Q2 2024 Qifu Technology Inc Earnings Call
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At this time I would like to turn the conference over to MS guarantee senior director of capital markets. Please go ahead Karen.
Karen: Thank you Emily Hello, everyone and welcome to Chi fluid technologies second quarter 2024 earnings Conference call. Our earnings release was distributed earlier today and is available on our IR website.
Speaker Change: Joining me today are Mr. <unk>, our CEO, Mr. Alex <unk>, our CFO and Mr. Jin Yan our CFO.
Speaker Change: Before we start I would like to refer you to our safe Harbor statement in the earnings press release, which applies to this call as we will make certain forward looking statements.
Speaker Change: Also this call includes discussions of certain non-GAAP financial measures.
Speaker Change: Please refer to our earnings release, which contains a reconciliation of the non-GAAP financial measures to GAAP financial measures.
Speaker Change: Also please note that unless otherwise stated all figures mentioned in this call are in RMB terms.
Speaker Change: Before we start we would like to like you to know that today's prepared remarks from our CEO will be delivered in English using an AI generated voice.
Speaker Change: Now I will turn the call over to MS to Hudson. Please go ahead.
Speaker Change: Hello, everyone. Thank you for joining us today.
Speaker Change: Despite the ongoing macroeconomic challenges.
Speaker Change: 2024.
Speaker Change: The solid performance by adhering to our prudent execution and quality development strategy.
Speaker Change: The end of Q2 all platform empowered.
Hunton: Hunton 60 financial institutions.
Hunton: More than 53 million users with approved credit lines on accumulative basis.
Hunton: During the quarter, we further solidified our business foundation, and improved asset quality and operational efficiency with a keen focus on the quality of loans.
Hunton: These efforts enabled us to significantly improve our risk performance on record the highest quarterly profit over the past 11 quarters.
Hunton: Highlighting the strong resilience of our business.
Speaker Change: I would like to thank our entire team for their persistent drive for excellence and ongoing self development.
Speaker Change: It has enabled us to navigate an ever evolving market environment.
Speaker Change: At the same time, we are building a more open ecosystem and adopting a platform approach to create value for both users and financial institutions aiming to further expanding the boundary of our business.
Speaker Change: In Q2, our revenue increased by six 3% year over year to RMB 416 billion.
Speaker Change: With our net take rate increasing by over one percentage points year over year to roughly 4.4%.
Speaker Change: non-GAAP net income increased by 23% year over year to RMB 141 billion.
Speaker Change: While non-GAAP net income per diluted ads increased by 32% year over year to RMB 916.
Speaker Change: Thanks to our outstanding operational results and efficient capital allocation or are we in Q2 continued to outperform industry peers coming in at 25, 4% during the quarter.
Speaker Change: Despite facing macroeconomic headwinds our asset quality has steadily improved in Q2.
Speaker Change: Based on our keen insights into risk, we proactively tightened our overall credit standards over the past three quarters iterating risk strategies across loan facilitation credit operations and post credit processes to improve risk metrics.
Speaker Change: Risk indicators for new loans have started improving since November last year and stabilized in the first half of this year.
Speaker Change: For loan collection, we further optimized collection resources to boost efficiency as line control issues have been largely resolved.
Speaker Change: Asset quality of the overall loan portfolio steadily improved in Q2 with day, one delinquency rate decreasing by 10 basis points, while 30 day collection rate increase by around 1.2 percentage points sequentially.
Speaker Change: This positive trend in risk performance continued into Q3.
Speaker Change: With the optimization of risk strategies already in place.
Speaker Change: We are confident in our ability to deliver on our operational and financial objectives for the second half of the year.
Speaker Change: During Q2 liquidity in the financial system was relatively ample market interest rates remained in a downward trend.
Speaker Change: With robust asset quality, we maintained on negotiating leverage on the funding side to further drive down costs. We also maintained the pace of ABS issuance with RMB four 6 billion issued in Q2.
Speaker Change: ABS issuance during the first half of the year increased 30% compared to the same period last year.
Speaker Change: Overall funding costs in Q2 decreased by another 56 basis points sequentially, resulting in a total decrease of 132 basis points for the first half of the year this notably improve the take rate for our capital heavy business.
Speaker Change: For the second half of the year, we expect funding cost to maintain largely stable with potential to slightly decrease further.
Speaker Change: In terms of user acquisition, we focused on acquiring and retaining high value users, while further diversifying acquisition channels and boosting efficiency.
Speaker Change: In Q2, we adopted a relatively prudent customer acquisition approach with a reduction in marketing spending.
Speaker Change: Among new credit line uses unit acquisition costs remained flat sequentially, while the percentage of high value users increased by six eight percentage points.
Speaker Change: Our acquisition channels further diversified with loan volume from our embedded finance business more than doubling year over year.
Speaker Change: The percentage of new credit line users from this channel increased from 36, 4% in Q1 to 37, 7% in Q2.
Speaker Change: We also partnered with a wider range of traffic platforms under the embedded finance model, including E Commerce O to O and short form videos.
Speaker Change: Leveraging our strong user profiling and risk management capabilities, we have empowered these platforms to better serve a diverse user base.
