Qifu Technology, Inc. (NASDAQ:QFIN) Q4 2024 Results Conference Call March 17, 2025 7:30 AM ET Company Participants Karen Ji - Senior Director, Capital Markets Haisheng Wu - CEO Alex Xu - CFO Yan Zheng - Chief Risk Officer Conference Call Participants Richard Xu - Morgan Stanley Alex Ye - UBS Cindy Wang - China Renaissance Emma Xu - Bank of America Yada Li - CICC Operator Ladies and gentlemen, thank you for standing by, and welcome to the Qifu Technology Fourth Quarter and Full Year 2024 Earnings Conference ...

Core Viewpoint - Qifu Technology has reported strong financial results, showing significant growth and a low earnings multiple, making it an attractive investment opportunity despite its stock price more than doubling last year [1][2]. Company Overview - Qifu Technology is an AI-empowered credit-tech platform in China, providing credit solutions to 56.9 million users and a total of 261.2 million consumers, connecting them with 162 financial service providers [3]. - The company primarily serves consumers and small to medium businesses, focusing on credit needs in rural Tier 3 and Tier 4 communities, with 81% of users located in these areas [4]. Financial Performance - Revenue for Qifu rose by less than 3% to $614.1 million, a slight decrease from the 5% growth in 2024 [5]. - Adjusted net income increased by 8% in the fourth quarter, driven by better asset quality and lower funding costs, surpassing analysts' expectations of flat growth [5][6]. - Earnings per American depositary share (ADS) for 2024 increased by 56% to $5.81, reflecting consistent performance above Wall Street estimates [6]. Shareholder Returns - Qifu has been returning value to shareholders through aggressive share buybacks and announced a semiannual dividend of $0.70 per ADS for the second half of 2024, following a $0.60 distribution in September [7][8]. - The company's dividend payouts have increased annually since initiating a variable distribution policy in 2021, more than doubling from $0.54 per ADS in 2021 to $1.30 in 2024 [10]. Valuation - Despite strong earnings growth and capital appreciation, Qifu's stock trades at a compelling valuation of just 7.4 times trailing earnings, having been available at only 2.6 times earnings at the start of the previous year [8]. - The company has improved operations even with modest revenue growth, indicating potential for further upside as demand for personal and small business loans in China increases [9].

Qifu Technology (QFIN) Q4 2024 Earnings Call March 17, 2025 07:30 AM ET Company Participants Karen Ji - Senior Director of Capital MarketsHaisheng Wu - CEO & DirectorAlex Xu - Chief Financial Officer & DirectorRichard Xu - Managing DirectorNone - ExecutiveCindy Wang - DirectorYada Li - Non-bank Financials & Global Fintech Equity Research Conference Call Participants Alex Ye - Research AnalystEmma Xu - Analyst Operator Ladies and gentlemen, thank you for standing by, Welcome to the Qifu Technology Fourth Qua ...

Core Viewpoint - Qifu Technology reported strong operational and financial results for the fourth quarter and full year of 2024, despite facing macroeconomic challenges, and announced a semi-annual dividend increase [1][15][20]. Fourth Quarter 2024 Business Highlights - As of December 31, 2024, Qifu Technology connected 261.2 million consumers with potential credit needs, an increase of 11.0% from 235.4 million a year ago [10]. - Cumulative users with approved credit lines reached 56.9 million, up 11.8% from 50.9 million in 2023 [10]. - The company facilitated 24,814,923 loans in the fourth quarter, with total loan facilitation and origination volume reaching RMB89,885 million, a 0.4% increase year-over-year [10]. - The total outstanding loan balance was RMB137,014 million, a decrease of 5.7% from the previous year [10]. - The 90-day+ delinquency rate was 2.09% as of December 31, 2024 [10]. Fourth Quarter 2024 Financial Highlights - Total net revenue for the fourth quarter was RMB4,482.3 million (US$614.1 million), compared to RMB4,370.2 million in the prior quarter [18]. - Net income was RMB1,912.7 million (US$262.0 million), an increase from RMB1,798.8 million in the prior quarter [18]. - Non-GAAP net income was RMB1,972.4 million (US$270.2 million), compared to RMB1,825.1 million in the prior quarter [18]. - Net income per fully diluted ADS was RMB13.24 (US$1.82), up from RMB12.18 in the prior quarter [18]. Full Year 2024 Operational Highlights - Total loan facilitation and origination volume for 2024 was RMB321,969 million, a decrease of 12.8% from RMB369,132 million in 2023 [19]. - The weighted average contractual tenor of loans was 10.05 months, compared to 11.21 months in 2023 [19]. - Repeat borrower contribution was 93.1% for the year, up from 91.6% in 2023 [19]. Full Year 2024 Financial Highlights - Total net revenue for 2024 was RMB17,165.7 million (US$2,351.7 million), compared to RMB16,290.0 million in 2023 [43]. - Net income for the year was RMB6,248.1 million (US$856.0 million), an increase from RMB4,268.6 million in 2023 [43]. - Non-GAAP net income was RMB6,415.7 million (US$879.0 million), compared to RMB4,454.2 million in 2023 [43]. - Net income per fully diluted ADS was RMB41.28 (US$5.66), up from RMB26.08 in 2023 [43]. Dividend and Share Repurchase - The board approved a semi-annual dividend of US$0.35 per Class A ordinary share for the second half of 2024 [57]. - The company repurchased approximately 3.1 million ADSs for about US$107 million in the fourth quarter [59]. - A new share repurchase plan for 2025 was approved, allowing for up to US$450 million in repurchases [60]. Business Outlook - The company expects to generate a net income between RMB1.75 billion and RMB1.85 billion for the first quarter of 2025, reflecting a year-on-year growth of 49% to 58% [62].

