• Total Net Revenue: RMB4.37 billion in Q3 2024, up from RMB4.16 billion in Q2 2024 and RMB4.28 billion a year ago.
• Non-GAAP Net Income: RMB1.83 billion in Q3 2024, a 29.1% sequential increase and 54.5% year-over-year increase.
• Non-GAAP Net Income per Diluted ADS: RMB12.4, a 34.8% sequential increase and 71.5% year-over-year increase.
• Return on Equity (ROE): 32.2% in Q3 2024.
• Loan Facilitation and Origination Volume: Increased by 13.1% sequentially.
• 90-Day Delinquency Rate: 2.7% in Q3 2024, down from 3.4% in Q2 2024.
• 30-Day Collection Rate: 87.4% in Q3 2024, up from 86.3% in Q2 2024.
• Cash from Operations: RMB2.37 billion in Q3 2024, up from RMB1.96 billion in Q2 2024.
• Cash and Cash Equivalents: RMB9.77 billion in Q3 2024, up from RMB8.78 billion in Q2 2024.
• Share Repurchase: Approximately 13.7 million ADSs purchased for $298 million as of November 19, 2024.
• New Share Repurchase Plan: Up to $450 million starting January 1, 2025.

• Warning! GuruFocus has detected 3 Warning Sign with QFIN.

Release Date: November 20, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Qifu Technology Inc (NASDAQ:QFIN) achieved record profitability in Q3 2024, with non-GAAP net income reaching RMB1.83 billion, a 29.1% sequential increase and a 54.5% year-over-year increase.
• The company successfully reduced funding costs by 30 basis points sequentially, leveraging robust asset quality and strong relationships with financial partners.
• Qifu Technology Inc (NASDAQ:QFIN) reported a significant improvement in asset quality, with the D1 delinquency rate falling by 0.2 percentage points sequentially and the 30-day collection rate increasing by 1.1 percentage points.
• The capital-light segment contributed 55% of total loan facilitation and origination volume in Q3, marking a 10 percentage point increase from the same period last year.
• The company executed a substantial share repurchase plan, reducing share count and enhancing shareholder returns, with a new USD450 million buyback plan approved for 2025.

Negative Points

• Despite improvements, the macroeconomic environment remains uncertain, with Qifu Technology Inc (NASDAQ:QFIN) maintaining a cautious outlook for 2025.
• Sales and marketing expenses increased by 15% quarter-on-quarter, indicating higher costs in acquiring new users.
• The effective tax rate for Q3 was higher than usual at 23.4%, due to a RMB200 million withholding tax provision related to cash distribution.
• The company continues to face competitive pressures from both banks and other fintech players, necessitating ongoing strategic adjustments.
• Provision for risk-bearing loans increased to RMB1.63 billion in Q3, reflecting a cautious approach to potential credit losses.

Q & A Highlights

Q: We noticed in the third quarter, loan volume increased 4.4% sequentially. What are the drivers, and will the company consider more positive loan volume growth next year? A: Haisheng Wu, CEO: We achieved good growth in Q3, with a slight recovery in customer demand by September. Our platform strategy has positively impacted customer retention and lifetime value. However, due to macroeconomic uncertainties, we remain prudent and focused on healthy operations. If growth opportunities arise, we are well-positioned to seize them.

Q: The writeback amount was over RMB900 million, a sizable increase from last quarter. What drove this uptick, and how sustainable is it? A: Alex Xu, CFO: We maintain a prudent provision policy, resulting in consistent writebacks. The Q3 writeback was driven by improved risk metrics and a prudent provision booking policy. We expect sizable writebacks to continue, although the shift to a capital-light model may reduce the need for large provisions in the future.

Q: Your major asset quality metrics improved in Q3. What is your outlook for asset quality, and why is QFIN seeing improvements while others face pressure? A: Yan Zheng, CRO: Our focus on high-quality development and tightening credit standards have driven improvements. Technologically, we've enhanced risk management systems and optimized risk models, leading to better asset quality. We expect stable risk performance assuming a stable macro environment.

Q: The pace of share buyback has been fast this year, and a new USD450 million plan was announced. What is the pace of buyback in 2025, and any considerations for repurchase price? A: Haisheng Wu, CEO: We are committed to completing our current buyback program, reducing share count by about 12%. We believe our shares are undervalued and will prioritize buybacks. The new plan will be executed proactively, focusing on attractive valuations.

Q: The take rate improved from 4.4% last quarter. What drove this increase, and do you expect further improvement next year? A: Alex Xu, CFO: The improvement was driven by better risk performance, lower funding costs, and mix changes. We expect a similar take rate in Q4 and potential improvement next year, assuming stable macro conditions. Long-term take rate depends on macroeconomic recovery.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.