Q1 2025 Qifu Technology Inc Earnings Call
It depends I ran a listen only mode. If you wish to ask a question you will need to press the star key followed by the number one on your telephone keypad.
Please also note today's event is being recorded.
Karen G: This time I'd like to turn the conference call over to MS. Karen G Senior director of capital markets. Please go ahead Karen.
Speaker Change: Thank you Jesse Hello, everyone and welcome to <unk> Technologies first cultural 2025 earnings Conference call. Our earnings release was distributed earlier today and is available on our IR website.
Speaker Change: Joining me today are Mr. Haisheng <unk>, our CEO, Mr. Alex <unk>, our CFO and Mr. Jin Yan our Seattle.
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.
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: We've always thought we would like to let you know that today's prepared remarks from our CEO will be delivered in English using an AI generated a boy now I will turn the call over to Mr. <unk>. Please go ahead.
Speaker Change: Hello, everyone.
Speaker Change: Thank you for joining us today.
Speaker Change: In the first quarter of 2025, China's economy showed early signs of a mild recovery under the guiding principles of stabilizing gross optimizing structure and managing risks.
Speaker Change: Meanwhile, the.
Speaker Change: The global economy is undergoing profound technological transformation and structural changes.
Speaker Change: The increasingly complex and volatile environment, we upheld the prudent operations.
Leveraged AI to reshape the credit value chain and achieved high quality growth deliver.
Speaker Change: Delivering results that surpassed our expectations.
Speaker Change: By the end of the quarter, our AI powered to credit decision engine and asset distribution platform empowered a total of 163 financial institutions.
Speaker Change: And serve the more than 58 million users with approved credit lines on.
Speaker Change: On accumulative basis.
Speaker Change: Total loan facilitation and origination volume on our platform increased by 15, 8% year over year with.
Speaker Change: With operational efficiency continuing to improve our take rate for the quarter reached five 7% up two two percentage points year over year.
Speaker Change: non-GAAP net income increased by 59, 9% year over year to RMB, one point to 93 billion, while non-GAAP EPS on a fully diluted basis rose by 78, 5% to RMB 13.5.
Speaker Change: Despite macroeconomic headwinds we have consistently improved upon our past results and outperformed our market commitments through ongoing involvement and enhancements to our business.
Speaker Change: At the start of this year.
Speaker Change: We began rolling out our AI plus credit strategy at a scale aimed at building the industry's first AI agent platform to empower our core credit processes.
Speaker Change: We plan to recruit an additional 100 algorithm engineers by the end of the year and accelerate our transformation into an AI native organization we.
Speaker Change: We have also established our deep Bank Division, which is driving the research and development of our AI plus bank agent products to support the intelligent upgraded all financial institutions in.
Speaker Change: In April we introduced our internal AI agent platform and by May deploy five digital employees.
Speaker Change: Cross key functions, such as data analytics operations compliance risk management strategy.
Speaker Change: Financial reconciliation.
Speaker Change: Our AI agent chat is now deeply integrated into our intelligent decision, making and business analysis workflows.
Speaker Change: This agent provides real time data insights and attribution analysis.
Speaker Change: Empowering us to dynamically optimize our strategy and enhance decision efficiency.
Speaker Change: Risk management has always been a cornerstone of our business.
Speaker Change: This quarter, we allocated a small portion of our traffic to pilot an end to end risk management framework powered by large language models.
Speaker Change: By training all historical decision logs using deep seek re achieved a notable improvement in AUC or area under the curve to 0.6 for a metric that measures risked hearing ability. We also upgraded our data mining capabilities by incorporating video and other.
Speaker Change: RT model inputs, enabling richer and more diverse feature representations on top of that we had developed a user profiling agent that performance consistency checks on user features with over 95% accuracy supporting differentiate the credit lines and pricing based on user.
Speaker Change: <unk>.
Speaker Change: In terms of risk strategy, we maintained a differentiated approach in user operations driving moderate loan growth, while preserving ample risk buffers.
Speaker Change: With loan volume, increasing by 15, 8% year over year during the quarter.
Speaker Change: Our seed to M, two metric, which measures delinquency rates after 30 day collections.
Operator: conference call. All participants are in a listen-only mode. If you wish to ask a question, you'll need to press the star key followed by the number one on your telephone keypad. Please also note today's event is being recorded.
Speaker Change: <unk> largely stable at 0.6%.
Speaker Change: In Q1.
Speaker Change: We made further upgrades to our intelligent asset distribution platform to improve the precision of fund asset matching this.
Karen Ji: At this time, I'd like to turn the conference call over to Ms. Karen Ji, Senior Director of Capital Markets. Please go ahead, Karen. Thank you, Jesse.
Speaker Change: This helped us boost underwriting efficiency and strike a better balance between risk and return of our loan portfolio.
Speaker Change: Benefiting from our robust asset quality, we maintained our negotiating leverage on the funding side, resulting in a consistent decline in funding costs in.
Karen Ji: Hello, everyone, and welcome to Qifu Technology's first quarter 2025 earnings conference call. Our earnings release was distributed earlier today and is available on our IR website. Joining me today are Mr. Wu Haisheng, our CEO, Mr. Alex Xu, our CFO, and Mr. Zhen Yan, our CIO.
Speaker Change: In Q1, we issued RMB, six 6 billion and a B S.
Speaker Change: Our year over year increase of approximately 25% was the proportion of ABS and our funding mix growing further our overall funding costs decreased by an additional 30 basis points sequentially.
Karen Ji: 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. Also, this call includes discussions of certain non-gap financial measures. Please refer to our earnings release, which contains a reconciliation of the non-GAAP financial measures to GAAP financial measures. Also, please note that unless otherwise stated, all figures mentioned in this call are in RMB.
Speaker Change: We expect funding costs for the coming quarters to decrease slightly from Q1 levels.
Speaker Change: In terms of user acquisition, we have modestly increased our spending and are actively exploring a broader range of channels.
In Q1, we added 1.54 million new credit line users.
Up 6% year over year, with new borrowers, increasing approximately 41% year over year to 1.13 million.
Karen Ji: Before we start, we would like to let you know that today's prepared remarks from our CEO will be delivered in English using an AI-generated voice.
Speaker Change: Our marketing focused AI agent Leverages multimodal recognition technology to analyze user intent in real time integrated campaign management across multiple channels.
Haisheng Wu: Now I will turn the call over to Mr. Wu Haisheng. Please go ahead. Hello everyone, thank you for joining us today.
Speaker Change: And enable real time strategy adjustments.
Speaker Change: This has significantly improved our user profiling accuracy across channels with a conversion rate of new credit line users to new borrowers increasing by 33% from the same period last year, our embedded finance business remains a key strategic focus as we continue to expand both.
Haisheng Wu: In the first quarter of 2025, China's economy showed early signs of a mild recovery under the guiding principles of stabilizing growth, optimizing structure, and managing risk. Meanwhile, the global economy is undergoing profound technological transformation and structural changes. In an increasingly complex and volatile environment, we upheld prudent operations, leveraged AI to reshape the credit value chain, and achieved high quality growth. delivering results that surpassed our expectations. By the end of the quarter, our AI-powered credit decision engine and asset distribution platform empowered a total of 163 financial and served more than 58 million users with approved credit lines.
Speaker Change: The breadth and depth of our channel coverage.
Speaker Change: In Q1, we added seven new channels spanning from leading internet platforms, and various small and mid sized platforms two banks in multiple regions.
Speaker Change: We are also in the midst of Onboarding two additional strategic platforms signaling broader collaboration with leading internet traffic platforms, and unlocking meaningful and incremental growth potential going forward during the quarter, our new credit line users from the embedded finance channels grew 30.
Speaker Change: 6% a year over year, while loan volume surged by roughly 106%.
Haisheng Wu: on a cumulative basis. Total loan facilitation and origination volume on our platform increased by 15.8% year-over-year. With operational efficiency continuing to improve, our take rate for the quarter reached 5.7%, up 2.2% year-over-year. year-over-year. Non-GAAP net income increased by 59.9% year-over-year to RMB 1.93 billion, while non-GAAP EPADS on a fully diluted basis rose by 78.5% to RMB 13.5.
Speaker Change: The overall ROA of these channels improved by 20% on a sequential basis.
Speaker Change: Regarding our technology solutions business, we established partnerships with three additional mid to large sized municipal banks in Q1 driving loan volume from this segment to grow by roughly 144% year over year powered by our focused pro <unk>.