Speaker Change: Furthermore, we are proactively exploring collaborations with financial institutions under the embedded finance model.
Speaker Change: By jointly serving the existing users who are currently underserved by the financial institutions, we will create new avenues for user acquisition.
Speaker Change: So far we have entered preliminary partnerships with a number of financial institutions.
Speaker Change: This collaborative model is expected to significantly enhance service efficiency for financial institutions improve the user experience and promote financial inclusion over the long term.
Speaker Change: We are also building a comprehensive credit Tech service platform based on users' risk profiles and values.
Speaker Change: By empowering financial institutions with a diverse range of products services and collaborative models, we aimed to promote financial inclusion across the board.
Speaker Change: Financial institutions, we have improved underwriting efficiency by providing more precise user profiling and better fund asset matching tailored to different risk appetites and return preferences for.
Speaker Change: For end users, we have expanded the breadth and depth of our services by introducing a more diverse range of financial institutions and a broader price spectrum. We have also enriched our user loyalty program with additional benefits and improved our long term retention through differentiated user operations.
By upgrading from a loan facilitation model to a platform model, we are expanding our total addressable market and extending the use of lifecycle, enabling us to boost operational efficiency and long term profitability, while balancing risks.
Speaker Change: In Q2, we further optimized the structure of our business with a higher contribution from the capital light model.
Speaker Change: The percentage of loan volume under the IC E model increased slightly to 24, 6% with the revenue take rate as a percentage of loan volume increasing by 54 basis points from the same period last year.
Speaker Change: Our technology solutions business continued to make steady progress.
Speaker Change: During the first half we established partnerships with seven additional financial institutions, bringing the total number of financial partners to 12.
Speaker Change: Our Chefoo Digitech brand has one broad recognition across the banking industry and is now among the first tier players in the market.
Speaker Change: As of the end of June our end to end technology solutions facilitated nearly RMB 2 billion in bank loans cumulatively with outstanding balances exceeding RMB 1 billion.
Speaker Change: Loan volume compounded monthly growth rate reached 14% during the first half of the year.
Speaker Change: Of the new financial partners, we on boarded this year, our solutions will be deployed and launched with five of them between August and September driving further growth for this business.
Speaker Change: Our technology solutions have achieved an 80% standardization rate offering financial institution's digital enhancements and operations risk management and products based on hybrid deployment.
Speaker Change: We are also seeing growing synergies between our tech solutions and credit businesses.
Speaker Change: Through our integrated solutions covering technology empowerment joint operations loan facilitation and user referrals, we will further deepen our support for financial institutions and expand our customer reach.
Speaker Change: We continued to invest in cutting edge technologies with a strong focus on expanding the application of AI and large language models in the fintech sector to enhance user experience and improve operational efficiency.
Speaker Change: We upgraded over 10 modules in our efficiency focused AI co pilot system enhancing supervision summarization and analysis of collection teams work to better support supervisors in managing both collection teams in cases.
Speaker Change: Currently in the testing phase the upgraded system processes, a 1000 word cool and just five three seconds on average.
Speaker Change: Once rolled out in full scale, we expect the system to handle around 100000 calls per day.
Speaker Change: We're also leveraging the large language model to enhance our chat bots capabilities and communication efficiency and enrich the variety of scripts, increasing the average number of exchanges per call by over 10% and boosting script iteration efficiency by 40%.
Speaker Change: Additionally, we are also strengthening the copilot system's fundamental capabilities through ongoing upgrades to our automatic speech recognition ASR technology.
Speaker Change: By integrating our proprietary T fusion framework model, we have achieved a speech recognition accuracy rate of more than 93% and an intent recognition accuracy rate of more than 95% and a complex context.
Speaker Change: T fusion has also set a new industry benchmark for the lowest character error rate, making us one of the top performers in China.
Speaker Change: Notably this achievement was recognized by into speech 2020 for a leading global conference on the science and technology of spoken language processing.
Speaker Change: Looking back at the first half of the year, we successfully navigated a challenging macro environment.
Speaker Change: And made significant improvements in both asset quality and profitability.
Speaker Change: We also upgraded our business model and enhance user engagement through differentiated strategies.
Speaker Change: Additionally.
Speaker Change: We strengthened synergies between our tech solutions and credit businesses.
Speaker Change: Reinforcing our platform position.
Speaker Change: As we look into the second half of the year, we will maintain prudent operations to effectively manage risks, while continuing to iterate products and services expand strategic partnerships and build a sustainable growth engine.
Speaker Change: We believe many of our current initiatives will continue to generate positive results in the near future.
Speaker Change: Supported by the steady growth of our earnings we have proactively optimized capital allocation and maintained a fast pace of share buyback so far this year.
Speaker Change: Our combined payout ratio leads the industry as well as the majority of Chinese ADR ours.
Speaker Change: Moving forward, we will continue to create value for shareholders through substantial buybacks and dividends.
Speaker Change: With that I will now turn the call over to Alex.
Speaker Change: Okay. Thank you Hi Shang.
Speaker Change: Good evening everyone.
Alex: Welcome to our second quarter earnings call.
