Q2 2022 OneConnect Financial Technology Co Ltd Earnings Call (English)

In Q1, because of the volatility in cash flow, if we compare cash flow with the P&L, we can witness the sum of volatilities. However, if we extend the time horizon to look at the overall condition in H1, we can see they match with each other. The basis for cash flow is operating profit and loss. This is our foundation. If we are to improve the cash flow, the priority will be reducing loss and breaking even as best possible. This is the core for business operations of One Connect. On top of it, cash flow management is also vital for us. In recent years, we have been very strict about cash flow management. For example, we have a higher requirement for recovery of funds. We will split the requirement to each use under One Connect and ask them to track how many days they take.

from Mr. Zhou Tian, comes from Zhou Tian from Dofeng Securities.

Congratulations to the management and the company for your solid performance in Q2.

My first question is about your new products.

We noticed that in the past few quarters, you disclosed progress in new products for core banking system.

So I want to know more about its momentum in the market and what are their competitive advantages.

My second question is about your business overseas.

We noticed that for Taggle OB it experienced very rapid growth.

In the future, what's the PAOB's position strategy-wise and what's your outlook for PAOB's fitness? Thank you for your question. The first question will be answered by our CTO, Mr. Lee. And then we will answer your second question.

Good evening, everyone.

Let me answer your first question about the AI customer service and for banking systems.

First, AI customer service.

If you look at the market potential and target customers...

medium and large financial institutions and regulators have a market of tens of billions. Although financial institutions have voice robots, they lack scenario-based AI customer service. It will be the main growth point of AI customer service in the future. Compared with our competitors, the...

and connect both the technology plus the model plus business model.

Our AI customer service covers more than 2,000 banking, insurance, and

investment, AI, customer service scenarios including

telemarketing, loan collection, and customer services, as well as the profound experience in fine-tuning AI.

financial scenario with the

and we have pinon verified business deployment processes. It can be widely replicated among financial institutions without much extra customization.

The AI customer service also is highly recognized by the market, as of the end of H1. The number of premium customers almost doubled compared with the same period last year.

And the net expansion rate of value customers will already surpass the 80% in six months time. This is about AI customer service. The second product is about a...

core systems for banks.

We have shifted from a single product to core systems, which are very hard to be replaced and will help us to hire customers to connect.

In terms of the competitiveness of the product, I think there are mainly three. First is the cloud-based through digital banking system solution.

It integrates with the.

The front-end system of One Connect is seamless to me.

It will better support online business as well as the information technology.

application and innovation hardware to improve for security level.

It has a module like the design with a comprehensive function.

we can configure these services at a single client level.

In terms of infrastructure, we use the cloud native for microservice design.

by leveraging the cloud computing.

we can offer available

services for banks and provide them with a faster, more reliable and secure platform. We also use the homemade distributed infrastructure.

We can make sure that the basic IT infrastructure used by banks are advanced controllable and in line with the regulatory requirements.

In terms of the sales strategy, the upselling to existing clients works very well. If you look at our 10 customers, most of them used our other product first before they used our core sounded.

In terms of market recognition, although it is a relatively newly launched product, Core Banking Solutions is widely recognized in the market. In H1, we have already required around 20 customers and third-party revenue contribution increased by several of fours.

from 22 million in 2021.

278 million in the first half of 2022.

The customer thickness is also very high. The net expansion rate is over 100% in H1.

Thank you..

I'd like to respond to PAOB question. Among the eight virtual banks in Hong Kong, PAOB is the only one that serves SMEs.

Our goal is to leverage technology to provide SMEs with fast, convenient, and cost-effective financial services. There are three features of our business. The first is that it's a purely online process. CLB is the first office client to offer a purely online.

a solution to SMEs. You only take one day for them to open account with us.

PAOB is also the only one that use alternative data to do credit screening.

Customers do not need to provide with us financial reports or flatwares to obtain a loan from us.

And the third feature is that...

and product development.

The results are good. In 2021, the revenue growth ranked first among all virtual banks in Hong Kong.

In the first half of this year, the momentum was packed at 5.3 times the...

In the future, we will stick to this development direction, which is to serve the SMEs. The market is huge. We only reach out to a small number of the business in need. We are very confident that we will maintain fast growth in the future.