Speaker Change: Credit Tech platform, our proprietary solution for SME lending, which is built on a three tiered credit assessment system gain meaningful scale in loan facilitation volume and delivered better than expected risk performance in Q1.
Haisheng Wu: Despite macroeconomic headwinds, we have consistently improved upon our past results and outperformed our market commitments through ongoing evolvement and enhancements to our business. At the start of this year, we began rolling out our AI plus credit strategy at scale aimed at building the industry's first AI agent platform to empower core credit process. We plan to recruit an additional 100 algorithm engineers by the end of the year and accelerate our transformation into an AI-native organization. We have also established our Deep Bank division, which is driving the research and development of our AI plus bank agent products to support the intelligent upgrade of financial institutions.
Speaker Change: This success has created new opportunities for our market expansion and growth in 2025.
Speaker Change: We have already received a wide range of inquiries from multiple banks about our AI plus bank agent products and recently entered into strategic partnerships with several of them.
Speaker Change: As a key component of these partnerships, we will help banks deploy agents across a broad range of applications, including marketing and customer acquisition risk management and loan approval decision analytics.
Growth operations compliance reviews, multimodal recognition remote banking and digital employees.
Haisheng Wu: In April, we introduced an internal AI agent platform, and by May, deployed five digital employees. such as data analytics, operations, compliance, risk management strategy. and Financial Reconciliation. Our AI agent ChatBI is now deeply integrated into our intelligent decision making and business analysis workflows. This agent provides real-time data insights and attribution analysis. empowering us to dynamically optimize our strategy and enhance decision efficiency.
Speaker Change: Facilitating their digital and intelligent transformation.
Speaker Change: In April.
Speaker Change: China's National financial regulatory administration issued a notice on strengthening the management of the Internet loan facilitation business of commercial banks to enhance the quality and the efficiency of financial services.
Speaker Change: The notice provides clearer guidance for internet based lending practices.
Speaker Change: The sizing that commercial banks should establish equal.
Speaker Change: Usually beneficial partnerships with platform operators and credit enhancement providers sharing risk responsibilities and adopting a long term perspective.
Haisheng Wu: Risk management has always been a cornerstone of our business. This quarter, we allocated a small portion of our traffic to pilot an end-to-end risk management framework powered by large language models. By training on historical decision logs using DeepSeq, we achieved a notable improvement in AUC area under curve to 0.64, a metric that measures risk tiering ability. We also upgraded our data mining capabilities by incorporating video and other multimodal inputs, enabling richer and more diverse feature representation. On top of that, we developed a user profiling agent that performs consistency checks on user features with over 95% accuracy.
Speaker Change: We view these guidelines as strong regulatory recognition of the value the loan facilitation model provides bye.
Speaker Change: By setting clearer industries tenders. The notice is expected to improve the overall house and the sustainability of the sector. We will continue to engage in proactive and constructive discussions with regulators.
Speaker Change: Regularly reviewing our practices and upholding prudent and compliance in our operations.
Speaker Change: The increasingly complex international landscape has added uncertainty to the pace of China's economic recovery.
Speaker Change: That said, we believe the economy will remain fundamentally resilient over the long run supported by China's technological innovation supply chain upgrades and the government measures to boost domestic demand.
Haisheng Wu: supporting differentiated credit lines and pricing based on user profiles. In terms of risk strategy, we maintain the differentiated approach in user operations, driving moderate loan growth while preserving ample risk buffer. With loan volume increasing by 15.8% year-over-year during the quarter, our C to M2 metric which measures delinquency rates after 30-day collection. remained largely stable at 0.6. in Q1.
Speaker Change: The press conference held on May seven this year. The State Council information office announced a package of financial policies aimed at stabilizing markets and managing expectations.
Speaker Change: Including guidance for financial institutions to increase support for key consumption verticals.
Speaker Change: More recently, we're seeing encouraging progress in U S. China trade talks.
Speaker Change: Overall, the macro economic and policy landscape is showing signs of stabilization, which will provide a favorable environment for the steady development of the consumer credit industry.
Haisheng Wu: We made further upgrades to our intelligent asset distribution platform. to improve the precision of found asset matching. This helped us boost underwriting efficiency. strike a better balance between risk and return of our long Benefiting from our robust asset quality, we maintained our negotiating leverage on the funding side, resulting in a consistent decline in funding costs. In Q1, we issued RMB 6.6 billion in ABS. a year-over-year increase of approximately 25%. With the proportion of ABS in our funding mix growing further, our overall funding costs decreased by an additional 30 basis points sequentially. We expect funding costs for the coming quarters to decrease slightly from Q1 level.
Speaker Change: As we progress through 2025, we remain cautiously optimistic in.
Speaker Change: In the near term our focus will be on enhancing operational efficiency.
Speaker Change: Optimizing capital allocation and enhancing shareholder returns.
Speaker Change: Over the long term, we will continue executing our one core tooling strategy.
Speaker Change: We expect our core loan facilitation business to sustain high quality growth, while our technology solutions business will continue to empower financial institutions to accelerate their intelligent transformation through our AI plus strategy.
Speaker Change: Internationally, we will focus on near prime segments in markets with relatively stable regulatory environments.
Haisheng Wu: In terms of user acquisition, we have modestly increased our spending and are actively exploring a broader range of In Q1, we added 1.54 million new credit line users. up 6% year-over-year, with new borrowers increasing approximately 41% year-over-year to 1.13 million. Our marketing-focused AI agent leverages multi-modal recognition technology to analyze user intent in real-time, integrate campaign management across multiple channels. and enable real-time strategy adjustment. This has significantly improved our user profiling accuracy across channels with a conversion rate of new credit line users to new borrowers increasing by 33% from the same period last year.
Speaker Change: Leveraging our leading fintech capabilities to build a strong competitive edge.
Speaker Change: In Q1.
Speaker Change: We issued USD $690 million in convertible senior notes further expanding our international funding channels and improving capital allocation efficiency.
Speaker Change: 100% of the proceeds from this issuance will be allocated to share buybacks.
Speaker Change: Adopting a cash par settlement structure allows us to significantly reduce the potential dilution to existing shareholders.
Speaker Change: On the 25th of much pricing date, we concurrently completed a USD $227 million share repurchase.
Speaker Change: Resulting in an immediate three 6% reduction in our share count combined.
Speaker Change: Combined with our USD $450 million share repurchase program that took effect on the first of January we.
Haisheng Wu: Our embedded finance business remains a key strategic focus as we continue to expand both the breadth and depth of our channel coverage. In Q1, we added 7 new channels, spanning from leading internet platforms and various small and mid-sized platforms to banks in multiple regions. We are also in the midst of onboarding two additional strategic platforms. signaling broader collaboration with leading Internet traffic platforms and unlocking meaningful and incremental growth potential going forward. During the quarter, our new credit line users from the embedded finance channels grew 36% year-over-year, while loan volumes surged by roughly 160%. The overall ROA of these channels improved by 20% on a sequential basis.
Speaker Change: We expect our total repurchases this year to be no less than USD $680 million.
Speaker Change: Just on the current share price, we estimate our total share count will decrease by approximately 11% when compared to the beginning of the year.
Speaker Change: We are confident in the future of our company and remain dedicated to delivering long term value to our shareholders.
Speaker Change: Going forward, we will continue to prioritize efficient capital allocation and shareholder value creation through recurring share buybacks and dividends with that I will now turn the call over to Alex.
Alex: Thank you hi, good.
Speaker Change: Good morning, and good evening, everyone welcome to our first quarter earnings call. We started at 2025 with a solid Q1 overall user activities or stronger than normal seasonality.
Haisheng Wu: regarding our technology solutions business. We established partnerships with three additional mid- to large-sized municipal banks in Q1, driving loan volume from this segment to grow by roughly 144% year-over-year. Powered by our Focus Pro credit tech platform. Our proprietary solution for SME lending, which is built on a three-tiered credit assessment system, gained meaningful scale in loan facilitation volume, and delivered better than expected risk performance in Q1.
Speaker Change: Well my point environment appears stabilizing early in the year impacts from trade War added on a certain day recently.
Speaker Change: We will continue to focus on efforts to optimize operations and manage risk exposures and the uncertain market.
Speaker Change: Total revenue for Q1 was 4.69 billion versus $4 four 8 billion in Q4 and $4, one 5 billion a year ago.
Speaker Change: From credit driven service capital heavy was 3.11 billion in Q1 compared to 2.89 billion in Q4, and 3.02 billion a year ago. The sequential growth was mainly due to increases in on balance sheet loans.