Core Viewpoint - Qifu Technology reported strong financial results for the fourth quarter and full year of 2024, despite macroeconomic challenges, and announced an increase in semi-annual dividends [1][8][46]. Group 1: Fourth Quarter 2024 Business Highlights - The platform connected 162 financial institutional partners and 261.2 million consumers, marking an 11.0% increase from 235.4 million a year ago [5]. - Cumulative users with approved credit lines reached 56.9 million, up 11.8% from 50.9 million in the previous year [5]. - The total facilitation and origination loan volume was RMB 89,885 million, a 0.4% increase from RMB 89,561 million in the same period of 2023 [5]. Group 2: Fourth Quarter 2024 Financial Highlights - Total net revenue was RMB 4,482.3 million (US$ 614.1 million), compared to RMB 4,370.2 million in the prior quarter [6]. - Net income was RMB 1,912.7 million (US$ 262.0 million), an increase from RMB 1,798.8 million in the prior quarter [6]. - Non-GAAP net income was RMB 1,972.4 million (US$ 270.2 million), compared to RMB 1,825.1 million in the prior quarter [6]. Group 3: Full Year 2024 Operational Highlights - Total net revenue for 2024 was RMB 17.17 billion, up from RMB 16.29 billion in 2023 [10][32]. - Non-GAAP net income for the year was RMB 6.42 billion, compared to RMB 4.45 billion in 2023 [10][32]. - The company generated a record RMB 9.34 billion in cash from operations in 2024 [10]. Group 4: Business Strategy and Outlook - The company plans to maintain a prudent approach in business planning for 2025, focusing on quality growth and enhancing operational efficiency [10][52]. - Management expects net income for the first quarter of 2025 to be between RMB 1.75 billion and RMB 1.85 billion, representing a year-on-year growth of 49% to 58% [52]. - The company aims to allocate more resources to AI applications across credit scenarios to navigate the current environment effectively [10]. Group 5: Shareholder Returns - The board approved a semi-annual dividend of US$ 0.35 per Class A ordinary share for the second half of 2024 [46]. - The company has initiated a new share repurchase plan for up to US$ 450 million starting January 1, 2025 [50].

Core Viewpoint - Qifu Technology, Inc. will report its unaudited financial results for Q4 and the full year ended December 31, 2024, on March 17, 2025, before U.S. markets open [1] Company Overview - Qifu Technology is a leading Credit-Tech platform in China, providing a comprehensive suite of technology services to assist financial institutions, consumers, and SMEs throughout the loan lifecycle [5] - The company aims to make credit services more accessible and personalized through its Credit-Tech services [5]