Speaker Change: Well micron environment was still challenging won't continue to make good progress to optimize operations improve efficiencies reduce risk exposure.
Speaker Change: And deliver strong financial results in the second quarter.
Speaker Change: Total net revenue for Q2 was $4 6 billion versus $4. One 5 billion in Q1, and $3 9 billion a year ago.
Speaker Change: Revenue from credit driven service capital heavy was $2 91 billion in Q2 compared to three point or two better than Q1, and 279 billion a year ago.
Speaker Change: On your growth was mainly driven by growth in on balance sheet loan and the contribution from other value added services.
Speaker Change: Partially offset by decline in off balance sheet loans.
Speaker Change: Our balance sheet account for over 28% of the total loan volume in Q2.
Speaker Change: Overall funding costs further declined over 50 bps sequentially and over 150 Opex year on year with the help of a strong relationship with financial institution partners and new ABS issuance.
Speaker Change: Revenue from platform service capital Light was 125 billion in Q2 compared to 1.14 billion in Q1, and $1 3 billion a year ago.
Speaker Change: The year on year growth was mainly due to strong contribution from IC. Another value added service substantially offsetting the decline in capitalized loan facilitation.
Speaker Change: Overall the contribution from her phone service further increase as we try to strike at an optimal balance between risk bearing an interest bearing assets.
Speaker Change: Certain macro environment.
Speaker Change: Q2, we saw continued sequential improvement in revenue take rates for both cap heavy and kept line business.
Speaker Change: During the quarter average IRR of the loans, we originated <unk> facilitated was 21, 6% compared to 21 five in the prior quarter looking.
Speaker Change: Looking forward, we expect pricing to be fluctuate around this level.
Speaker Change: Sales and marketing expense increased 12% Q on Q and 16% year on year as we intentionally control the pace of the user acquisition in an uncertain environment.
Speaker Change: We added approximately one 3 million new credit line users in Q2 versus 1.45 million in Q1 unit.
Speaker Change: Unit cost to acquire a new credit line users was essentially flat Q on Q.
Speaker Change: We will continue to make timely adjustments to the pace of new user acquisition based on macro environment from time to time and further diversify our user acquisition channels. Meanwhile, we will also continue to focus on reenergizing existing user base.
Speaker Change: I should repeat borrowers historically contribute the vast majority of our business.
Speaker Change: 90 day delinquency rate was three 4% in Q2, the ratio was pocketed by providing outstanding balance of on and off balance sheet lungs that were nine months past sorry, three three months past due with a total outstanding balance of on and off balance sheet loss across.
Speaker Change: Our platform.
Speaker Change: At the end of a quarter.
Speaker Change: As we continued to purposely cut our exposure to certain risk bearing assets total outstanding balance of on and off balance sheet loans.
Speaker Change: Used by approximately 15% sequentially in Q2.
Speaker Change: Therefore, the 90 day delinquency rate was mathematically insulated by roughly 18%.
Speaker Change: It is somewhat misleading.
Speaker Change: Furthermore, as we discussed in previous calls this metrics is backward looking nature and provide little value to help investors understand our asset quality trends.
Speaker Change: We strongly recommend investors focus on key leading risk indicators, such as they wanted to delinquency and 30 day collection rates.
Speaker Change: Day, one delinquency rate was four 8% in Q2 versus four nine in Q1 30 day collection rate was 86, 3% in Q2 versus 85, 1% in Q1.
Speaker Change: The collection rate has since recovered to a similar level of Q3 2023 in recent months.
Speaker Change: We expect to see continued gradual.
Speaker Change: Graduate improvement in these risk metrics in the coming quarters.
Speaker Change: As macro uncertainty persists we.
Speaker Change: We continue to take a prudent approach to book provision against potential credit losses.
Speaker Change: Total net provision for risk bearing laws in Q2 were approximately $1 three 1 billion versus 138 billion in Q1.
Speaker Change: The modest sequential decline in new provision was mainly due to Q on Q decline in off balance sheet capital have a longwall in.
Speaker Change: Well, the new provision booking ratio rising sequentially.
Speaker Change: Write backs, our previous provisions or approximately $480 million in Q2.
Speaker Change: As overall portfolio risk metrics improved we expect additional write backs in the coming quarters provision.
Speaker Change: Provision coverage ratio, which is defined tacoda outstanding provision divided by total outstandings delinquent asset heavy long.
Speaker Change: Loan balance between 90, and 180 days or 421% in Q2 compared to 414% in Q1.
Speaker Change: non-GAAP net profit was 1.41 billion in Q2 compared to $1 2 billion in Q1.
Speaker Change: A significant improvement in profitability was mainly due to better asset quality and operational efficiency as well as a favorable mix changes.
Speaker Change: Effective tax rate for Q2 was 33, 1% compared to our typical ETR of approximately 15%.
Speaker Change: That's higher than normal ETR was mainly due to approximately 380 million withholding tax provision related to the large stomach cash distributions from onshore to offshore for dividend payments and share repurchase program during the quarter.
Speaker Change: With solid operating results and higher contribution from capital light models, our leverage ratio, which is defined as risk bearing along balance provided by shareholders equity was two 4% in Q2 a historical.