Haisheng Wu: This success has created new opportunities for our market expansion and growth in 2025. We have already received a wide range of inquiries from multiple banks about our AI plus bank agent products, and recently entered into strategic partnerships with several as a key component of this partnership. We will help banks deploy agents across a broad range of applications. including Marketing and Customer Acquisition, Risk Management and Loan Approval, Decision Analysis. growth operation. Compliance Reviews, Multimodal Recognition. Remote Banking and Digital Employees. facilitating their digital and intelligent transformation.
Speaker Change: And lower early repayment desktop.
Speaker Change: Overall funding costs further declined modestly Q on Q as avs contribute a larger portion of our total funding in kilowatt.
Speaker Change: Revenue from <unk> for a platform service.
Speaker Change: Service.
Speaker Change: Capital Light was 158 billion in Q1.
Speaker Change: 215, 9 billion in Q4, and $1 4 billion a year ago, a year on year growth was mainly due to strong contribution from IC and other value added services more than offsetting the decline in capitalized loan facilitation.
Haisheng Wu: In April, China's National Financial Regulatory Administration issued the Notice on Strengthening the Management of the Internet Loan Facilitation Business of Commercial Banks to Enhance the Quality and Efficiency of Financial Service. The notice provides clearer guidance for internet-based lending practices. Emphasizing that commercial banks should establish equal, mutually beneficial partnerships with platform operators and credit enhancement providers. Sharing Risk Responsibilities and Adopting a Long-Term Perspective. We view these guidelines as strong regulatory recognition of the value the loan facilitation model provides.
Speaker Change: Platform service.
Speaker Change: Roughly 56% of quarter ending loan balance, we expect the ratio to be roughly stable in the near term.
Speaker Change: During the quarter average IRR of the loans, we originated and all facilitated was 21, 4% compared to 21, 3% in prior quarter.
Speaker Change: Looking forward, we expect pricing to be fluctuated around this level for the coming quarters.
Marketing expenses increased 13% Q on Q and 42% year on year with.
The sequential and year on year increase were mainly due to larger volume contribution from API channels in both new and existing users.
Haisheng Wu: By setting clearer industry standards, the notice is expected to improve the overall health and sustainability of the sector. We will continue to engage in proactive and constructive discussions with regulators. regularly reviewing our practices and upholding prudence and compliance in our operation.
Speaker Change: We added approximately one 4 million new users in Q1 versus 169 million in Q4, we will make the primary adjustment to the pace of our new user acquisition in the coming months, given the volatile macro condition and further optimize our user acquisition channels.
Haisheng Wu: The increasingly complex international landscape has added uncertainty to the pace of China's economic recovery. That said, we believe the economy will remain fundamentally resilient over the long run, supported by China's technological innovation. Supply Chain Upgrades and Government Measures to Boost Domestic Demand at the press conference held on May 7th. State Council Information Office announced a package of financial policies aimed at stabilizing markets and managing expectations. including guidance for financial institutions to increase support for key consumption verticals. More recently, we are seeing encouraging progress in U.S.-China trade talks. Overall, the macroeconomic and policy landscape is showing signs of stabilization.
Speaker Change: And improve user engagement and retention.
Speaker Change: 90 day delinquency rate was two 2% in Q1 compared to two 9% in Q4 paywall delinquency was five <unk> percent in Chihuahua versus four 8% in Q4.
Speaker Change: 30 day collection rate was 88, 1% in Q1, essentially flat Q on Q.
Speaker Change: Another key risk metrics feedback and to which represent the outstanding delinquency rate. After the 30 day collection increased modestly Q on Q2, 0.6% still within our comfortable range, we will remain vigilant to manage overall risk exposure, particularly.
Speaker Change: Given the latest micro uncertainty and tried to maintain graduates have a stable risk vouchers in the coming quarters.
Haisheng Wu: which will provide a favorable environment for the steady development of the consumer credit industry.
Speaker Change: At the same time, we continued to take conservative approach to book provision against professional credit losses.
Haisheng Wu: As we progress through 2025, we remain cautiously optimistic. In the near term, our focus will be on enhancing operational efficiency. Optimizing Capital Allocation and Enhancing Shareholder Returns. Over the long term, we will continue executing our One Core, Two Wings strategy. We expect our core loan facilitation business to sustain high quality growth, while our technology solutions business will continue to empower financial institutions to accelerate their intelligent transformation through our AI plus strategy. Internationally, we will focus on near prime segments in markets with relatively stable regulatory environment. leveraging our leading fintech capabilities to build a strong competitive edge.
Speaker Change: Although new permission for a risk bearing loans in Q1 or approximately two point choose 3 billion versus 2.07 billion in Q4.
Speaker Change: The increase in new provision was mainly due to increases in risk bearing loan volume Q on Q and higher provision booking ratio.
Speaker Change: Write backs of previous provisions or approximately 1.14 billion in Q1, whereas this one <unk> billion in Q4 provision coverage ratio, which is defined as the total outstanding provision.
Speaker Change: <unk> by total outstanding delinquency risk bearing long balance between 90 and 180 days.
Haisheng Wu: In Q1, we issued USD 690 million in convertible senior notes, further expanding our international funding chain. and Improving Capital Allocation Efficiency. 100% of the proceeds from this issuance will be allocated to share buyback. Adopting a cash-par settlement structure allows us to significantly reduce the potential dilution to existing shareholdings. On the 25th of March pricing date, we concurrently completed a USD 227 million share repurchase. resulting in an immediate 3.6% reduction in our share Combined with our USD 450 million share repurchase program that took effect on the 1st of January. We expect our total repurchases this year to be no less than USD 680 million.
Speaker Change: 666% in Q1, our historical high compared to 617% in Q4.
Speaker Change: non-GAAP net profit was 193 billion in Q1 compared to a $1 97 billion in Q4, non-GAAP net income per fully diluted avs or 13, five three in Q1 compared to 13 six case.
Speaker Change: Six six in Q4, and 758, a year ago as strong earnings growth and the proactive share repurchase created significant <unk>.
Speaker Change: <unk> equation.
Speaker Change: At the end of Q1 total outstanding share count was approximately $134 5 million.
Speaker Change: <unk> 142 minutes at the end of Q4, and 155 million a year ago.
Haisheng Wu: based on the current share price. We estimate our total share count will decrease by approximately 11% when compared to the beginning of the year.
Speaker Change: The effective tax rate for Q1 was 18% compared to our typical ETR of approximately 15% the higher than normal ETR was mainly due to withholding tax provision related to cash distribution from onshore to offshore.
Haisheng Wu: We are confident in the future of our company and remain dedicated to delivering long-term value to our shareholders. Moving forward, we will continue to prioritize efficient capital allocation and shareholder value creation through recurring share buybacks and dividends.
Speaker Change: With higher contribution from capital having models, our leverage ratio, which is defined as risk bearing loan balance divided by shareholders equity was two seven times in Q1 still near the low end of historical rich, we expect to see the leverage ratio fluctuated around.
Alex Xu: With that, I will now turn the call over to Alex. Thank you, Haisheng. Good morning and good evening, everyone.
Alex Xu: Welcome to our first quarter earnings call. We started 2025 with a solid Q1, as overall user activities were stronger than normal seasonality. While microenvironment appears stabilizing early in the year, impacts from trade war added uncertainty recently. We will continue to focus on efforts to optimize operations and manage risk exposures in an uncertain market.
Speaker Change: This level in the near future.
Speaker Change: We generated approximately $2 eight 1 billion cash from operations in Q1 compared to three point <unk> 5 billion in Q4, total cash and cash equivalents and short term investments was $14 three.
Speaker Change: 3 billion in Q1 compared to 10.3 dollars 6 billion in Q4, the increase in cash was mainly due to the net proceeds from the our 690 million U S dollars CB issuance.
Alex Xu: Total revenue for Q1 was $4.69 billion versus $4.48 billion in Q4 and $4.15 billion a year ago. Revenue from credit-driven service Capital Heavy was $3.11 billion in Q1 compared to $2.89 billion in Q4 and $3.02 billion a year ago. The sequential growth was mainly due to increases in unbalanced loans. and lower early repayment discount. Overall funding costs further declined modestly two-on-two as ABS contribute a larger portion of our total funding in Q1.
Speaker Change: So we're continuing to generate strong cash flow from operation, we will further optimize our capital allocation to support our business initiatives and to return to our shareholders. We start to execute the 450 million share repurchase plan on January one as of May 19, 2025, we had in <unk>.
