QFIN(QFIN)2024-11-20 16:01Financial Data and Key Metrics - Non-GAAP net income reached a record high of RMB 1.83 billion in Q3, up 29.1% sequentially and 54.5% YoY [8] - Non-GAAP net income per diluted ADS increased 34.8% sequentially and 71.5% YoY to RMB 12.4 [8] - ROE in Q3 increased to 32.2%, significantly higher than most financial services and internet companies in China [9] - Total loan facilitation and origination volume (excluding RM SaaS) increased by 13.1% sequentially [7] - D1 delinquency rate decreased by 0.2 percentage points sequentially, and 30-day collection rate increased by 1.1 percentage points to the highest level since 2022 [11] - Funding costs decreased by 30 basis points sequentially, and ABS issuance costs fell by more than 50 basis points [12] - Total ABS issuance for the first three quarters of 2024 reached RMB 13.4 billion, up 23% YoY [13] Business Line Data and Key Metrics - Capital-light segment contributed 55% of total loan facilitation and origination volume in Q3, up approximately 10 percentage points YoY [20] - Loan volume from embedded finance channels increased by 85% YoY, with new credit line users acquired through these channels increasing by roughly 5 percentage points [15] - The number of users with successful drawdown grew consistently each month, with the monthly average increasing by approximately 12% from the previous quarter [18] - Log-in conversion rate increased by 11.6% sequentially in Q3 [18] - Total Technology Solutions business partnered with an additional 9 financial institutions, bringing the total to 14, with solutions deployed in 10 of them [24] Market Data and Key Metrics - The company served more than 55 million users with approved credit lines cumulatively by the end of Q3 [7] - New credit line users increased by 23.8% sequentially, while average unit acquisition cost declined by 7.4% [14] - The proportion of new credit line users acquired through embedded finance channels increased by roughly 5 percentage points [15] - The company partnered with 5 financial institutions across various categories, including joint stock banks, municipal banks, private banks, and consumer finance companies [16] Company Strategy and Industry Competition - The company transitioned from a loan facilitation model to a platform model, focusing on long-term user engagement and diversified product offerings [21][22] - The platform model enables the company to address users' credit needs at different stages of their life cycle while balancing scale, risk, and profitability [22] - The company is leveraging AI and large language models to improve user experience and operational efficiency, with the AI copilot system achieving a recall rate of 96.3% and an accuracy rate of 98.8% [25][26] - The company is expanding its tech solutions beyond consumer credit services, developing a proprietary solution tailored for SME lending [25] - The company is confident in its competitive advantage, particularly in its target customer groups, and believes the platform model has made it more robust and resilient [68][69] Management Commentary on Operating Environment and Future Outlook - The company remains cautiously optimistic about the economic outlook but is confident in achieving long-term, high-quality growth [30] - The company expects risk performance to remain relatively stable in the coming quarters, assuming a muted macro environment [11][77] - The company anticipates total shareholder returns in 2024 to approach 100% of its 2023 net income, one of the highest payout ratios among Chinese ADRs [31] - The company expects non-GAAP net income for Q4 2024 to be between RMB 1.8 billion and RMB 1.9 billion, representing YoY growth of 57% to 65% [50] Other Important Information - The company completed the majority of its USD 350 million share repurchase plan and approved a new repurchase plan of USD 450 million starting January 1, 2025 [31][47] - The company generated approximately RMB 2.37 billion in cash from operations in Q3, with total cash and cash equivalents and short-term investments reaching RMB 9.77 billion [45] - The company's leverage ratio reached a historical low of 2.3x in Q3, and it expects the ratio to fluctuate around this level in the near future [44] Q&A Session Summary Question: Drivers of loan volume growth and outlook for 2025 [53] - Loan volume increased 4.4% sequentially, driven by a slight recovery in customer demand and the platform strategy [54] - The company remains prudent due to macroeconomic, geopolitical, and domestic policy uncertainties but is well-positioned to seize growth opportunities [56] Question: Drivers of write-backs and sustainability [59] - Write-backs increased significantly due to prudent provisioning policies and improved risk performance, with RMB 910 million in write-backs in Q3 [60][63] - Write-backs are expected to remain sizable in Q4 and beyond, though the shift to a capital-light model may reduce the need for large provisions [65][66] Question: Competitive landscape and strategy [59] - The company has a competitive advantage in its target customer groups and has transitioned to a platform model, improving customer retention and lifetime value [67][68] Question: Asset quality outlook [71] - The company expects stable risk performance in the near future, supported by its high-quality development strategy and advanced risk management technology [73][77] Question: Share buyback pace and price considerations [79] - The company plans to complete its current share repurchase plan by the end of 2024 and will execute the new USD 450 million plan starting January 1, 2025 [79][81] - The company believes its shares are undervalued and will prioritize share buybacks to maximize shareholder returns [80][83] Question: Take rate improvement and long-term outlook [86] - Take rate improvement in Q3 was driven by reduced credit costs, lower funding costs, and deferred impacts from mix changes [87] - The company expects take rate to remain stable in Q4 and improve slightly in 2025, with long-term sustainability dependent on macroeconomic recovery [89][91]