Financial Data and Key Metrics Changes - Total net revenue for Q3 was RMB 5.21 billion, slightly down from RMB 5.22 billion in Q2 but up from RMB 4.37 billion a year ago [16] - Non-GAAP net income reached RMB 1.51 billion in Q3, compared to RMB 1.85 billion in Q2 [21] - Non-GAAP net income per fully diluted ADS was RMB 11.36 in Q3, down from RMB 13.63 in Q2 [21] - The effective tax rate for Q3 was 20.9%, higher than the typical rate of approximately 15% due to withholding tax provisions [21] Business Line Data and Key Metrics Changes - Revenue from credit-driven services was RMB 3.87 billion in Q3, up from RMB 3.57 billion in Q2 [16] - Revenue from platform services was RMB 1.34 billion in Q3, down from RMB 1.65 billion in Q2 [17] - The average internal rate of return (IRR) for loans originated was 20.9%, compared to 21.4% in Q2 [17] Market Data and Key Metrics Changes - The number of new credit line users grew by 9% to 1.95 million in Q3, while the average cost per credit line user declined by 8% [8] - The 90-day delinquency rate increased to 2.09% in Q3 from 1.97% in Q2 [18] - The provision coverage ratio remained near historical high at 613% in Q3 [21] Company Strategy and Development Direction - The company is focusing on risk management and enhancing AI capabilities to better serve inclusive finance needs [4] - The strategy includes optimizing the user mix by increasing the proportion of high-quality borrowers [6] - The company aims to strengthen its competitive edge through technology solutions and AI-driven initiatives [10] Management's Comments on Operating Environment and Future Outlook - The management acknowledged persistent headwinds in the consumer finance sector and the need for regulatory adjustments [4] - They expect the competitive environment to become healthier in the long run, despite short-term impacts on market size and profitability [27] - The company plans to maintain a cautious approach in business planning for the next few quarters, focusing on risk control [23] Other Important Information - The company issued RMB 4.5 billion in asset-backed securities (ABS) during Q3, up 29% year-over-year [8] - Total cash and cash equivalents were RMB 14.35 billion in Q3, compared to RMB 13.34 billion in Q2 [22] - The company plans to resume its share repurchase program after the earnings call [33] Q&A Session Summary Question: Impact of new loan facilitation rules on business model and take rates - Management indicated that the new rules will require time for adjustment, impacting market size and profitability in the near term [26] - They expect a take rate of 3%-4% in Q4 due to pricing and risk impacts, with a focus on optimizing risk strategies and improving collection efficiency [28] Question: Shareholder return and buyback plans - The company plans to resume its share repurchase program after the earnings call, with a goal to gradually increase dividend payouts [33][34] Question: Asset quality trends and expectations - Management noted early signs of stabilization in asset quality, with no further upward trend in delinquency rates observed in November [39] - They expect improvements in overall portfolio risk to take a few more months to materialize [43] Question: Implications of potential APR regulations - Management assessed that while direct impacts are limited, there may be indirect effects on liquidity and risk volatility [49] - They emphasized the importance of serving higher-quality users and optimizing pricing to maintain a balanced risk profile [50] Question: Drivers behind technology solutions loan volume growth - The technology solutions business saw significant growth due to increased collaboration with financial institutions and strong demand for AI agents [55] - The company is upgrading its technology offerings to enhance customer acquisition and risk management [56] Question: Capital heavy vs. capital light business mix outlook - In the short term, the company may lean towards capital light models due to market volatility, but expects to maintain a balanced mix over the long term [60]

Core Insights - Q2 2025 performance of Qifu Technology shows revenue of 5.216 billion, a year-on-year increase of 25.38% and a quarter-on-quarter increase of 11.2% [1] - Net profit for the same period is 1.731 billion, reflecting a year-on-year increase of 25.72% but a quarter-on-quarter decrease of 3.68% [1] Financial Performance - Total loan facilitation in Q2 reached 84.609 billion, a quarter-on-quarter decrease of 4.81% but a year-on-year increase of 16.12% [2] - As of June 30, 2025, the loan balance stood at 1400.80 billion, showing a slight decrease from 1402.73 billion at the end of March but a year-on-year increase of 13.38% from 1235.51 billion [3] Business Strategy - Qifu Technology's strategy remains cautious, with a focus on balancing growth and risk [4] - The company has diversified its business model, allowing for flexibility in asset allocation between heavy and light capital [5] Revenue Breakdown - In Q2, revenue from heavy capital loan facilitation reached 0.461 billion, a year-on-year increase of 205.1% [7] - Financing income accounted for the largest share of total revenue at 2.205 billion, representing 42% of total revenue [10] - The company issued bonds totaling 14.4 billion in the first half of 2025, a 45% increase year-on-year [12] Regulatory Impact - The "Assisted Loan New Regulations" are expected to have a positive long-term impact on the industry, promoting a healthier ecosystem [13][14] - Qifu Technology is preparing alternative plans in response to the new regulations, ensuring compliance and operational stability [20][21] International Expansion - Qifu has initiated small-scale operations in the UK, with positive early indicators [24] - The company aims to understand local markets and refine its risk models as part of its international strategy [25] Cost Management - Customer acquisition costs decreased to 370 yuan in Q2 from 384 yuan in the previous quarter [30] - Marketing expenses increased to 6.63 billion, a 12% quarter-on-quarter rise [33] Risk Management - The company has increased its risk provisions, with new provisions for risk-bearing loans totaling approximately 2.5 billion in Q2 [8] - The D1 delinquency rate remained stable, but recovery rates declined from 88.1% to 87.3% [35] - Qifu is tightening risk management measures in response to industry-wide pressures and regulatory changes [42][43] Future Outlook - The company maintains a cautious outlook due to ongoing macroeconomic uncertainties, projecting Q3 net profit between 1.52 billion and 1.72 billion, reflecting a potential year-on-year decline [44][45]