Form 6-K ONECONNECT FINANCIAL For: May 26

May 26, 2022 6:09 AM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 6-K

 

 

 

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of May 2022

 

Commission File Number: 001-39147

 

ONECONNECT FINANCIAL TECHNOLOGY CO., LTD.

(Registrant’s Name)

 

55F, Ping An Financial Center
No. 5033 Yitian Road, Futian District
Shenzhen, Guangdong
People’s Republic of China
(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F x Form 40-F ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

 

 

 

 

 

 

EXHIBIT INDEX

 

Exhibit Number Description
   
Exhibit 99.1 OneConnect Announces First Quarter 2022 Unaudited Financial Results

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  OneConnect Financial Technology Co., Ltd.
   
  By:

/s/ Chongfeng Shen

  Name: Chongfeng Shen
  Title: Chief Executive Officer
     

Date: May 26, 2022

   

 

 

 

 

Exhibit 99.1

 

OneConnect Announces First Quarter 2022 Unaudited Financial Results

 

Revenue Up by 24.3% and Adjusted Net Loss Ratio1 Improved by 9.6ppt YoY for First Quarter 2022

 

SHENZHEN, China — (BUSINESS WIRE) — OneConnect Financial Technology Co., Ltd. (“OneConnect” or the “Company”) (NYSE: OCFT), a leading technology-as-a-service provider for financial institutions in China, today announced its unaudited financial results for the first quarter ended March 31, 2022.

 

First Quarter 2022 Financial Highlights

 

·Revenue increased 24.3% year-over-year to RMB1,019 million from RMB820 million.

 

·Gross margin was 34.3% as compared to 34.0% same period of the prior year; non-IFRS gross margin was 38.8%, as compared to 43.5% same period of the prior year.

 

·Operating loss was RMB355 million, as compared to RMB346 million same period of the prior year. Excluding the impact of listing expenses in connection with the Company’s proposed listing in Hong Kong, adjusted loss from operations1 amounted to RMB318 million, compared with RMB346 million for the same period in the prior year. Adjusted operating loss margin narrowed to 31.2% from 42.2% same period of the prior year.

 

·Net loss attributable to shareholders was RMB318 million, as compared to RMB305 million same period of the prior year. Net loss ratio narrowed to 31.2% compared to 37.2% same period of the prior year. Adjusted net loss to shareholders for the first quarter of 2022 amounted to RMB281 million, as compared to RMB305 million same period of the prior year. Adjusted net loss ratio narrowed to 27.6% from 37.2%.

 

·Net loss per ADS, basic and diluted, was RMB-0.86 as compared to RMB-0.83 same period of the prior year.

 

   Three Months Ended March 31     
In RMB’000, except percentages and per ADS amounts  2022   2021   YoY 
Revenue               
Revenue from Ping An Group   548,682    435,851    25.9%
Revenue from Lufax   129,100    75,105    71.9%
Revenue from third-party customers2   341,156    308,809    10.5%
Total   1,018,938    819,765    24.3%
Gross profit   349,031    278,555      
Gross margin   34.3%   34.0%     
Non-IFRS gross margin   38.8%   43.5%     
Operating loss   354,895    346,130      
Adjusted operating loss1   318,409    346,130      
Operating margin   34.8%   42.2%     
Adjusted operating margin1   31.2%   42.2%     
Net loss to shareholders   317,585    304,732      
Net loss ratio   31.2%   37.2%     
Adjusted Net loss ratio1   27.6%   37.2%     
Net loss per ADS3, basic and diluted   -0.86    -0.83      

 

 

1 Adjusted operation loss and adjusted net loss ratio excludes listing expense RMB 36.5 million in 2022Q1 in connection with the Company’s proposed listing in Hong Kong.

2 Third-party customers refer to each customer with revenue contribution of less than 5% of our total revenue in the relevant period. These customers are a key focus of the Company’s diversification strategy.

3 Each ADS represents three ordinary shares

 

 

 

 

Chairman,CEO and CFO Comments

 

“I am delighted to announce that we achieved strong financial results in Q1 notwithstanding impact from Covid outbreaks. We sustained a revenue growth rate of 24.3% and at the same time, narrowed adjusted net loss ratio by double digits.” said Mr. Ye Wangchun, Chairman of the Board. “We continued to implement our 2nd stage strategy of deepening customer engagement to focus on serving premium-plus customer and product integration in Q1,resulting in a growth in the number of premium-plus customers. Admittedly, this year will feature higher uncertainties from the macro environment, we, nevertheless, see strong demands from our FI customers for digital transformation. In addition, we have also seen favorable regulatory development, including the FinTech Development Plan (2022-2025), the Guidance on Digital Transformation of Banking and Insurance Sectors, highlighting the strategic importance of digital transformation. We remain fully confident in the potential and outlook of the FinTech industry.”

