Qfin Holdings, Inc. Q3 FY2024 earnings call

• Asset quality improved in Q3 with the D1 delinquency rate falling by 0.2 percentage points sequentially and the 30-day collection rate increasing by 1.1 percentage points. - Liquidity in the financial system was ample, funding costs reduced by 30 basis points sequentially, and RMB 3.5 billion in ABSs were issued with issuance costs falling by over 50 basis points. - In user acquisition, new credit line users increased by 23.8% sequentially, average unit acquisition cost declined by 7.4%, and loan volume from embedded finance channels grew by 85% year-over-year. - The business model was upgraded from a loan facilitation model to a platform model, with the capital-light segment playing a more prominent role. - AI technology was applied, such as an AI copilot system for loan collection where the average daily use by the collection team more than doubled, and the Qifu report interpretation system was enhanced with large language model integration.

In Q3, revenue from the credit-driven service (capital-heavy) segment was RMB 2.9 billion, and revenue from the platform service (capital-light) segment was RMB 1.47 billion. Excluding the contribution from risk management SaaS services (RM SaaS), the capital-light segment contributed 55% of the total loan facilitation and origination volume in Q3, an increase of approximately 10 percentage points from the same period last year.

• For the fourth quarter of 2024, the company expects non-GAAP net income to be between RMB 1.8 billion and RMB 1.9 billion, representing a year-on-year growth of 57% to 65%. - On January 1, 2025, the Board approved a new share repurchase plan of USD 450 million, which will start implementation.

• Uncertainties in the macroeconomic environment. - Geopolitical uncertainties. - Risks associated with transitioning from the capital-heavy to the capital-light business model.

Q: Richard Xu asked about the drivers of loan volume growth and the outlook for 2025.

A: Haisheng Wu responded that there was a recovery in customer demand by the end of September, the platform strategy had a positive effect, and the company remained prudent with a focus on healthy operations and executing the platform strategy.

Q: Alex Ye asked about the large write-back amount and the competitive landscape.

A: Alex Xu stated that write-backs continued due to prudent provision booking and improved risk performance, and Haisheng Wu mentioned that different players serve different customer groups and Qifu had upgraded to a platform model with a competitive advantage.

Q: Emma Xu asked about the outlook for asset quality.

A: Haisheng Wu said risk management capabilities were improved with upgraded risk models, optimized asset allocation, and strengthened post-lending management.

Q: Cindy Wang asked about the share buyback pace in 2025.

A: Haisheng Wu said a new USD 450 million share buyback plan started on January 1, 2025, and Alex Xu added that shares were undervalued based on forward price-to-earnings ratio.

Q: Yada Li asked about the increase in take rate and future outlook.

A: Alex Xu said the take rate improvement was driven by risk improvement, funding cost reduction, and mix change, with expectations of further improvement in 2025 depending on the macro environment.