Speaker Change: Aggregate purchase of approximately $4 4 million in the open market for a total amount approximate the U S. Dollar 178 million inclusive of commissions at the average price of U S. Dollar 40 point to her avs.
Alex Xu: revenue from platform for platform surveys. Capital Light was $1.58 billion in Q1 compared to $1.59 billion in Q4 and $1.14 billion a year ago. The year-on-year growth was mainly due to strong contribution from ICE and other value-added services more than offsetting the decline in Capital Light loan facilitation. platform service account for roughly 56% of quarter ending loan balance. we expect the ratio to be roughly stable in the near term. During the quarter, average IRR of the loans we originated and all facilitated was 21.4%, compared to 21.3% in prior quarter. Looking forward, we expect pricing to be fluctuated around this level for the coming quarter.
Speaker Change: The time schedule.
Speaker Change: In addition on March 25, we successfully priced our 690 million U S C b offering and the repurchase of approximately $5 1 million Avs is.
Speaker Change: Currently with the aggregate value of approximately USD $227 million.
Speaker Change: Concurrent buyback and the net share settlement magnesium make us <unk> immediately accretive to EPS.
At issuance.
Altogether, so far in 2025, we bought back approximately $9 6 million for a total amount of 405 million U S dollar including commission at.
Speaker Change: At an average price of $42 three her avs.
Speaker Change: Accelerated pace of share repurchase further demonstrates management's confidence and commitment to the future of the company and the management intend to further use share repurchase.
Alex Xu: Sales and marketing expenses increased 13% queue-on-queue and 42% year-on-year. The sequential and year-on-year increase were mainly due to larger volume contribution from API channels in both new and existing users. We added approximately 1.54 million new credit line users in Q1 versus 1.69 million in Q4. We will make timely adjustment to the pace of a new user acquisition in the coming months, given the volatile micro condition and further optimize our user acquisition channels and improve user engagement and retention. 90-day delinquency rate was 2.02% in Q1 compared to 2.09% in Q4. Bay 1 delinquency was 5.0% in Q1 versus 4.8% in Q4.
Achieve actual EPA D a.
Speaker Change: Sure.
Speaker Change: Finally regarding our business outlook.
Well, we observed some tentative signs of marginal improvement in user activity early in the year micro uncertainties persist.
Speaker Change: We will continue to take a prudent approach and business planning for 2025, and a focus on enhancing the efficiency of our operation for the second quarter of 2025, the company expect to generate non-GAAP net income between RMB 175 billion and RMB 185 billion.
Speaker Change: Renting a year on year growth between 24, and 31%. This outlook reflects the companys current and preliminary view, which is subject to material changes.
Alex Xu: 30-day collection rate was 88.1% in Q1, essentially flat Q1Q. Another key risk metric, C-M2, which represents the outstanding delinquency rate after the 30-day collection, increased modestly QonQ to 0.6%, still within our comfortable range. We will remain vigilant to manage overall risk exposure, particularly given the latest micro uncertainty, and try to maintain relatively stable risk metrics in the coming quarters. At the same time, we continue to take a conservative approach to book provisions against potential credit loss. Total new provision for risk-bearing loans in Q1 were approximately $2.23 billion versus $2.07 billion in Q4. The increase in new provision was mainly due to increases in risk-bearing loan volume, Q1-Q2, and higher provision booking ratio.
Speaker Change: With that I would like to conclude our prepared remarks, operator, we can now take some questions.
Speaker Change: If you wish to ask a question. Please press star one on your telephone.
Speaker Change: And wait for your name to be announced.
Speaker Change: If you wish to cancel your request please press star two.
Speaker Change: You're on a speakerphone, please pick up the handset to ask your question.
Speaker Change: So those who can speak Chinese please start your question in Chinese followed by English translation.
Speaker Change: To allow enough time to address everyone on the call and please keep it to one question and one follow up and return to the queue. If you have more questions.
Speaker Change: Thank you. Your first question comes from Richard Xu from Morgan Stanley. Please go ahead.
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Speaker Change: Could you dig a chef and Jacob and gradually you're going into the year.
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Speaker Change: And I always say banking proposal number Tim Dugan are in Asia.
Alex Xu: Write-backs of previous provisions were approximately 1.14 billion in Q1 versus 1.02 billion in Q4. Provision coverage ratio, which is defined as a total outstanding provision divided by total outstanding delinquent risk-bearing loan balance between 90 and 180 days, was 666% in Q1, a historical high, compared to 617% in Q4.
Speaker Change: In particular.
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Speaker Change: So I'll just do a translation theres two questions what kind of impact of changes can we expect once the new loan facilitation rules come.
Speaker Change: Into effect in October 2025.
Speaker Change: And then what's the latest trends to finish seeing on the credit quality, how does it compare to second half of 2022 and 2023.
Alex Xu: non-gap net profit was $1.93 billion in Q1 compared to $1.97 billion in Q4. Non-gap net income per fully diluted ADS was $13.53 billion in Q1 compared to $13.66 billion in Q4 and $7.58 billion a year ago as strong earning growth and proactive share repurchase created significant EP ADS accretion. At the end of Q1, total outstanding ADS share count was approximately $134.5 million compared to $142 million at the end of Q4 and $155 million a year ago. Effective tax rate for Q1 was 18% compared to our typical ETR of approximately 15%. The higher than normal ETR was mainly due to withholding tax provision related to cash distribution from onshore to offshore.
Speaker Change: When do you think.
Speaker Change: Started to tighten credit risks and will that impact the total expectation.
Speaker Change: Expected loan growth for the year. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: And then to your first question.
Speaker Change: Oh, sorry, I'm sorry, your second question.
Speaker Change: In terms of regulation.
Speaker Change: And now she knew the new rules for lift in April.
Speaker Change: The positive thinking of them in the sense that the regulator recognized the value of loan facilitation platform.
Speaker Change: The regulator's intention is to promote a more orderly and the healthy development.
Speaker Change: Of the industry.
Speaker Change: Certain principles and gradually.
Speaker Change: The printing out the long term platforms, which are less capable of complying with the industry standards.
Speaker Change: Mr regulatory requirement.
Speaker Change: At the same time.
Speaker Change: New rules recognize the value of our leading loan facilitation platforms.
Speaker Change: And to encourage banks to adopt or wireless to approach.
Alex Xu: With higher contribution from capital-heavy models, our leverage ratio, which is defined as risk-bearing loan balance divided by shareholders' equity, was 2.7 times in Q1, still near the low end of historical reach. We expect to see the leverage ratio fluctuate around this level in the near future. we generate approximately $2.81 billion cash from operation in Q1 compared to $3.05 billion in Q4. Total cash and cash equivalent and short-term investment was $14.03 billion in Q1 compared to $10.36 billion in Q4. The increase in cash was mainly due to the net proceeds from our $690 U.S. dollar CB issuance.
Speaker Change: Clear entries vendors.
Speaker Change: And the beauty equal long term and mutually beneficial partnerships based on the risk sharing.
Speaker Change: In conclusion.
Speaker Change: With the implementation of the new rules.
Speaker Change: The industry, we have become more organized.
Speaker Change: We have enhanced the overall health and the system the ability of the loan facility.
Speaker Change: Sanitation sector.
Speaker Change: As a leading industry player.
Speaker Change: We believe we will benefit from the less competitive market environment.
Speaker Change: We will continue to engage in proactive and constructive discussions with regulators.
Speaker Change: Review, our practices and upgrade with Prudence.
Speaker Change: In compliance.
Alex Xu: As we continue to generate a strong cash flow from our operation, we will further optimize our capital allocation to support our business initiatives and to return to our shareholders.
Tim: And for a second question, Tim can you answer it.
Tim: No.
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Alex Xu: We start to execute the $450 million share repurchase plan on January 1. As of May 19, 2025, we had in aggregate purchased approximately $4.4 million ADS in the open market for a total amount approximately US$178 million, inclusive of commissions, at the average price of US$40.2 per ADS, ahead of the time schedule. In addition, on March 25, we successfully priced our $690 million U.S. CB offering and repurchased approximately 5.1 million ADSes concurrently with the aggregate value of approximately U.S. $227 million. The concurrent buyback and the net share settlement magnitude make the CB immediately accreted to EP-ADS as issued.
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Alex Xu: Altogether, so far in 2025, we brought back approximately 9.6 million ADS for a total amount of $405 million, including commissions, at an average price of $42.3 per ADS. The accelerated pace of share repurchase further demonstrates management confidence and commitment to the future of the company, and the management intent to further use share repurchase to achieve actual EPADS equations.
