Qfin Holdings, Inc. Q4 FY2024 earnings call

• Quality growth: Enhanced user acquisition efficiency with 16.2% Y-o-Y increase in new borrowers and 5.3% decline in average acquisition cost per credit line user. Added 18 new channels to embedded finance, seeing 26% increase in new credit line users and 98% growth in loan volume from these channels. 74% of graphics and 27% of videos deployed are AIGC-generated, improving user outreach efficiency by 25.1% and reducing average cost per credit line user by ~10%. 40% of ad placements automated, achieving 9% improvement in ROI.
• Asset quality: C2M2 metric (delinquency rate after 30-day collection) for overall loan portfolio declined sequentially in Q4, reaching lowest level of the year. 90-day delinquency rate was 2.09% in Q4 vs 2.7% in Q3; 30-day collection rate was 88.1% in Q4 vs 87.4% in Q3. C-M2 improved slightly Q-on-Q to 0.57% with higher loan volume.
• AI integration: AI deeply embedded in operations, from loan collection to marketing material generation. 74% graphics and 27% videos generated by AIGC, 40% ad placements automated. Plan to allocate more resources to AI in credit scenarios, including risk management and core business process improvement.
• Technology Solutions: Technology Solutions business reached scale, enhanced Focus Pro credit tech solution with 11 new partner institutions, total 16, 11 live. Loan volume under Focus Pro model grew at 17% CAGR in 2024. Plan to develop AI-plus bank agent platform to help banks improve operational efficiency.
• Share repurchases: Successfully executed USD410 million share repurchase in 2024, buying back ~12% of share count. Began new repurchase plan of up to USD450 million in 2025. Dividends and buybacks in 2024 totaled USD280 million and USD410 million respectively, with total shareholder returns 100% of 2023 GAAP net income.

In Q4, total net revenue was RMB4.48 billion. Revenue from credit-driven service (capital heavy) was RMB2.89 billion, down Y-o-Y due to off-balance sheet loans decline but with on-balance sheet loans and other value-added services contributing. Revenue from platform service (capital light) was RMB1.59 billion, up Y-o-Y driven by ICE and other value-added services. For the full year 2024, platform service accounted for roughly 53% of total loan volume and 58% of the year-end loan balance.

• For 2025 Q1, company expects non-GAAP net income between RMB1.8 billion and RMB1.9 billion, representing Y-o-Y growth of 49%-58%.
• Expect Q1 loan volume to grow by more than 10% Y-o-Y.
• Plan to ramp up ABS issuance in 2025 and increase ABS share in funding mix.

• Macro-economic headwinds: Despite some improvement in user activities, still adopting prudent approach due to macro uncertainties.
• Interest rate uncertainty: Slight uptick in interest rate uncertainty, but confident in driving moderate decline in funding costs.
• Geopolitical uncertainties: Taking prudent approach in business planning.
• Provisioning: Taking prudent approach to book provisions against potential credit losses, with total new provision for risk-bearing loans in Q4 at RMB2.07 billion vs RMB1.63 billion in Q3.

Q: On AI, discuss areas of potential integration with Deepseek and efficiency gains, and on credit demand recovery.

A: AI integration in credit assessment, collection, and marketing; 1/3 of core business processes expected to be powered by AI agent platform in next 1 year. Observed some improvement in user activities post-September 2024, Q4 loan application ratio 10% higher than Q3, expect Q1 loan volume to grow over 10% Y-o-Y but remain prudent.

Q: Drivers for risk metrics in Q4 and outlook, and net tariff guidance adjustment.

A: Focus on C2M2 ratio, risk level stable; net tariff guidance remains around slightly above 5% for 2025, with approach to drive higher profitability by testing margins.

Q: Impact of new regulatory policy on industry and company.

A: New policy is positive signal, expects increased supply of consumer loans, flexible terms for financial institutions, and consumer protection, creating stable environment for innovation.

Q: Funding cost trend and lowest level outlook.

A: Funding costs have continued to decline, limited room for further decline; driven by risk cuts and demand oversupply, expect to maintain current trend but space for further reduction is limited.

Q: Shareholder return outlook and sustainability.

A: Aim for 70+% payout ratio, current $450 million share buyback program ongoing, intend to continue; dividend per ADS expected to increase semiannually, with priority on buyback currently but dividend to increase over time.