OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) Q4 2023 Earnings Call Transcript

OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) Q4 2023 Earnings Call Transcript March 18, 2024

OneConnect Financial Technology Co., Ltd. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Ladies and gentlemen, thank you for standing by, and welcome to OneConnect’s Fourth Quarter and Full Year 2023 Earnings Call. [Operator Instructions]. Please note this event is being recorded. Now I would like to hand the conference over to your speaker host today, Mr. Rick Chan, the company’s Head of Investor Relations. Please go ahead, Mr. Chan.

Rick Chan: Thank you, operator. Hello, everyone, and welcome to our 2023 four quarter earnings call. Our financial and operating results are released earlier today and currently available on our IR website. Today, you will hear from our Chairman and CEO, Mr. Shen Chong Feng, who will give opening remarks and business highlights. Afterwards, our CFO, Mr. Luo Yongtao will go over a closer look into our financials. And then in question-and-answer session, our management team will be available to you. We have our CTO, Mr. Li Jie; Head of Digital Banking, Ms. Ellen Jia; and Head of Corporate Planning and Product Management, Ms. Jessie Shen. In today’s conference, our management team will make statements in Mandarin or in English.

For those in Mandarin, a contracted translation will be provided. In case of any discrepancy between the Mandarin version and the English version, our statement in the original language should prevail. Let me quickly cover the safe harbor statement before we start. As we are making forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to defer materially. Please note that we may present both IFRS and non-IFRS financial measures. With that, I’m pleased to turn our call to our Chairman and CEO, Mr. Shen Chong Feng. Mr. Shen, please.

Shen Chong Feng: [Foreign Language] Hello, everyone. I’m Shen Chong Feng. Thank you for taking your time to join our 2023 four quarter and annual results earnings call. Firstly, on behalf of OneConnect, I’d like to extend a warm welcome to investors, analysts and friends from media or with us during this call. It’s a great pleasure for me to share with you the results we’ve achieved in the fourth quarter and last year. [Foreign Language] In 2023, the Central Financial Work Conference proposed for the first time to build up China’s financial strength, reaffirming the importance of financial sector as the lifeblood of the national economy. The conference pointed out that technology capacity in many small- and medium-sized banks remains to be improved, and the high-quality development of these institutions is imperative.

At the same time, vigorously developing technology, innovation in finance, green finance, financial inclusion, pension finance and digital brands finance, which are known as the five major articles unveiled at the Central Financial Work Conference are also included in the government work report for the first time. With cutting-edge technologies such as artificial intelligence and big data and the unique advantages of technology plus business, OneConnect continues to improve its product capabilities in our three major business segments, namely digital banking, digital insurance and gamma platform for us to encourage the development of new quality productive forces in the financial industry. [Foreign Language] In 2023, we achieved significant milestones in loss reduction with net loss attributable to shareholders improving to CNY363 million from CNY872 million in the previous year.

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Q&A Session

The past year also saw proactive adjustments in product portfolio, continuous expense control and improved operational efficiency with the resources effectively allocated to R&D in key products. These efforts will provide a solid foundation for profitability in the medium term. [Foreign Language] Next, please go to the Page 4 of our slides. [Foreign Language] Committed to our business philosophy of value, win-win cooperation and quality development, we achieved significant progress in three core priorities, namely product upgrade, customer expansion, as well as loss reduction and efficiency improvement. At this stage, we are accelerating export of Ping An Group technology and upgrade of self-developed products. In addition to aggregating resources on high-value products.

At the same time, the company also fine-tuned our project ROI management and cost control, which will put us closer to the medium-term strategy of breaking even and becoming profitable. [Foreign Language] Next page. [Foreign Language] In 2023, we achieved satisfactory progress and results in products, customers and cost control. [Foreign Language] The company focused on product upgrade, product standardization, accelerating the export of Ping An Group experience, strengthening product portfolio and aggregating our resources on high-value and high threshold products. [Foreign Language] OneConnect also strengthened customer engagement, the company has expanded the business pipeline, developed a deeper understanding of customer needs, improved revenue structure and now can better meet the needs and the expectations of our customers.

And we have established long-term cooperation with them. [Foreign Language] At the same time, expense control, per capita revenue, product ROI management have all been improved, which translates into higher operational efficiency. [Foreign Language] In 2023, non-IFRS gross profit margin exceeded 40%. The number of premium plus customers of the company was over 200 and net loss attributable to shareholders was narrowed by about CNY510 million. [Foreign Language] Next page. [Foreign Language] Last year, we secured a cooperation with many large customers at both home and abroad, landing contracts with financial institutions such as SBF, Hong Kong Stock Exchange, Well Link Life and Old Mutual. There were 75 customers with a total contract value of over CNY5 million and the average contract value of such customers increased by 6% year-over-year.

[Foreign Language] Centered on the strategy of deepening customer engagement, we continue to strengthen relationship with existing customers. In terms of cross-selling and implementing new products for existing customers, we have signed contracts with financial institutions, including Huaxia Bank, Postal Savings Bank of China, Daga Insurance, China Continent Insurance, et cetera, they help them continue to succeed on their digital transformation journey. [Foreign Language] Next page. [Foreign Language] While serving financial institutions in Mainland China, the company also exported successful experience abroad, actively expanding its overseas presence and remains committed to empowering a broader market with China’s financial technology. [Foreign Language] In 2023, revenue contribution from overseas customers increased by over 30% year-on-year and the proportion of overseas revenue as a part of third-party customer revenue increased by about 6 percentage points to 15.7%.