Historical low we expect to see this leverage ratio fluctuate around this level in the near future.
Speaker Change: We generated approximately 1.96 billion cash from operations in Q2.
Speaker Change: Flat Q on Q.
Speaker Change: Total cash and cash equivalent was $8 5 billion in Q2 compared to $8 3 billion in Q1.
Speaker Change: Restricted cash was approximately $6 3 billion in Q2 compared to $5 3 billion in Q1.
Speaker Change: It's why we continue to generate strong cash flow from operations. We believe our current cash position is sufficient to support our business development and to return to our shareholders.
Speaker Change: Cortez to our current dividend policy our board.
Speaker Change: Lord has approved a dividend of U S. Dollar 30 cents per class, a ordinary share or U S. Dollar 60 cents per avs.
Speaker Change: For the first half of 'twenty 'twenty four to holders of record of class a ordinary share in the avs is as of the close of business day on September 27, 2020 for Hong Kong time in New York Times, respectively.
Speaker Change: This represents the second consecutive time, we've raised our semiannual dividends.
Speaker Change: On March 12, 2024, we announced a new share repurchase plan.
Repurchase up to 350 million worth of eds over a 12 months period, starting April one 2024.
As of August 13, 2024, we just had in aggregate purchased approximately 10.7 million assets in the open market for a total amount of approximately U S dollar $211 million inclusive about commissions.
Speaker Change: At an average price of $19 seven U.
U S dollar per avs under the 2020 for a purchase price.
Speaker Change: So if the repurchase is significantly faster than time schedule.
The proactive execution of share repurchase further demonstrates management's confidence and commitment to the future of the company and the management intent to consistently use share repurchase to achieve additional.
Speaker Change: As accretion in the long run.
Speaker Change: With the full execution of our current share repurchase program and the dividend policy, we are generating the highest combined yield on a recurrent basis amongst Chinese ADR is to our shareholders.
Speaker Change: Before we move on to discuss financial outlook I would like to spend a few minutes to talk about the technology solution business.
We start to offer other technology solution in large scale in early 2022, which provides financial institutions onsite deployed risk management SaaS module that help our partners improve credit assessment results.
Speaker Change: In Q2 these solutions facilitated approximately 20 256 billion loan volume.
Speaker Change: However, this service only generate marginal returns even after more than two years ramping and do not meet our internal target.
Speaker Change: As a result, we have decided to gradually discontinue the service by the end of 2024.
Speaker Change: Session will have a negligible impact to our overall financial metrics.
Speaker Change: Well since the middle of a 2023 we start to offer end to end technology solution to financial institutions, which covers various aspects of our Fi partners operations, such offerings should generate higher returns that satisfy our internal criterias one fully scale up.
That said the ramping of our answer.
Speaker Change: And technology solutions still in its early stage and facilitated approximately $685 million of loan volume in Q2.
Speaker Change: Given the above mentioned changes starting Q3 2024, we will provide pro forma information regarding loan volume and loan balance for the ongoing business and the intended discontinued business to better reflect year on year and sequential trends.
Speaker Change: We were strongly suggest investors and analysts make necessary adjustments to your respective financial models as well.
Speaker Change: Finally regarding our business outlook.
Speaker Change: Well, we started to see some tentative signs of marginal improvement in demand. We will continue to take a prudent approach and a focus on enhancing profitability.
Speaker Change: The efficiency of our operation for second half of 2024.
Speaker Change: Meanwhile, changes in business mix overall over the last few quarters will also result in changing the pace of our revenue bookings.
Speaker Change: As such we expect to see continued improvement in overall take rate for the remainder of the year.
For the third quarter of 2020 for Comtech expects to generate non-GAAP net income between RMB 155 billion.
Speaker Change: 165 billion.
Speaker Change: Representing a year on year growth between 31% and 40%. This outlook reflects the company's current and preliminary view, which is subject to material changes.
Speaker Change: With that I would like to conclude our prepared remarks, operator, we can now take some questions.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be now.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: Those who can speak Chinese please type your question in Chinese followed by English translation.
Speaker Change: Allowing enough time to address everyone on the call. Please keep it to one question and one follow up and we tend to QEP has more questions. Thank you.
Speaker Change: We will now take our first question from the line.
Speaker Change: Richard <unk> from Morgan Stanley. Please ask your question.
Speaker Change: Richard Your line is open please ask your question.
Speaker Change: Yeah.
Speaker Change: Okay.
Okay.
Speaker Change: Yeah.
Okay Gotcha Gotcha Gotcha.
Okay.
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: Even the guidance.
Speaker Change: Well I think I.
I should be careful about.
Speaker Change: Yeah.
Greg: Q <unk>, Hey, Greg for you all.
Speaker Change: That's important.
Speaker Change: Sure it wont come back and kind of logical.
Speaker Change: Right.
Speaker Change: Thanks Joel.
Speaker Change: Okay.
Speaker Change: In that regard.
Speaker Change: Okay, I'll take hold the tree removal to LNG.
Speaker Change: Two questions for me one is.
Speaker Change: Volume for second half.
Speaker Change: 'twenty 'twenty four 'twenty.