Core Viewpoint - Qifu Technology, Inc. (QFIN) has experienced significant stock growth of 106% over the past six months, outperforming the industry average of 46% and competitors like SLM Corporation and Credit Acceptance Corporation [1][15]. Company Performance - QFIN's third-quarter 2024 revenues reached RMB 4.37 billion, marking a 2.1% year-over-year increase, while non-GAAP net income grew by 54.5% year-over-year, indicating effective cost management and operational efficiency [6]. - The company expanded its financial institutional partners to 162 and increased its user base from 53.6 million to 55.2 million, reflecting successful marketing strategies [7]. Financial Position - QFIN reported robust cash reserves of $1.4 billion at the end of the third quarter, with minimal current debt of $149 million, providing ample liquidity for growth initiatives [8]. - The current ratio of 2.56 exceeds the industry average of 2.15, demonstrating the company's ability to meet short-term obligations [8]. - QFIN's return on equity stands at 24.4%, significantly higher than the industry average of 3.6%, showcasing exceptional profitability and efficient use of shareholder capital [9]. Business Model - QFIN's AI-driven business model targets young, urban Chinese professionals, simplifying the loan process by leveraging AI, machine learning, and big data to assess borrowers' repayment abilities [4][5]. - The company focuses on individuals with high, consistent salaries, offering unsecured loans with higher interest rates, which has allowed it to scale effectively and achieve profitability [5].

Group 1 - The stock of Qifu Technology, Inc. (NASDAQ: QFIN) has increased approximately 13% since October 2024, indicating potential for further growth [1] Group 2 - The analyst has a background in Finance and has worked in two financial companies over five years, focusing on Energy, Banking, and Tech stocks [2] - The primary focus is on fundamental analysis and long-term stock positions rather than short-term analysis [2]

Group 1 - Qihoo 360, a sister company of QFIN, is listed on the US DoD Chinese Military Company list, or CMC, but this is not believed to directly impact the company [1] - Astrada Advisors specializes in delivering actionable recommendations that enhance portfolio performance and uncover alpha opportunities, supported by a strong track record in investment research [1] - The firm has expertise in technology, media, internet, and consumer sectors across North America and Asia, excelling in identifying high-potential investments and navigating complex industries [1] Group 2 - Astrada Advisors leverages extensive local and global experience to provide a unique perspective on market developments, regulatory changes, and emerging risks [1] - The research conducted by Astrada Advisors integrates rigorous fundamental analysis with data-driven insights, offering a nuanced understanding of key trends, growth drivers, and competitive landscapes [1] - The focus of the company is to empower investors with timely research and a comprehensive view of industry dynamics, whether navigating volatile markets or exploring new trends [1]

Core Viewpoint - Qifu Technology, Inc. (QFIN) has demonstrated exceptional stock performance, significantly outperforming its industry and competitors, driven by strong financial metrics and favorable economic conditions [1][12][18]. Group 1: Stock Performance - QFIN stock has surged 104.4% over the past six months, compared to a 50.5% increase in the industry and 11.4% growth in the Zacks S&P 500 composite [1]. - As of the last trading session, QFIN closed at $38.3, which is 5.2% below its 52-week high of $40.3, and is trading above its 50-day moving average, indicating bullish investor sentiment [4][5]. Group 2: Financial Metrics - QFIN's D1 delinquency rate has decreased over the last three quarters, with rates of 4.9%, 4.8%, and 4.6% for the first, second, and third quarters of 2024, respectively, while the 30-day collection rate improved from 85.1% to 87.4% during the same period [8]. - The 90-day default rate improved from 3.4% in Q2 2024 to 2.7% in Q3 2024, and funding costs were reduced by 30 basis points per quarter, indicating effective risk management and collection practices [9]. - QFIN's stock is priced at 6.3 times forward 12-month earnings per share, significantly lower than the industry average of 41.7 times, and its trailing 12-month EV-to-EBITDA ratio is 4.9 times, compared to the industry's average of 89.1 times [12]. - The return on equity (ROE) for QFIN is 24.4%, well above the industry average of 3.4%, reflecting strong profitability [13]. - QFIN has a current ratio of 2.56, surpassing the industry average of 2.16, indicating a strong liquidity position [14]. Group 3: Revenue and Earnings Outlook - The Zacks Consensus Estimate for QFIN's 2024 revenues is $2.3 billion, reflecting a 1.8% increase from the previous year, with a projected revenue of $2.4 billion for 2025, indicating a 3.7% year-over-year growth [16]. - The consensus estimate for 2024 earnings is $5.7 per share, suggesting a 55.2% increase from the prior year, with a projected earnings of $6.4 per share for 2025, indicating a 12% year-over-year rise [16]. Group 4: Economic Environment - The People's Bank of China (PBOC) has implemented measures to lower the reverse repurchase rate and reduce the Required Reserve Ratio (RRR), which enhances liquidity in the banking system and lowers lending costs, potentially increasing demand for QFIN's lending services [10][11].