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Alex Xu: Finally, regarding our business outlook, where we observed some tentative sign of marginal improvement in user activity early in the year, micro uncertainties persist. We will continue to take a prudent approach in business planning for 2025 and focus on enhancing the efficiency of our operation. For the second quarter of 2025, the company expects to generate non-gap net income between RMB 1.75 billion and RMB 1.85 billion, representing a year-on-year growth between 24 and 31 percent. This outlook reflects the company's current and preliminary view, which is subject to material changes.
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Speaker Change: Okay, Let me do the translation.
Speaker Change: Uh huh.
Speaker Change: First of all I want to say that so far our asset quality has remained largely stable I'll ask you to enter your ratio, which measures. The delinquency rates off 10, 30 day collection has fluctuated within a narrow band which is in line with our expectations.
Speaker Change: We believe that current situation is completely comparable to that in the second half of 2022 at end of 2023.
Alex Xu: With that, I would like to conclude our prepared remarks.
Speaker Change: Average feature and two ratio.
Operator: Operator, we can now take some questions. Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question.
Speaker Change: <unk> six 4% in second half of 2022 and zero point.
Speaker Change: Six 9% in the second half of 2023, the volatility in the second half of 2023 was partially due to the macro uncertainty and some line culture by China Telecom carriers.
Operator: For those who can speak Chinese, please start your question in Chinese, followed by English translation. To allow enough time to address everyone on the call, please keep it to one question and one follow up and return to the queue if you have more questions. Thank you.
Speaker Change: In Q1, our <unk> ratio came in at seven 6%, which is significantly better than the second half of 'twenty, two and Tennessee, and we expect this matrix to remain largely stable going forward.
Richard Xu: Your first question comes from Richard Xu from Morgan Stanley. Please go ahead. Thank you for the first question.
Speaker Change: Right now our risk levels.
Speaker Change: Well under control and we don't see any need to make any major adjustments to our risk policy. Therefore as for the loan volume.
Richard Xu: I have two questions. First, I'd like to ask, what impact will the new regulations on the industry and the company have on the industry in October? Second, what is the current quality of assets? After all, there have been some concerns and fluctuations recently. How is it compared to the second half of 2022 or the second half of 2023? Will the current risk situation affect the growth of the entire year? So, I'll just, you know, do a translation. There's two questions. What kind of impact of changes do we expect once the new loan facilitation rules come into effect in October 2025?
Speaker Change: A full year basis, it will largely depend on the consumer credit demand.
Speaker Change: In Q1, we saw early signs of a recovery.
Speaker Change: Mount and Overwatch has also shown to be stabilizing.
Speaker Change: However, the cost is currently changing global trade environment has increased macro uncertainty.
Speaker Change: While recent U S. China talks have shown some encouraging progress we still need to monitor how things will develop and what kind of impact that will have on China.
Speaker Change: <unk>.
Haisheng Wu: Secondly is what's the latest trends QFIN is seeing on the credit quality? How does it compare to second half of 2022 and 2023 when, you know, QFIN was started to tighten credit risks? Will that impact the total expected loan growth for the year? Thank you. Okay, Richard. Thank you.
Speaker Change: We will stay prudent.
Speaker Change: Our operation at this moment.
Jos: Jos I want to say that our business model is quite diversified meaning that we can easily shift change at the heavy and light that gives us the flexibility to adjust our asset allocation and the balance between growth and risk based on what we what we've seen at now.
Haisheng Wu: I can take your first question and I'll answer your second question. In terms of regulation, In our opinion, the new rules released in April is a positive signal in the sense that regulators recognize the value of loan facilitation platforms. The regulator's intention is to promote a more orderly and healthy development. of the industry. setting principles and gradually sequencing out the long-tail platform. which are less capable of complying with the industry standards and meets regulatory requirements. At the same time, the new rules recognize the value of leading loan facilitation platforms. and encourage banks to adopt a whitelist approach.
Speaker Change: Our outlook for full year loan volume.
Speaker Change: <unk> unchanged from what we expected at the start.
Speaker Change: So out of the year.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Thank you. Your next question comes from Alex <unk> from UBS. Please go ahead.
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Haisheng Wu: set clear entry standards. and BuildEqual, long-term and mutually beneficial partners. based on risk sharing. In conclusion, with the implementation of the new rules. The industry will become more organized. which will enhance the overall health and sustainability of the lung facilitation sector. as the lead industry player. We believe we will benefit from the less competitive market environment. We will continue to engage in proactive and constructive discussions with regulators. Review our practices and operate with prudence and in compliance.
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Speaker Change: I'll do the translation. So my first question is about the asset quality.
Speaker Change: <unk> is specifically we saw day, one delinquency ratio was up by two consecutive quarters now reaching five ponzu.
Speaker Change: In the quarter, and then also bringing CGM to ratio stood at <unk>, 6%. So can you share with them all kind of on the reason behind and how do you expect any.
Speaker Change: We cater to to try and going forward and the second question is on the demand trends.
Zhen Yan: And for your second question, Zeng Yan, can you answer it?
Speaker Change: Two months things, we are seeing more noise coming from the external environment. So just wondering how has been the Q on Q.
Zhen Yan: Okay, I will answer in Chinese, and then Karen will help to discuss it later. Regarding the quality of assets, we think that the current quality of the company's assets is relatively stable. Our C-M-R index is fluctuating in a narrow range of time, which is in line with our expectations. First of all, we think that the risk situation is completely incomparable with the second and third half of the year. In the second and third half of the year, the C-M-R index was 0.64, and in the second half of the year, the average C-M-R index was 0.69.
Speaker Change: Trend in terms of print demand. Thank you.
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Zhen Yan: In addition to the uncertainty of the macro level, there were also some influence of the cash flow. In the second half of the year, the C-M-R index was 0.6, which was better than the second half of the year and the second half of the year. And it will continue to be a relatively stable trend. Second, the current risk is completely controllable. We do not need to adjust the control strategy in a large-scale manner. So the amount of money released in the previous year mainly depends on the change of demand itself. In Q1 this year, we saw that the current demand has recovered mildly.
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Zhen Yan: The whole trend is showing signs of stability. But the current international situation still increases some uncertainty in the macro environment. Although the recent Sino-US dialogue has made positive progress, the subsequent progress and the impact on the macro economy still need to be further observed.
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Zhen Yan: We will continue to maintain a sound business strategy. Finally, I would like to say that our business model is still more diversified. We can completely balance growth and risk by adjusting the asset distribution strategy. So based on the current situation, compared with the expected return on investment in the beginning of the year, there is not much change.
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Zhen Yan: Okay, let me do the translation. First of all, I want to say that so far our asset quality has remained largely stable. Our C2M2 ratio, which measures the delinquency rate after 30-day collections, has fluctuated within a narrow band, which is in line with our expectations. First, we believe that current situation is completely incomparable to that in the second half of 2022 and 2023. Our average C2M2 ratio was 0.64% in the second half of 2022 and 0.69% in the second half of 2023. The volatility in the second half of 2023 was partially due to macro uncertainties and some line controls by China's telecom careers.
Speaker Change: Another challenge that women would your tenure in the Sudan.
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Speaker Change: Okay.
Speaker Change: First of all I want to say that.
Speaker Change: Slight fluctuation in our CTO MTO ratio in line with our expectations and also well within the target range. We have set for our risk performance overall speaking our asset quality is at a healthy level compared to your historical trends.
Speaker Change: As for the increase in the day, one delinquency rate. It was mainly driven by the change in our loan mix in Q1, the percentage of loan volume from our embedded finance channel.
Speaker Change: <unk> by 31% from last quarter and this business line, usually has a higher delinquency rates.
Zhen Yan: In Q1, our C2M2 ratio came in at 0.6%, which is significantly better than the second half of 2022 and 2023, and we expect this matrix to remain largely stable going forward. Right now, our risk levels remain well under control and we don't see a need to make any major adjustment to our risk policies. Therefore, as for the loan volume growth on a full-year basis, it will largely depend on the consumer's credit amount. In Q1, we saw early signs of a mild recovery in credit amount and overall trend also seemed to be stabilizing. However, the consistently changing global trade environment has increased macro uncertainty.
Speaker Change: Compared to our App based.
Speaker Change: H five based business also our overall loan volume was roughly flat Q on Q, leading to a smaller portion of early stage loans, which usually have a lower delinquency rate is structural change has led to a slight increase in our day one delinquency.
Speaker Change: Right.
Speaker Change: And our cash burn rate is very stable.
Speaker Change: Our CFO just mentioned in Q.