Speaker Change: 2025.
Any expected changes in take rate.
Obviously, the profit guidance for the quarter is quite strong and the drivers behind that.
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Speaker Change: Okay I'll do the translation effect regarding the loan volume clearly, we expect loan volume to grow in the second half of the year compared to the first half mainly because I read it.
Speaker Change: The first one on demand side, we observed that credit amount is relatively stable recently and they use their activity level has slightly increased in June and July with the logging in Asia Asia, right, Oh, absolutely rising by about 7% compared to May.
Speaker Change: Our risk side.
Speaker Change: Treatment with <unk>.
Matrix is on track and that the momentum continues in Q3, which gives us more comfort that we can okay.
Speaker Change: Our Pac ratio and credit lines to enhance activity of our exiting.
Speaker Change: That intent.
Speaker Change: New customer Lake we have diversified our.
Mike: Our channels and improve our efficiency and customer acquisition in the first half uptick yet and the quality of new customers has been significantly okay. Mike.
Mike: We may try to invest more to attract new students.
Mike: Diverse channels in the second half.
Mike: First one our platform strategy is basically to you.
Mike: Direct cooperation model way more financial institutions to have a more diversified user base, which will enhance our customer coverage and our collection rate. So in summary, we have a lot of work in the first half of this year, giving us more room to do.
Speaker Change: Hi, and OPEC epic given the improving.
Speaker Change: And then Rick So we believe that the loan volume in the second half of the year will increase ex Tac at.
Speaker Change: At the same time.
Speaker Change: It's also laying a foundation for our longer term growth.
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Glenn: Thank.
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Speaker Change: Hello, how are you thinking about the easy integration.
Speaker Change:
Sheridan: And the emotional tie to it so low the Sheridan CFO Sandrine quick question.
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Sandy: Kind of question Sandy.
So you're going to generate here.
Speaker Change: Regarding the take rate I would like to address that the main driver of our profit in Q3 is mainly attributed the Q3, leaving.
Speaker Change: The reason is I get the.
Speaker Change: Credit cost and the funding cost will continue to.
Speaker Change: In Q3.
Speaker Change: Second reason is that.
Our platform strategy will not only enhance our user coverage. That's also achieved better monetization.
Speaker Change: And certainly then is that in Q3, the proportion of asset light business model will be fed rate increase and the revenue recognition pace of asset light model is relatively okay, which is also a reason for the REIT and our take rate in Q3. So based on these reasons, we believe that the takeaway in Q3 may not.
Speaker Change: A normal level and we won't expect our take rate to rise continuously in the future.
We have been keeping and improving on that.
Speaker Change: The take rate in the past quarter. So in the long run we believe four to four 5% is a relatively reasonable level for our sustainable take rate.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of <unk> from Bank of America. Please ask your question Anna.
Speaker Change: Hum.
Speaker Change: One that you got with Adam welcome. Thank you.
Anna: Got you.
Anna: Yeah.
Anna: Okay.
Anna: Yeah.
Anna: Sure.
Anna: So that you just recently on the call.
Anna: Thank God.
Anna: Hold on.
Anna: Now what they are going through that.
Speaker Change: Yeah. So congratulations on the very strong result.
Speaker Change: Macro challenges and we noticed that.
Speaker Change: He has been done and get the channel throughout the company.
Speaker Change: The duration is behind this business, yet and will it have an impact on the Companys operation.
Speaker Change: Okay.
Matt: Hi, Matt.
Matt:
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Speaker Change #101: Sure Sandy.
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Andrea: Or.
Speaker Change #110: I agree that there are 800.
Speaker Change #111: Some tons only.
Speaker Change #111: <unk> way of going to.
Speaker Change #111: Sure.
Speaker Change #111: Gotcha.
Speaker Change #111: Yeah.
Speaker Change #111: Okay I'll do the calculation thanks Ana.
MS. Jo has Mr. Joe has resigned from his position as chairman and a director of the board of the company, mainly due to personal reasons.
Speaker Change #112: He also believes that the company has become a material enterprise in Fintech space and hope that the company can develop more independently maintaining its own brand and development strategy.
Speaker Change #113: Our largest shareholder Mr. Joe is very confident in the company's long term development and has been increasing his holdings in the company stock in the secondary market over the past two years.
Speaker Change #114: According to our annual report.
Speaker Change #115: Joe and his authentic increased his holdings by one point $58 million between February 2023, and February 'twenty 'twenty four and then she also increased holding going to wind up here this year.
Speaker Change #116: Mr. Joe has not been involved in the company's day to day operations in the past. So his resignation will have no impact on the Companys operation.
Speaker Change #116: Future Mr. Joe will continue to provide his valuable insights for the company, particularly in areas of strategy and AI.
Speaker Change #117: So on behalf of our management team I would like to express our heartfelt gratitude to make to Joe for his contribution to the company during his tenure as talent.
Joe: Thank you.
Speaker Change #119: Please go ahead.
Speaker Change #119: Our next question comes from the line of Alex Yes.
Speaker Change #120: UBS. Please ask your question Alec.
Speaker Change #120:
Speaker Change #121: When he is why don't.
