QFIN(QFIN)2024-08-14 04:26Financial Data and Key Metrics - Revenue increased by 6.3% YoY to RMB4.16 billion in Q2 2024, with a net take rate rising by over 1 percentage point YoY to 4.4% [6] - Non-GAAP net income grew by 23% YoY to RMB1.41 billion, and non-GAAP net income per diluted ADS increased by 32% YoY to RMB9.16 [6] - ROE reached 25.4% in Q2, outperforming industry peers [6] - Funding costs decreased by 56 basis points sequentially, totaling a 132 basis point reduction in H1 2024 [8] - 90-day delinquency rate was 3.4% in Q2, while day one delinquency rate decreased by 10 basis points and 30-day collection rate increased by 1.2 percentage points sequentially [7][21] Business Line Performance - Revenue from credit-driven services (capital-heavy) was RMB2.91 billion in Q2, down from RMB3.02 billion in Q1 but up from RMB2.79 billion YoY [17] - Revenue from platform services (capital-light) increased to RMB1.25 billion in Q2, up from RMB1.14 billion in Q1 and RMB1.13 billion YoY [18] - Loan volume under the ICE model increased slightly to 24.6%, with the revenue take rate rising by 54 basis points YoY [12] - Technology solutions business facilitated nearly RMB2 billion in bank loans cumulatively, with outstanding balances exceeding RMB1 billion [12] Market and Strategic Developments - The company served 160 financial institutions and over 53 million users with approved credit lines by the end of Q2 [4] - The embedded finance business saw loan volume more than double YoY, with new credit line users from this channel increasing from 36.4% in Q1 to 37.7% in Q2 [9] - The company is exploring collaborations with financial institutions under the embedded finance model, aiming to enhance service efficiency and promote financial inclusion [10][11] - The technology solutions business achieved an 80% standardization rate, with partnerships established with 12 financial institutions [12][13] Management Commentary on Operating Environment and Outlook - Despite macroeconomic challenges, the company achieved its highest quarterly profit in the past 11 quarters, driven by improved asset quality and operational efficiency [4][6] - Management expects funding costs to remain stable with potential for slight decreases in H2 2024 [8] - The company plans to maintain prudent operations, iterate products and services, and expand strategic partnerships to build a sustainable growth engine [16] - For Q3 2024, the company expects non-GAAP net income between RMB1.55 billion and RMB1.65 billion, representing YoY growth of 31% to 40% [27] Other Key Information - The company issued RMB4.6 billion in ABS in Q2, with H1 2024 ABS issuance up 30% YoY [8] - Sales and marketing expenses decreased by 12% QoQ and 16% YoY, reflecting a more prudent customer acquisition approach [19] - The company upgraded its AI copilot system, achieving a speech recognition accuracy rate of over 93% and intent recognition accuracy of over 95% [14][15] - The Board approved a dividend of $0.30 per Class A ordinary share or $0.60 per ADS for H1 2024 [24] Q&A Session Summary Question: Loan volume growth and take rate expectations for H2 2024 - Loan volume is expected to grow in H2 2024 due to stable credit demand, improved risk metrics, and diversified acquisition channels [30][31] - Take rate growth in Q3 is driven by declining credit and funding costs, better monetization through platform strategy, and increased contribution from the capital-light model [33] Question: Impact of Mr. Zhou Hongyi's resignation - Mr. Zhou resigned due to personal reasons, and his departure will not impact daily operations as he was not involved in them [35][36] Question: Share buyback pace and rationale - The company accelerated share buybacks, purchasing $211 million worth of stock by August 13, 2024, due to undervaluation and to maximize shareholder value [38] Question: Funding cost reduction and asset quality improvement - Funding costs declined due to lower ABS costs and increased ABS proportion, with limited room for further reduction [41] - Asset quality improved due to cautious loan origination, optimized risk models, and enhanced post-loan operations [42][43] Question: Customer acquisition pace in H2 2024 - The company plans to accelerate customer acquisition in H2 2024, leveraging diversified channels and embedded finance models to achieve quality loan growth [47][48]