Speaker Change: Have it marked.
Speaker Change: In April given the uncertainty around tariff impact.
Speaker Change: <unk> slightly tightened our credit standards. Since then our risk indicators have remained stable.
Speaker Change: April and May moving forward, we will continue to adjust our risk strategy.
Speaker Change: Basically we expect our CTO and two ratio throughout the full year to remain largely stable around that 0.6 level.
Zhen Yan: While recent U.S.-China talks have shown some encouraging progress, we still need to monitor how things will develop and what kind of impact that will have on China's economy. So we will stay prudent in our operation at this moment. Last, I want to say that our business model is quite diversified, meaning that we can easily shift between asset-heavy and asset-light. That gives us the flexibility to adjust our asset allocation and the balance between growth and risk. Based on what we've seen now, our outlook for full-year loan volume growth is largely unchanged from what we expected at the early start of the year.
Speaker Change: Just on the assumption that the Max.
Speaker Change: The macro environment.
Speaker Change: Doesn't change dramatically.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: In terms of.
Speaker Change: Credit demand.
Speaker Change: For the average daily loan volume.
Speaker Change: April was roughly in line with March.
Speaker Change: We did see some fluctuation in borrow activities due to the impact of U S. China trade tensions.
Speaker Change: But we proactively expand our customer reach through partnership with diversified channels.
Speaker Change: Richard will be able to mitigate the potential decline in credit demand.
Zhen Yan: Thank you.
In may.
Speaker Change: Credit demand slightly decreased sequentially.
Alex Yu: Your next question comes from Alex Yu from UBS. Please go ahead. Hello, Guanyin. Thank you for giving me this opportunity to ask questions. I have two questions. The first one is about the quality of the assets. I would like to ask about the Day 1 Delinquency Ratio. There has been a continuous rise in the past two quarters. This quarter reached 5.0%, and the C2M2 reached 0.60%. May I ask what the main reason is?
Speaker Change: Finally, due to the mandated holiday.
Speaker Change: But this is just normal seasonality.
Speaker Change: Based on what we are seeing now we expect loan volume in Q2 will be largely on track as we planned at the start of the year.
Speaker Change: Thank you.
Speaker Change: Thank you. Your next question comes from MSA from Bank of America Securities. Please go ahead.
Speaker Change: Yes.
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Alex Yu: 可能预期后续这一块的这些智能 How should we look at the trend of asset indicators? The second question is about the trend of new generation demand. I would like to ask, especially since April to May, we have seen a lot of red flags, or some disruptions in the external environment. I would like to see the trend of new generation demand in the past two months compared to the situation in March. I'll do a translation.
Speaker Change: Question is will do that today.
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Jason: Hi, Jason.
Speaker Change: With you guys.
Jason: Sure sure sure.
Zhen Yan: So my first question is about the asset quality indicators. Specifically, we saw day one delinquency ratio was up by two consecutive quarters and now reaching 5.0% in the quarter and then also bringing C2M2 ratio to 0.60%. So can you share with more color on the reasons behind and how do you expect this indicator to trend going forward? My second question is on the credit demand trends in the last two months, since we are seeing more noises coming from the external environment. So just wondering how has been the Q&Q trend in terms of credit demand. Thank you.
Jason: Thank you good luck on GBM together, what are we seeing with Amazon.
Jason: So with recent China U S trade escalation.
Jason: How do you assess the potential impact of the tariff tensions in the future and where you tightened lending standards and my second question is on the West strategy with management comments today adopting regarding potential ADR do they stick with us.
Jason: I do a primary listing in Hong Kong, where you would take measures to improve the liquidity of your Hong Kong ticker.
Okay.
Jason: Uh huh.
Jason: In terms of tariffs.
Jason: We believe the direct impact of tariffs on our business is quite limited.
Jason: First the vast majority of our loan volume in consumer lending.
Zhen Yan: First of all, I would like to answer the question about the risk. The small-wave fluctuations of SIGAR-M2 are in line with the company's expectations and are within the target range set by our wind control. As I mentioned earlier, we have shared the situation for the past two or three years. At present, compared to the past, our capacity is still a relatively good water channel historically. Let me explain the first change. The increase in the dew point rate is mainly due to structural changes. There are two structural changes. One is the slowdown ratio of the Q1 API channel, which is 31% higher than before.
Jason: Second we reviewed the industry of the resilience of our users are involved in in Q1 those related to expert accounted for just around the 4% of our total loan volume.
Jason: Among them only about 1% were in sectors likely to be significantly impacted by U S tariff.
Jason: For these users we have already adjusted our transaction and asset allocation strategies to mitigate potential impact from tariffs.
Jason: On the policy side U S China talks.
Zhen Yan: The dew point rate of the API business is higher than that of the APTX business. The change in this structure itself will lead to a change in D1. The second change is that due to the slowdown of Q1, there is not much growth. This will lead to a decrease in the early slowdown ratio in the business structure. The early slowdown of D1 is relatively low. So after this ratio drops, it will also lead to an increase in the large-scale D1 rate. So these two structures together affect the increase in D1 rate. In terms of recovery rate, the CFO mentioned earlier that this quarter has maintained a relatively stable level.
Jason: We have achieved with some encouraging progress.
Jason: And we view that as a positive for both credit demand and asset quality.
Jason: However.
Jason: The global threat landscape has been shifting quite a little quite a bit this year.
Jason: And this has added uncertainty to China's macro environment.
Jason: The affect people's consumption sentiment.
Jason: <unk>.
Jason: Weaker experts could put pressure on areas.
Jason: Such as Capex and household consumption.
Jason: So in April.
Jason: After a question, we slightly tightened our risk strategy.
Jason: Far overall risk levels have remained largely stable.
Zhen Yan: In April, due to some uncertainties related to tariffs, we narrowed the wind control standards. At present, the risk indicators in April and May are relatively stable. We will also adjust the wind control dynamically in the future. Okay, first of all, I want to say that the slight fluctuation in our C2M2 ratio were in line with our expectations and also well within the target range we have set for our risk performance. Overall speaking, our asset quality is at a healthy level compared to historical trends. As for the increase in the day-one delinquency rate, it was mainly driven by the change in our loan mix.
Jason: We will continue to monitor how the tariff situation impacts risk performance.
Jason: And dynamically adjust our strategy as needed.
Jason: In addition, our diversified business model also mixed modular flexible to react to the potential challenges.
Okay.
Stefan: And then for a second question Stefan you can answer.
Jason: Sure.
Jason: As you know with the list of things.
Jason: Basically any surface.
Jason: Every few years.
Jason: The U S side of the political needs.
Jason: Given that you know in early May.
Jason: The U S and China entered into at least a tentative kind of awkward agreements.
Jason: On the tariff.
Jason: So compared to early April I think that the delisting risk.
Zhen Yan: In Q1, the percentage of loan volume from our embedded finance channel increased by 31% from last quarter, and this business line usually has a higher day-one delinquency rate compared to our app-based or H5-based business. Also, our overall loan volume was roughly flat Q1Q, leading to a smaller portion of early-stage loans, which usually have a lower day-one delinquency rate. These two structural changes have led to a slight increase in our day-one delinquency rate, and our collection rate is very stable, as our CFO just mentioned in his prepared remarks. In April, given the uncertainty around tariff impact, we slightly tightened our credit standards.
Jason: Clearly.
Jason: Kind of a mid.
Jason: Reduced by quite a bit.
Jason: But with that said, we have been carefully evaluating the potential risk of the listing I think we're well prepared.
Jason: And we have a very clear.
Speaker Change: Uh huh.
Two response, what is kind of a scenario.
Speaker Change: As you know.
In November 2022.
When complete the secondary listing in Hong Kong.
Speaker Change: This basically I have will give our shareholders more flexibility. They can choose to continue trading U S or moved in Hong Kong market.
Speaker Change: So even in a worst case scenario, where when our ABS are forced to de list invest there would still be able to trade on our shares seamlessly in Hong Kong.
Zhen Yan: Since then, our risk indicators have remained stable through both April and May. Moving forward, we will continue to adjust our risk strategy on a dynamic basis. We expect our C2M2 ratio for the full year to remain largely stable around 0.6 level, based on the assumption that the macro environment doesn't change dramatically.
Speaker Change: As for liquidity.
Speaker Change: Currently about 99% of our trading volume in the U S market.
Speaker Change: And then Hong Kong, obviously, it's a very very light.
Speaker Change: This is mainly because you are trading off.
Speaker Change: Breaking last year's Mark Dr. Rolla.