Speaker Change #121: Don't worry about it.
Speaker Change #123: What kind of Oh, my gosh with all day.
Speaker Change #123: It all gets you to the whole.
Speaker Change #123: People the central task order.
Speaker Change #123: But I guess the Danville.
Speaker Change #123: So the way that they hold a called out some of your U S allies of Citi.
Speaker Change #124: E Commerce is about so the more tenants at the optical that needle.
Speaker Change #123: No.
Speaker Change #125: We have noticed that the company has further accelerated the pace of share buybacks in Q.
Speaker Change #125: Q1 results in May and it's also faster dental original schedule of one year for the 50.
Speaker Change #126: 50 million buyback quota so I'm wondering what's the penetration behind this and then.
Speaker Change #127: Should we be expecting the company will be able to maintain that pace.
Speaker Change #128: Pace of buybacks for the rest of the year. Thank you.
Speaker Change #128: Okay.
Alex Yes: Alex I will take this one so yeah as of August 13th we have purchased a U S.
Speaker Change #130: $211 million worth of stock out of the 350 million authorization.
Speaker Change #130: It's about 60% into the program a much faster than the.
The time.
Speaker Change #130: <unk> schedule.
Speaker Change #130: And the reason we are accelerating our repurchase.
Speaker Change #130: That period is for one is because of the macro environment is still pretty challenging.
Speaker Change #130: And the market itself is still.
Speaker Change #130: Very much undervalued, the companys stock, we want to use that opportunity.
Speaker Change #130: To do more repurchase.
Speaker Change #130: And this will allow us to.
Speaker Change #130: Create additional EPS accretion.
Speaker Change #130: And ultimately maximize the value of our existing shareholders.
Speaker Change #130: Since we already finished the 60%.
Speaker Change #130: One third of the time of the plan.
Speaker Change #130: Going forward, we will continue to execute.
Speaker Change #130: Execute the repurchase program based on the market condition.
Speaker Change #130: And if the market.
Speaker Change #130: Consistently undervalue.
Speaker Change #130: Our equity.
Speaker Change #131: We will probably will maintain their continue at very.
Speaker Change #131: Active pace in the market and complete the current program ahead of the time.
Speaker Change #131: Scheduled.
Thank you.
Speaker Change #131: Thank you.
Speaker Change #132: Our next question comes from the line of <unk> from CIBC. Please go ahead, yes.
Speaker Change #132: Okay.
Speaker Change #133: You bet.
Speaker Change #133: He has held since always out there.
Speaker Change #134: Sure sounds good.
Speaker Change #133: The interim button on gold.
Speaker Change #133: In a completely new ABS pricing the highest return.
Speaker Change #133: Okay.
Speaker Change #133: Neither northern Colorado.
Speaker Change #136: Yeah like hub will items, even though youre walking dead.
Doug: Doug one thing that they always have done.
Tony Ramos: And your thoughts on how that you go to our Tony Ramos.
Speaker Change #139: I'm, assuming that's all kind of in a downturn.
Speaker Change #140: With element.
Speaker Change #140: John is going to happen now.
Speaker Change #140: We would put out there you go you have or do you want to go.
Speaker Change #140: Sure.
Speaker Change #141: Then I'll do the translation Hello management. Thank you for taking my questions. The first one is about our funding cost what are the main reasons for the decline on the average funding cost.
At UBS insurance or more discount on the required returns by the financial institutions and if we look at these two parts separately how much room is still there for the decrease in funding costs in the future.
Speaker Change #141: Secondly, the quality of the company has stabilized and improved what are the main reasons to see this trend and from the cost from the credit cards. The perspective, when we'd see the asset quality returns to the level of normal years, how much will it be optimized and when shall we see the optimization.
Speaker Change #141: In the future.
Speaker Change #142: Thank you.
Yeah.
Speaker Change #143: Uh huh.
Speaker Change #144: Do you want to hear what you are going to hit your woman zero right now.
Speaker Change #143: Sure.
Speaker Change #143: Glen.
Funding cost.
Speaker Change #143: I think cigarettes, you do the one woman.
Speaker Change #145: I mean I go to the theater.
Sanjay: In 10 minutes Sanjay.
Speaker Change #146: It hasn't been that bad.
Speaker Change #146: Sure.
Speaker Change #146: We also think it's you don't use it.
Speaker Change #146: Now evs over time and.
Speaker Change #146: And when you can do that.
You do not you achieved.
Speaker Change #146: John.
Speaker Change #148: It's Omega Jiggled RTL demand ticketed with UBS.
Speaker Change #149: Maybe a dozen benign.
Speaker Change #148: But here you could see some.
Speaker Change #148: Particularly this year the good news with Ohio.
Speaker Change #148: 2000, and that one element.
Speaker Change #150: Tendencies in Shandong.
Speaker Change #151: Oh Hello, good Pepsi.
Speaker Change #151: And kind of Wenchang kinda on women.
Speaker Change #152: Uh huh.
Speaker Change #153: We are very good.
Speaker Change #154: I think it went to kind of really the shelf with a shutdown.
Speaker Change #155: Columbia Ankeny.
