360 Finance, Inc. (QFIN) Misses Q3 EPS by 26c

360 Finance, Inc. (NASDAQ: QFIN) reported Q3 EPS of $0.34, $0.26 worse than the analyst estimate of $0.60. Revenue for the quarter came in at $361.4 million versus the consensus estimate of $274.67 million.

Third Quarter Operational Highlights

• Loan origination volume*1 was RMB55,965 million, an increase of 108% from RMB26,925 million in the same period of 2018, and an increase of 16% from RMB48,378 million in the second quarter of 2019.
• Outstanding loan balance*2 was RMB70,568 million as of September 30, 2019, an increase of 106% from RMB34,338 million as of September 30, 2018, and an increase of 15% from RMB61,289 million as of June 30, 2019.
• The weighted average tenor of loans originated was approximately 7.90 months, compared with 8.57 months in the same period of 2018, and 7.76 months in the second quarter of 2019.
• Cumulative registered users was 126.00 million, an increase of 90% from 66.35 million as of September 30, 2018, and an increase of 15% from 109.28 million as of June 30, 2019.
• Users with approved credit lines*3 was 22.83 million as of September 30, 2019, an increase of 137% from 9.64 million as of September 30, 2018, and an increase of 19% from 19.23 million as of June 30, 2019.
• Cumulative borrowers with successful drawdown, including repeat borrowers was 14.73 million as of September 30, 2019, an increase of 129% from 6.44 million as of September 30, 2018, and an increase of 17% from 12.54 million as of June 30, 2019.
• 90 day+ delinquency ratio*4 was 1.07% as of September 30, 2019.
• The percentage of funding from financial institutions*5 was 93%
• Repeat borrower contribution*6 was 70.3%.

Third Quarter 2019 Financial Highlights

• Total net revenue was RMB2,583.0 million (US$361.4 million), an increase of 98% from RMB1,302.7 million in the same period of 2018.
• Income from operations was RMB942.4 million (US$131.8 million), an increase of 21% from 777.4 million in the same period of 2018.
• Non-GAAP*7 income from operations was RMB 964.7 million (US$135.0 million), an increase of 15% from RMB841.4 million in the same period of 2018.
• Operating margin was 36.5%. Non-GAAP operating margin was 37.3%, compared with 64.6% in the same period of 2018.
• Net income was RMB733.5 million (US$102.6 million), an increase of 27% from RMB 577.4 million in the same period of 2018.
• Non-GAAP net income was RMB755.8 million (US$105.7 million), an increase of 18% from RMB641.5 million in the same period of 2018.
• Net income margin was 28.4%. Non-GAAP net income margin was 29.3%, compared with 49.2% in the same period of 2018.

Mr. Haisheng Wu, Chief Executive Officer and Director of 360 Finance, commented, “We continued to achieve healthy and solid growth as we remain committed to executing our strategies in place. We have firmly implemented our strategic transition from a traditional loan facilitator to a technology enabler through the ‘capital light’ model. This transition allows us to serve more financial institutions and steadily reduce overall operational risk. Recently, we have observed regulatory tightening and market volatilities. We have always prided ourselves on our market leading position and ability to maintain high regulatory compliance standards. We have been actively working with regulators, industry associations and other leading companies to advocate for operating in regulatory compliance and protecting customer privacy. For example, we jointed efforts with National Internet Finance Association of China to appeal for the establishment of an industry-wide anti-scam alliance. In response to the short-term market uncertainties, we expect to adopt a relatively conservative measure of customer acquisition, yet remain confident in meeting our full year guidance. In the long-run, we will continue to focus on the quality of growth and safety of operations, while maintaining a reasonable growth rate. We are committed to delivering greater value to all of our stakeholders. ”

Mr. Jiang Wu, Chief Financial Officer of 360 Finance, stated, “Our solid operating performance in the third quarter continued to generate healthy financial results. In this quarter, loans originated under the ‘capital light’ model accounted for 20% of total loan originations, a significant increase from 8% in the previous quarter. It not only frees up more cash to support our daily operations and pilot projects, but also provides us with more of a cushion against industry headwinds down the road. Meanwhile, our customer acquisition has become more efficient to offset, to some extent, a decrease in margin as a result of our strategic transition. We remain committed to originating more on-balance sheet loans to better match revenue with cash flow as long as the costs of consolidated trusts are reasonable. In addition, we have been trimming down overall funding costs through strengthening long term relationship with our financial institution partners and diversifying our fund sources, such as domestic ABS market. For example, in July, we successfully issued RMB 1 billion of ABS with an attractive comprehensive cost at about 5.6%, despite the challenging domestic ABS market. More importantly, we maintained our prudent attitude towards risk management to ensure sufficient provisions for estimated credit risks.”

Mr. Yan Zheng, Vice President of 360 Finance, added, “We maintained our market leading risk performance with 90 day+ delinquency ratio stood at 1.07%. We have implemented proactive measures in all stages of our operations to ensure full control over credit risk management in the long-run. These measures include raising requirement thresholds for loan applicants, offering loans with more flexible repayment schedules to increase the transaction volume of high quality borrowers, and recording additional provisions related to credit risk. In addition, we have received approval from People’s Bank of China to connect to its credit system, which will allow us to download and submit data on borrower’s credit profile. We believe this will enhance our risk management capabilities by increasing the effectiveness of credit underwriting and a borrower’s cost of default. Furthermore, we have adopted a stringent collection policy to ensure full regulatory compliance. With these measures in place, we are confident to elevate our overall business resilience and achieve more sustainable development.”

For earnings history and earnings-related data on 360 Finance, Inc. (QFIN) click here.

You May Also Be Interested In

• Tesla plans 'flying' Roadster stunt at SpaceX Texas site as early as August
• Sinda raises $331M in IPO, reports Q2 net loss of $16.6M
• Reading (RDI) Tops Q2 EPS by 4c