With strong growth momentum in Hong Kong, Southeast Asia, South Africa and the Middle East, we actively explored overseas market and continue to expand our sales network. OneConnect products are well received by overseas institutions. For example, our comprehensive strategic partnership with Old Mutual proved to be a big success in the development of the South African market. We’ve also jointly developed a digital platform for SME financing with the Abu Dhabi Global Market to export digital and inclusive finance abroad. [Foreign Language] So far, OneConnect’s business have covered 20 countries and regions, including Singapore, Thailand, Malaysia, Indonesia and the UAE, the Philippines, Vietnam, South Africa and 185 overseas financial institutions, including a top three regional bank in Southeast Asia and two of the top 10 global insurance companies.

Our gradual expansion into the overseas market has undoubtedly paved the way for OneConnect to achieve its second stage strategic goals and achieve new top line growth points. [Foreign Language] Next page. [Foreign Language] 2023 remains a key year for Stage 2 strategy, that is broadening customer engagement. During this stage, we are committed to unite the core and empower the wins where we focus on financial institutions while expanding ecosystem and overseas. [Foreign Language] Next page. [Foreign Language] In the Digital Banking segment, our family trust system realized full close-loop services for family trust establishment, investment allocation and account management in 2023. Expanding the family wealth intelligent scenario for high net worth customers of private banks.

[Foreign Language] We have built a unified technology base and successfully upgraded our intelligent credit management system. This system not only realizes the comprehensive digital management of credit business but also provides strong support for credit decision-making through smart analysis. The system has been successfully implemented in a number of non-banking and banking scenarios so far and has been highly recommended by our users. [Foreign Language] At the same time, OneConnect also continues to promote the adoption of self-controlled technology. The company’s self-developed portfolio management system have successfully accommodated home developed technology in 18 projects, providing some technical support for the sustainable development of the company’s business.

[Foreign Language] Next page. [Foreign Language] In Digital Insurance segment, we have upgraded our claims core system over the past year. [Foreign Language] With advanced technology, we provide customers with more intuitive and convenient remote survey services which creates significant improvements in user experience during claims processing. [Foreign Language] Our new online claims panel not only improves the efficiency of back-end claims adjusters, but also effectively reduces survey manpower and operating costs. [Foreign Language] Our innovative deployment model, combining in-house process and SaaS core engine, provides more flexible and efficient support for our claims core system. At the same time, our remote operation platform has added a new core module for claims settlement, making settlement operation more convenient and efficient.

[Foreign Language] Next page. [Foreign Language] In Gamma platform, we fully apply AI capabilities in all business links to further empower customers in risk management and sales, improving both their risk management efficiency and service and sales conversion rate. For example, our AI interview robot has over 20 AI vision and dialogue risk control capabilities and empowers customers to easily improve risk control efficiency with the vivid digital human interaction experience. At the same time, we have also launched an AI wealth management robot with over 30 car content templates, supports preset scripts and provides personalized recommendation of wealth management products, helping account managers gradually improve conversion rate. [Foreign Language] Next page.

[Foreign Language] In 2023, the company has gradually expanded its services in Hong Kong, helping to accelerate Hong Kong’s digital construction. In terms of supporting regulators, the launch of FINI, the company’s new IPO clearing platform for Hong Kong Stock Exchange has significantly shortened the time between pricing and trading of new shares from T+5 to T+2, marking another major milestone in the development of Hong Kong’s capital market. As for serving financial institutions, OneConnect has developed in-depth understanding of demand in banking and insurance customers from Hong Kong. While providing e-KYC to over 10 financial institutions to establish our market reputation, we have also implemented solutions such as asset and liability management, management accounting and risk management system services in a number of financial institutions in Hong Kong.

The company’s credit reference services agency also cross-sell with other business lines, now providing end-to-end solution of CRA report plus e-KYC certification plus account opening, plus loan system for two note issuing banks in Hong Kong. [Foreign Language] Next page. [Foreign Language] We have continued to upgrade our products and enhance our competitiveness overseas in 2023, striving to provide customers with higher value product and service experience and creating overseas flagship projects. OneConnect’s life insurance team provided [indiscernible] insurance system for well-linked life insurance to reshape their policy insurance process. Our Southeast Asian team upgraded the professional configuration of AI assistant to help overseas customers make informed decisions and innovate embedded AI intelligent translation module to greatly improve the adaptability and acceptability for multilingual customers in different countries and regions.

[Foreign Language] Next page. [Foreign Language] In 2023, our hard work has also won a number of recognitions and honors from third-party institutions and renowned media outlets. For example, the company has won KPMG’s China Fintech Enterprise Excellence Award and being included in IDC FinTech Global Top 100 for many years in a row. Named as the 2023 Chinese Banker Top Fintech Innovation Institution and won the 2023 Cailian Press ESG Pioneer Award. [Foreign Language] Since the beginning of 2024, we have seen a new round of scientific and technological revolution and industry transformation continue to deepen. New quality productive forces with artificial intelligence as the core is accelerating to lead the high-quality development of industries.