Speaker Change #156: Your boyfriend.
Speaker Change #156: Okay. Thanks, Yeah that first interim.
Speaker Change #157: The overall funding cost reduction significant reduction in the funding costs for our over a four hour capital heavy loan facilitation. This culture is the most important driving factor.
Speaker Change #158: And the cost of ABS, which was already quite low has further decreased in this quarter.
Speaker Change #158: So we haven't seen slight increase in the proportion of Aps filed a funding structure perspective.
Speaker Change #158: Three factors have collectively led to an overall decrease in the following close by 56 basis points sequentially in Q3.
Speaker Change #158: Looking ahead, we believe that funding cost will remain largely stable with a possibility of a slight decrease in Q4.
Speaker Change #158: Further reduction is quite limited.
Speaker Change #158: Okay.
Speaker Change #158: Geography.
Speaker Change #158: Definitely.
Speaker Change #158: Right.
Speaker Change #158: Hello.
Speaker Change #158: Thanks.
Speaker Change #158: This is Glenn.
Speaker Change #158: China.
Speaker Change #158: That's it.
Speaker Change #158: Okay.
Speaker Change #158: Lee.
Speaker Change #158: So Lisa this is.
Speaker Change #158: Yes.
Speaker Change #158: To achieve that.
Speaker Change #158: She.
Speaker Change #158: Just the.
Speaker Change #158: That sounds like it's kind of a year.
Speaker Change #158: <unk>.
Speaker Change #158: Hello.
Speaker Change #159: I'm going to but you didn't see that.
Speaker Change #159: Almost 70% level.
Speaker Change #159: Our hotel was tasked.
Speaker Change #159: With your partners in both hemophilia.
Danielle: Danielle <unk>.
Danielle: Yeah.
Danielle: Ciena.
Danielle: Yeah.
That chart as a whole.
Speaker Change #161: Jim Lynch Johan.
Danielle: Yes.
Danielle: Hum.
Speaker Change #162: Okay. So on the system.
Paul: Thank you Paul.
Paul: So hopefully this level. So does he go that's definitely one.
Paul: So let me go through some of the traditional type.
Paul: Hi.
Paul: Okay.
Paul: At this time.
Paul: Is that a decent number.
Paul: EMEA.
Paul: <unk>.
Paul: Okay.
Paul:
Paul: I hope that.
Paul: That's how they cope with Asia.
Paul: Thank you to the bundle.
Speaker Change #164: Let's move to Noah Madhya Pradesh.
Speaker Change #164: A couple of semi solar deepwater youll see a bunch of them at that facility as the dust EMEA.
Speaker Change #164: You can access it.
Speaker Change #164: <unk>.
Speaker Change #164: Sure, so telephone and somewhat timid.
Speaker Change #164: It was simple cheap.
Speaker Change #165: Uh huh.
Speaker Change #164: Dsos at certain.
Speaker Change #165: Do you want to.
Speaker Change #165: Julio do you go to cities yet.
Speaker Change #165: Houston liquidation.
Speaker Change #166: That's also an element.
Speaker Change #165: <unk> begun to ensure that <unk> got a balance.
Speaker Change #166: <unk> got it.
Speaker Change #167: And she says you cope with the Chi Johan.
Speaker Change #167: <unk> done that yet.
Speaker Change #167: <unk>, which is T cell user cohorts I think at this time.
Speaker Change #167: $2010 87.
Speaker Change #167: It does.
Speaker Change #167: Yeah.
Simon: Hello Simon.
Simon: Okay, Let me do the translation.
Speaker Change #169: Our overall risk indicators mailing to day, one delinquency rate and a 30 day collection rates showed stability and improvement in Q2, mainly for three reasons first in light of the macro uncertainty we took a more cautious approach in new loan origination in Q1.
Speaker Change #169: In Q2.
Helane: Thanks Helane.
Helane: Proving the quality of new loan through a substantial optimization of risk models and strategies compared to Q3 and Q4 of last year.
Helane: Second in Q2, we further optimized the structure of asset and the founding matching by selectively introducing more financial institution that can complement our risk capability or risk appetite, we have formed a differentiated and complementary cooperative model with these financial institutions in risk.
Helane: Making our asset quality more robust and solid.
Helane: In terms of managing the risk of that existing loan balance we continue to optimize pose no operation in Q2 for example by strengthening advanced your language.
Helane: Reminder, for customer payments, we effectively reduced our day one delinquency rate at the same time, we optimized the management and performance of their view of the external collection team, which also helped us to improve the traction bank.
Speaker Change #171: Regarding the second half of the year based on the current risk performance as Haisheng. Just mentioned, we may more directly open up a bit in terms of our cost ratio and credit limits to enhance the engagement of our existing customers.
Haisheng: At the same time, we have clear management measures to further optimize the user base structure, including further optimizing.
Haisheng: Like credit limit and the pricing combination.
Haisheng: Comprehensively upgrading customer base, it right and optimizing the customer experience on our App product site.
Haisheng: Well increase the portion of high quality user in the overall asset portfolio.
Haisheng: Thus far we believe second half or second half overall risk performance should be better than the first half and a relatively stable Ken.