Speaker Change: Relatively low transaction costs.
Speaker Change: However, if a force of the list.
Speaker Change: It happened at.
Speaker Change: All the tradings, probably naturally shipped from the U S to Hong Kong and accordingly, the liquidity in Hong Kong.
Zhen Yan: And in terms of the credit demand balance for the average daily loan volume. April was roughly in line with March. we did see some fluctuation in borrow activity. due to the impact of U.S.-China trade tension. But we proactively expand our customer reach through partnership with diversified channels. We should be able to mitigate the potential decline in credit demand. In May, credit demand slightly decreased sequentially. partly due to the May Day holiday. But this is just normal seasonality. Based on what we are seeing now, we expect low volume in Q2 will be largely on track as we planned at the start of the year.
Speaker Change: Sure.
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Speaker Change: Improved significantly.
Speaker Change: Point and Ah Hong Kong listing would automatically convert from a secondary listing to a primary listing in accordance with the Hong Kong Exchange rules, Okay, and we only need to file some additional document after that.
Speaker Change: Conversion or secondary to primary convert happening as a option.
Speaker Change: Providing the government support.
Speaker Change: Therefore, we believe the secondary listing that we already have.
Speaker Change: <unk> provides sufficient protection for our shareholders.
Speaker Change: We'll continue to obviously monitoring.
Speaker Change: The situation evolves and take.
Speaker Change: Correct measures.
Speaker Change: Based on our ongoing assessment on this matter.
Thank you.
Zhen Yan: Thank you.
Emma Xu: Your next question comes from Emma Xu from Bank of America Securities. Please go ahead. Thank you for giving me the opportunity to ask questions. I have two questions.
Speaker Change: Thank you. Your next question comes from Cindy Wang from China Renaissance. Please go ahead.
Angelica: And how can I just check on is Angelica. Thank you Linda.
Emma Xu: First, I would like to ask how the management is evaluating the potential impact of the tariff conflict, and whether it will tighten the investment of loans in the future.
Speaker Change: Are there any other.
Alan: Alan just your final question Matt.
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Emma Xu: The second question I would like to ask is, what measures will the management take for the potential risk of ADR withdrawal? Will you consider doing a double major listing in Hong Kong, and what are your thoughts on improving the liquidity of Hong Kong stocks? So, with recent China-US trade escalation, how do you assess the potential impact of the tariff tensions in the future, and will you tighten lending standards? And my second question is, what strategy is management currently adopting regarding potential ADR delisting risk? Will you consider a dual primary listing in Hong Kong? Will you take measures to improve the liquidity of your Hong Kong ticker?
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Speaker Change: That's helpful. Dan Schlanger, Jonathan Mahan thank accounts.
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Speaker Change: Thanks.
Thanks for taking my question. So in first quarter, the number of medium sour spreads approve glad there was down 9% sequentially.
Speaker Change: Uptime and 3% so far based on reasoning behind it and things and Paul that trial, while may cause a potential slowdown in loan demand I think affected the quality of new borrowers.
Haisheng Wu: and in terms of tariff.
Haisheng Wu: We believe the direct impact of tariffs on our business is quite limited. First, the vast majority of our loan volume is in consumer lending. Second, we reviewed the industries of users, of how users are involved in Q1. Those related to experts accounted for just around 4% of our total loan volume. Among them, only about 1% were in sectors likely to be significantly impacted by US tariffs. For these users, we have already adjusted our transaction and asset allocation strategies to mitigate potential impact from tariffs. On the policy side, U.S.-China tribal talks have achieved some encouraging progress.
Speaker Change: The happier adjusted customer acquisition strategy. So how do you expect the customer acquisition cost in the second quarter. Thank you.
Cindy Wang: Okay Cindy.
Cindy Wang: First the increase in units customer acquisition cost in Q1.
Cindy Wang: With many driven by a change in our business mix.
Cindy Wang: About 30% of our sales too expensive.
Cindy Wang: Come from API channel in the quarter.
Cindy Wang: Unlike other channels, we pay channel fees for both new ballroom and the repeat borrowers for API.
Cindy Wang: But when we calculate cost for users, but you only accounts new users.
Cindy Wang: Repeated runs.
Cindy Wang: So run HR channels contribute to a higher percentage of loan volume.
Haisheng Wu: And we view that as a positive for both credit demand and asset quality. However, The global trade landscape has been shifting quite a bit this year. And this has added uncertainty to China's macro environment and may affect people's consumption sentiment. Clicker expert could put pressure on an aerial. such as capex and household consumption. So in April, out of caution, we slightly tightened our risk strategy. So far, overall risk levels have remained largely stable. We will continue to monitor how the Paris situation impacts risk performance. and dynamically adjust our strategy as needed. In addition, our diversified business model also makes us more flexible to react to the potential challenges.
Cindy Wang: It pushes up our unit acquisition costs.
Cindy Wang: However, the API.
Cindy Wang: Are generating incremental loan volume for the company.
And the acquisition cost per loan through API, it's much lower than in feed marketing.
We are able to recover the cost of the cost with just the first low insurance.
Cindy Wang: In addition, we increased spending on <unk>.
Cindy Wang: And fifth marketing this quarter to reach higher quality users.
Cindy Wang: Although this channel generally have.
Cindy Wang: Higher acquisition cost compared to others.
Cindy Wang: Such as App store or data driven marketing.
Cindy Wang: Users from this generally tend to deliver stronger and healthier value.
Cindy Wang: In the medium to long term.
Cindy Wang: We have also tried new strategy.
Cindy Wang: Yes.
Cindy Wang: Tailoring our approach to a different pricing segments.
Cindy Wang: Applying different operations across our four year journey.
Unknown Executive: And for your second question, say a phone, you can answer it. Sure, Emma. As you know, this ADR delisting basically resurfaced every few years, depending on the the US side of a political need. Given that, you know, in early May, the US and China entered into at least a tentative kind of agreement on the tariff. So, you know, compared to early April, I think the delisting risk clearly kind of reduced by quite a bit. But with that we have been carefully evaluating the potential risk of the delisting. I think we're well prepared and we have a very clear plan to respond to what if kind of scenario.
Cindy Wang: Furthermore, I want to say that.
Cindy Wang: We pay more attention to the efficiency of customer acquisition.
Cindy Wang: Rather than the cost of customer acquisition.
Cindy Wang: As we optimize the entire acquisition journey. The end to end approach has made our targeting more accurate in terms of both user quality and intent.
Cindy Wang: This in turn boosts, our overall blended efficiency for new users.
Cindy Wang: This quarter.
Cindy Wang: Our conversion rate from new credit line users to new borrowers reached 74% up from around 55% in the same period last year.
Cindy Wang: That is to say that our end to end customer acquisition efficiency remains very healthy.
Cindy Wang: Since the start of Q2 users credit new have been affected by the ongoing trade tension.
Unknown Executive: As you know, in November 2022, we complete the secondary listing in Hong Kong. This basically will give our shareholders more flexibility. They can choose to continue trading in the US or move to Hong Kong market. So even in the worst case scenario where when our ADS are forced to delist, investors would still be able to trade on our shares seamlessly in Hong Kong. As for liquidity, currently about 99% of our trading volume is in the US market. And in Hong Kong, obviously, it's very, very light. This is mainly because US trading offers investors more flexibility and relatively low transaction costs.
Cindy Wang: Which has been too we also have a certain impact on our customer acquisition efficiency.
Cindy Wang: Going forward.
Cindy Wang: We will continue to closely monitor changes in the macro environment and the competitive landscape.
Cindy Wang: And just our acquisition pace accordingly.
Cindy Wang: We will also carefully evaluate our provision costs against the <unk>.
Cindy Wang: TV for new users.
Cindy Wang: And to further optimize our channels to improve efficiency.
Cindy Wang: Thank you.
Speaker Change: Thank you. Your next question comes from Yodlee from CIC. Please go ahead.
Unknown Executive: However, if a forced delist were to happen, all the tradings would probably naturally shift from the US to Hong Kong. And accordingly, the liquidity in Hong Kong will, you know, for sure, improve significantly. At that point, and our Hong Kong listing would automatically convert from a secondary listing to a primary listing in accordance with the Hong Kong exchange rules. And we only need to file some additional document after that conversion, or I mean, secondary to primary convert happening as a after providing the document support. Therefore, we believe the secondary listing that we already have already provides sufficient protection for our shareholders.
Speaker Change: So what is going to get rid of it.
Speaker Change: Two quick things.
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Speaker Change: With him.
