ability to adapt to changing ESG expectations is critical to avoid reputational damage and potential financial losses[190].

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITI ...

Group 1 - The core viewpoint emphasizes the empowering role of artificial intelligence (AI) in facilitating the digital transformation of small and micro enterprises, addressing their marketing challenges and resource limitations [1][2]. - AI technologies, including computer graphics, voice recognition, and semantic understanding, are integrated to help businesses reduce costs and improve efficiency, particularly in the financial sector [2][3]. - The application of AI in marketing allows for enhanced content generation that aligns better with user interests, leading to more effective marketing strategies [2][3]. Group 2 - The company, Qifu Technology, utilizes the 7P marketing theory to provide customized AI marketing solutions for small and micro enterprises, addressing various challenges in product, price, channel, promotion, personnel, process, and physical evidence [3]. - Qifu Technology has invested significantly in the development of large models, achieving notable results in marketing, telemarketing, and programming through the integration of AIGC and automation [3]. - The "Micro Star" support plan launched by Qifu Technology aims to assist small enterprises in the construction industry with their digital transformation, creating a financial service ecosystem that enhances operational capabilities [3].

Investment Rating - The report maintains an "Accumulate" rating for the company with a target price of HKD 115.43, corresponding to a 6.8x P/E for 2024 [4][5]. Core Views - The company's revenue decreased by 1.59% year-on-year to RMB 16.29 billion in 2023, while adjusted net profit increased by 5.92% to RMB 4.45 billion, aligning with expectations. Future revenue projections for 2024-2026 are RMB 16.59 billion, RMB 17.73 billion, and RMB 18.97 billion, reflecting growth rates of 1.8%, 6.8%, and 7.0% respectively. Adjusted net profit is expected to be RMB 4.74 billion, RMB 5.02 billion, and RMB 5.74 billion, with growth rates of 6.4%, 6.0%, and 14.3% respectively [4][8]. Summary by Sections Financial Performance - In 2023, the company achieved a net profit growth of 5.92%, driven primarily by better cost control. Revenue and cost contributed -106% and 261% respectively to profit growth. Sales expenses decreased by 12% year-on-year, indicating effective operational management. Additionally, provisions for liabilities dropped by 30% due to a reduction in capital loan scale. The financing cost also declined, with the company issuing ABS totaling RMB 12.5 billion, a 56% increase year-on-year, benefiting from lower financing costs [4][8]. Operational Strategy - The company plans to focus on refined operations and tighten risk control strategies to achieve quality growth. In Q4 2023, the credit issuance scale was RMB 1.119 trillion, up 13.8% year-on-year but down 3.3% quarter-on-quarter, with approximately 57% of loans provided through a light capital model. The company aims to enhance operational efficiency, which is expected to contribute to profit growth. A new share repurchase plan of USD 350 million has been announced, reflecting the company's confidence [4][8]. Catalysts - Improvement in asset quality and an increase in loan issuance volume are identified as potential catalysts for future growth [4].

Qifu Technology, Inc. (NASDAQ:QFIN) Q4 2023 Earnings Conference Call March 12, 2024 8:30 PM ET Company Participants Karen Ji - Senior Director of Capital Markets Wu Haisheng - CEO Alex Xu - CFO Yan Zheng - Chief Risk Officer Conference Call Participants Richard Xu - Morgan Stanley Alex Ye - UBS Emma Xu - Bank of America Securities Yada Li - CICC Operator Ladies and gentlemen, thank you for standing by, and welcome to the Qifu Technology Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator I ...

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 ...