Speaker Change #173: Thank you.
Speaker Change #174: Thank you.
Speaker Change #175: We will now take our last question from the line of Cindy Wang from China. Please.
Speaker Change #176: Please go ahead.
Speaker Change #177: Oh, Oh Oh.
Speaker Change #177: Yeah.
Speaker Change #177: Hum.
Speaker Change #178: Oh, yes.
Speaker Change #179: No what I wanted to just one.
Brian Chen: From Brian Chen does have a whole country itself.
Brian Chen: Chad.
Speaker Change #181: Okay. Okay.
Brian Chen: No.
Brian Chen:
Brian Chen: Some of them.
Brian Chen: Thank you Michelle.
Brian Chen: So our company has maintained a reality.
Brian Chen: It pays off.
Brian Chen: From the first half of this year.
Brian Chen: Got it.
Brian Chen: Thank you.
Speaker Change #182: After painful pathmark are peaking in the.
Speaker Change #182: Second half of this year.
Keeping wapiti that's one.
Speaker Change #182: Okay.
Speaker Change #182: Yeah.
Speaker Change #182: Kim.
Speaker Change #182: Oh.
Speaker Change #182: Uh huh.
Speaker Change #182: Yeah.
Speaker Change #182:
Speaker Change #182: Some of them end up.
Speaker Change #182: Uh huh.
Speaker Change #182: <unk>.
Speaker Change #182: Uh huh.
Speaker Change #182: Kind of what could be.
Speaker Change #182: Some money away.
Speaker Change #182: And it's not quite as yet.
Speaker Change #182: Yes, the only woman.
Speaker Change #182: Somebody has a taller towards I think a yoga in Laguna.
Speaker Change #182: Some of them in the English room.
Speaker Change #182: No woman, who can do the change in Shreveport.
Speaker Change #183: Meantime, you're a woman that put on the program woman Don quick what's your dog.
Speaker Change #184: Thumbs up more minutes of your life.
Speaker Change #184: So you're quite right.
Speaker Change #184: And put this integration slowed at full time.
Duane: Sure Duane.
Duane: And in fact, coincidentally, particularly meal remainder 10.
Duane: The genome box the harder it gets.
Duane: Linda.
Duane: Sure.
Speaker Change #186: But on the new one.
Speaker Change #186: So when it comes to women.
Speaker Change #186: And can do attitude.
Speaker Change #187: Uh huh.
Speaker Change #188: Peru and gains on the transaction.
Speaker Change #189: Tenants, you're concerned that they don't come June.
Duncan: Well, thank you Duncan.
Duncan: But to go up she tends or in China. They don't generally like to do it.
Duncan: Hum.
Duncan: To that end to get it fully.
Duncan: Yeah.
Speaker Change #191: Women and they say you did it on so many important towards eager eager dollywood the furniture.
Speaker Change #191: Uh huh.
John: That's a great thing John woman Detica co who grew more sounds like anymore.
Speaker Change #191: So and then I just want to women.
Speaker Change #191: Women.
Speaker Change #191: Sure.
Speaker Change #193: So this wasn't a good 10 nanosphere regional grimwood isn't done I should say.
Speaker Change #193: Thank you.
Speaker Change #193: Linda.
Speaker Change #195: They don't want to go into this without China.
Speaker Change #195: Consider that they could handle if we can go.
Speaker Change #196: You heard that you were going with <unk>.
Speaker Change #195: Yeah.
Speaker Change #195: Yeah.
Speaker Change #195: Hum.
Speaker Change #195: Okay.
Okay, Let me do the translation.
Speaker Change #195: Thank.
Speaker Change #195: Regarding your question.
Speaker Change #197: I'd say in the second half of the year, we may accelerate a bit our customer acquisition pace compared to the first half. This is because all of the aspects we have putting profitability improvement in the first half expiring thick, giving us more confidence to acquire new customers.
Speaker Change #197: Furthermore, we are continuously expanding our customer acquisition channels, making our customer acquisition approach increasingly diversified.
Speaker Change #197: Our customer acquisition is not just limited to information flow advertising at a quite diversified over the past few quarters. Our embedded finance model has maintained rapid growth with our <unk> also been continuously optimized.
Speaker Change #197: At the same time, we are expect expanding to more API channels, such as E Commerce shot video and other scenarios.
Speaker Change #197: We are also exploring embedded finance model with bank apps.
Speaker Change #197: Also were planning at some of our high quality dormant users to the banks all of these initiatives will help us expand our customer reach uplift our loan volume.
Speaker Change #197: Now what we are not simply pursuing loan volume because of that quality loan growth achieving eight overall improvement our business healthy.
Speaker Change #198: Even at a stimulus scale the quality of our business now is significantly better. Thank.
Speaker Change #197: Thank you.
Speaker Change #197: Thank you.
Speaker Change #199: We have now reached the end of the question and answer session. Thank you very much for all your questions I'll now turn the conference back to the management team for closing comments.
Okay.
Speaker Change #200: Thanks, again for everyone to join us for the call. If you have additional questions. Please feel free to contact us offline.
Speaker Change #201: Have a good day.
Speaker Change #202: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.