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Speaker Change: We will continue the portfolio I'll characterize it weighs out.
Speaker Change: Then I'll do the translation.
Speaker Change: Question is given the policy stimulus to promo to domestic consumption.
Speaker Change: They had had the view of the trend of ammonia demand funding any liquidity from bank partners and the Companys loan strategy.
Speaker Change: Today's recovering environment can we expect that a company can maintain our low funding costs in the long run and EMEA adopt a more proactive nimble and strategy in the future. That's all thank you.
Unknown Executive: We will continue to obviously monitor as the situation evolves, and take, you know, correct measures based on our ongoing assessment on this matter.
Speaker Change: Okay.
Speaker Change: Since the start of the year, China has rolled out a range of supportive policies.
Unknown Executive: Thank you.
Speaker Change: The boost in consumption.
Cindy Wong: Your next question comes from Cindy Wong from China Renaissance. Please go ahead.
Speaker Change: Project trading subsidies and the guidelines for stronger support for consumer lending.
Speaker Change: These measures have made a positive impact.
Cindy Wong: 好的,謝謝管理層給我這個提問的機會,然後我這裡有個小問題是關於貨客這一段, 那第一個我們看到就是說,本季度這個新受信用戶的數量其實環比是下降了9%, 但單位的這個受信成本是環比有上升了23%, 那可以跟我們大概展開說明這個背後的原因是什麼嗎? 然後第二個的話就是說,因為4月以來這個貿易戰帶來的一些潛在的貸款需求可能是放緩的, 那是否有影響到我們這個新貨客的一個質量? 然後在貨客手段上有沒有做怎麼樣的一個調整? 然後管理層怎麼看這個第二季度的一個貨客成本?
Speaker Change: We can see in the quarter and the Q.
Speaker Change: Q1 macro data.
Speaker Change: Retail sales were up four 6% year over year.
Speaker Change: Beating market expectations.
Speaker Change: Credit demand on our platform was also slightly better than typical seasonal trends.
Speaker Change: On the funding side.
Speaker Change: The government announced cuts to both of the interest rates and the reserve ratio.
Speaker Change: In may.
Speaker Change: So we expect the funding environment to remain relatively as part of this year.
Speaker Change: With some room for further decrease in funding cost.
Speaker Change: In addition, we plan to further expand our ABS issuance.
Cindy Wong: 那我很快地翻譯一下我的問題。 Thanks for taking my question. So in first quarter, the number of new users with approved credit was down 9% sequentially, but the CAC up 23%. So what is the reasoning behind it? And since April, the trade war may cause a potential slowdown in loan demand. Has it affected the quality of new borrowers? And have you adjusted customer acquisition strategy? So how do you expect the customer acquisition cost in second quarter?
Speaker Change: And optimized our funding structure.
Speaker Change: Overall, we expect our funding cost for 2025 to decrease slightly from Q1 levels.
Speaker Change: And finally.
Speaker Change: Our lending strategy.
Speaker Change: It's really depends on the risk I look and the customer demand.
Speaker Change: Although our risk indicators.
Speaker Change: Remained largely stable.
Speaker Change: At the moment.
Haisheng Wu: Thank you. First, the increase in unit customer acquisition costs in Q1 was mainly driven by changes in our business mix. about 30% of our sales expenses. came from API channel in the quarter. Unlike other channels, we pay channel fees for both new borrowers and repeat borrowers for API. But when we calculate cost for users, we only count new users, not repeat runs. So when API channels contribute to a higher percentage of loan volume. It pushes up our unit acquisition cost. However, the API channels are generating incremental loan volume for the company. and the acquisition cost per loan through API is much lower than in-phase marketing.
Speaker Change: There is still some uncertainty in the broader macro environment.
Speaker Change: Therefore, we will continue to maintain a prudent strategy.
Speaker Change: First of all in high quality and sustainable growth.
Speaker Change: That's right. Thank you.
Speaker Change: Yeah.
Speaker Change: I just wanted to add one little point here. So as you know we are very much focused on.
Speaker Change: The.
Speaker Change: The take rate up.
Speaker Change: Of our portfolio.
Speaker Change: And as in our previous discussion with the market.
Speaker Change: We communicated that the we continue to see from a full year basis.
Speaker Change: We will continue to see improvement this year, 25% versus 24 in terms of the net take rate assuming there's no dramatic macro changes from now to year end.
Speaker Change: That's still the assumption, we're looking at and I think that still on target.
Haisheng Wu: We are able to recover the cost of the cost with just the first loan insurance. In addition, we increased spending on in-feed marketing this quarter to reach higher quality users. Although these channels usually have higher acquisition cost compared to others. such as App Store or data-driven marketing. Users from these channels tend to deliver stronger and healthier value. and a medium to long term. We have also tried new strategies in this space, tailoring our approach to different pricing segments and applying different operations across a four-year journey. Furthermore, I want to say that we pay more attention to the efficiency of customer acquisition rather than the cost of customer acquisition.
Speaker Change: Thank you.
Speaker Change: Thank you there are no further questions at this time I'll now hand back to management for closing remarks.
Speaker Change: Okay.
Speaker Change: Thank you everyone again.
Speaker Change: Again to join US for this conference call. If you have any additional question.
Speaker Change: Feel free to contact us offline. Thank you.
Speaker Change: Thank you that does conclude our conference for today.
Speaker Change: For participating you may now disconnect.
Haisheng Wu: As we optimized the entire acquisition journey, the end-to-end approach has made our targeting more accurate in terms of both user quality and intent. This in turn boosts our overall landing efficiency for new users. This quarter Our conversion rate from new credit line users to new borrowers reached 74%, up from around 55% in the same period last year. That is to say that our end-to-end customer acquisition efficiency remains very healthy. Since the start of Q2, users' credit needs have been affected by the ongoing trade tension. which in turn will also have a certain impact on our customer acquisition efficiency.
Haisheng Wu: Going forward, we will continue to closely monitor change in the macro environment and competitive landscape. and adjust our acquisition pace accordingly. We will also carefully evaluate our acquisition cost against the LTV of new users. and further optimize our channels to improve efficiency.
Haisheng Wu: Thank you.
Yada Li: Your next question comes from Yada Li from CICC. Please go ahead. Hello, Guan Yiceng. Thank you for giving me a chance to ask you a question. Today, I would like to ask you a question.
Yada Li: Under the current policy of domestic consumption, how do you look at the future demand, the extent to which banks have sufficient funds, and some changes in the future company's lending strategy? In this case, can we look forward to the long-term cost of the company's funds being kept at a lower level, and can we look forward to a more active lending strategy in the future? Thank you very much, Guan Yiceng.
Haisheng Wu: Then I'll do a translation. My question is, given the policy stimulus to promote domestic consumption, looking ahead, how to view the trend of loan demand, funding inequality from bank partners and the company's loan strategy. In this recovery environment, can we expect that the company can maintain a low funding cost in the long run and may adopt a more proactive loan strategy in the future? That's all, thank you. Thanks for welcoming! Since the start of the year, China has rolled out a range of supportive policies aimed at boosting consumption. such as trading subsidies and guidelines for stronger support to consumer lending.
Haisheng Wu: These measures have made a positive impact. as we can see in the Q1 macro data. Retail sales were up 4.6% year-over-year, beating market expectations. Credit demand on our platform was also slightly better than typical seasonal trends. On the funny side The government announced cuts to both the interest rate and the reserve ratio. in May. So we expect the funding environment to remain relatively supportive this year. with some room for a further decrease in funding costs. In addition, we plan to further expand our ABS issuance. and optimize our funding structure. Overall, we expect our funding cost for 2025 to decrease slightly from Q1 levels.
Haisheng Wu: And finally, about our learning strategy, I think it really depends on the risk outlook and the customer demand. Although our risk indicators remain largely stable. at the moment. There is still some uncertainty in the broader microenvironment. Therefore, we will continue to maintain a prudent strategy. pursuing high quality and sustainable growth. That's all. Thank you.
Haisheng Wu: Yeah, and I just want to add one little point here. So as you know, we are very much focused on the take rate of our portfolio. And as in our previous discussion with the market, you know, we communicated that we continue to see from a four-year basis, we'll continue to improvement this year, 25 versus 24 in terms of the net take rate, assuming there's no dramatic micro changes from now to the year end. I think that's still the assumption we're looking at. And I think that's still on target. Thank you.
Unknown Executive: There are no further questions at this time. I'll now hand back to management for closing remarks. Okay, thank you everyone, again, to join us for this conference call. If you have any additional questions, feel free to contact us offline. Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.