Thank you for answering this question.

Operator, we are ready for our next question.

If you have any questions, please press star first and then press 1.

Your next question comes from...

from government tax.

Congratulations to Mr. Shen and Mr. Long on financial performance in Q2. I have two questions. Firstly... Regardless, I have two questions based on my socials to keep in mind, I think I will

I would like to know more about revenue growth in age two.

Yeah

Do you think revenue growth from third parties will outpace revenue from Lufex and the PM group? And if we look at it by division, for instance by digital insurance and digital banking, where do you see the opportunity for growth is? My second question is about standardization. We talked a lot about standardization.

and we see that it can bring improvements in gross margin. So I would like for the management to help me understand during product standardization, how will customers take it and how do we reach balance between revenue growth and standardization?

and will it make further contributions to our long-term growth? Thank you. Thank you for your question.

Mr. Law will answer your first question.

Let me answer your question about third-party revenue growth, the expectation. Charlene Damon from Bay Area College inch multifamily fund and by

In the previous introduction, I mentioned that

In Q2 and in H1.

the impact on disinfectant tubes stillsay the centummy destroyed tube?' peoples

third-party revenue rules.

Otherwise, in Q2 and HY, the third-party revenue would have grew faster.

especially in terms of implementation, is misceregenation and there is management.

These business lines were hit by COVID.

Third-party revenue growth remained a priority for us in 2022.

the three

also mentioned third-party revenue growth.

We have high hopes for third-party revenue growth.

For example, in the banking business line.

And in the micro, small and medium sized enterprise long platform, we continue to upgrade.

our products to meet their demands. However, because of COVID, some offline businesses were interrupted.

And we hope in the second half

the COVID will be brought more under control.

And we will have a higher revenue growth for our third party.

in terms of the gamma platform.

We mentioned a lot about the AI customer service.

the number of customers and its recognition in the market.

The core systems and the data products are also developing.

core systems and data products are also developing soundly.

We hope that this will all contribute to third party revenue growth in the second half of 2022.

Insurance products is one of the more sophisticated business lines for us.

that contribution.

is high.

For example, the auto insurance e-commerce system.

And we hope that we can maintain the growth momentum.

after the economy recovers.

we will see better growth

Another part is about our overseas business.

The OB was mentioned a lot.

The business, the girl by 5.3 times the in each one.

And we expect to maintain this momentum.

throughout 2022. GLB is not only a virtual band.

It is also a benchmark for us in terms of technology and the system.

It is embodiment of our advanced technology.

to our revenue from third parties.

Our median term target remains unchanged.

We hope that the third-party revenue will account for 50% of our total revenue in the future. And we are constantly working towards realizing this goal.

The second question concerning standardization, we answered by musician.

Let me answer this question.

This year the management raised three standardizations, marketing, product and delivery.

especially products of standardization.

In the past that.

the majority of products for banks are customized.

which makes it rather difficult to proceed.

this year because of COVID.

Many thanks.

started to control their IP expenditure.

And they are willing to take.

Testify the business cases.

So more and more banks will start to standardize the products and now...

And we are also building new benchmarks to...

reach out actively with the customers.

and make them understand that it is not only a server or IP infrastructure.

It will help for their business to iterate and operate faster and bring better customer services.

So that they are convinced that using standardized products

It's even better than customized version.

and will continue to guide our customers to accept more standardized products.

How we strike a balance between

standardize and customize the product.

I think in the short term.

We do need to use the customized products.

However,

if we have existing standard products.

We will reduce the need for customization.

And in terms of.

and when there is no standard version, we will make the customized version more replicable.

and the more generic curve.

In this way, we can...

include this customized version to our next standardized product.

This is the principle for balance between standard and customized products.

Thank you. And that concludes our Q&A session. And I'll hand it back to the management.

Thank you everyone for joining the call today. This is the first earnings release after we got listed in Hong Kong.

We appreciate your interest in following One Connect and look forward to speaking with you again. If you have any questions, please contact our IR team, OCEFT underscore IR at ocft.com. Thank you.

That's all for today's meeting.

Thank you for your participation and wish you a good day. Bye..