 

Mr. Shen Chongfeng, Chief Executive Officer, commented “Benefitting from ongoing execution of our 2nd stage strategy, integrated products in banking solution have successfully expanded large joint-stock bank customer base. As we sell more products to these customers, we are able to increase their value and improve contribution from premium-plus customers. Products in our relatively new solution-Gamma platform - core systems and AI customer service products - also demonstrated strong momentum, gaining more market share. We will continue to reinforce product integration and customer upgrade in 2022, to further solidify our position and fulfill our mission of supporting financial institutions to grow efficiently.”

 

Mr. Luo Yongtao, Chief Financial Officer, commented, “With more usage of our products by customers, revenue registered notable growth, at 24.3% year-over-year, fastest among last three quarters. Number of premium-plus customers, which is a key focus in our 2nd stage strategy, increased by 16% to 74, compared to 64 the same period of last year. In addition to high revenue growth, adjusted net loss ratio further improved by 9.6 ppts year over year from 37.2% to 27.6%. Covid outbreaks in 2022 have indeed brought uncertainties to the macro economy, but we remain unchanged in focusing on growing 3rd party revenue and retaining a sustainable growth. Meanwhile, our Q1 results reflect the effect of our disciplined cost and expenses management, marking another milestone in the path to profitability. We are ready to go further this year.”

 

Recent Developments of the Company’s Share Repurchase Program

 

In February 2022, the Company’s board of directors authorized a share repurchase program under which the Company is authorized to repurchase up to an aggregate of 2% of its outstanding ordinary shares during a specific period. As of April 29th, the Company had repurchased approximately 4.2 million ADSs for approximately US$5.9 million under this share repurchase program.

 

Revenue Breakdown

 

  

Three Months Ended

March 31

     
In RMB’000, except percentages  2022   2021   YoY 
Implementation revenue   171,678    168,567    1.8%
Transaction-based and support revenue               
Business origination services   114,793    118,499    -3.1%
Risk management services   106,951    99,290    7.7%
Operation support services   255,208    212,237    20.2%
Cloud services platform   295,834    180,512    63.9%
Post-implementation support services   11,427    13,236    -13.7%
Others   63,047    27,424    129.9%
Total   847,260    651,198    30.1%
Total   1,018,938    819,765    24.3%

 

 

 

 

Revenue in the first quarter of 2022 rose 24.3% to RMB1,019 million from RMB820 million for the same period in the prior year. Cloud services platform and operation support services were the key drivers. Revenue from cloud services platform surged by 63.9% year-over-year, majorly benefitting from on-going digital transformation within in Ping An Group. Revenue from operation support increased by 20.2%, benefiting from our gamma platform AI customer service products roll out and other products. Others, which included revenue from insurer ecosystem participants and oversea business, increased 129.9%. Notwithstanding the travel restrictions in major cities in response to the uptick in the COVID-19 pandemic, implementation revenue increased from RMB169 million to RMB172million.

 

First Quarter 2022 Financial Results

 

Revenue

 

Revenue in the first quarter of 2022 increased by 24.3% to RMB1,019 million from RMB820 million for the same period in the prior year, primarily driven by more demand for solutions in cloud services platform, operation support services and other services to insurer ecosystem participants and oversea business.

 

Cost of Revenue

 

Cost of revenue in the first quarter of 2022 was RMB670 million, compared with RMB541 million for the same period in the prior year, primarily driven by higher technology service fees and outsourcing labor cost as we continued to expand our business.

 

Gross Profit

 

Gross profit increased by 25.3% to RMB349 million from RMB279 million for the same period in the prior year. Gross margin was 34.3%, compared with 34.0% in the prior year, slightly increased by 0.3ppt, primarily due to improved gross margin from mature products, however, relatively new solutions showed lower gross margin at initial stage, which offset such improvement. Non-IFRS gross margin was 38.8%, compared with 43.5% in the prior year. For a reconciliation of the Company’s IFRS and non-IFRS gross margin, please refer to “Reconciliation of IFRS and Non-IFRS Results (Unaudited).”

 

Operating Loss and Expenses

 

Total operating expenses for the first quarter of 2022 amounted to RMB700 million, compared with RMB636 million for the same period in the prior year. As a percentage of revenue, total operating expenses decreased to 68.7% from 77.6%

 

·Research and Development expenses for the first quarter of 2022 rose to RMB363 million from RMB281 million, reflecting investment put into enhancing existing solutions and innovations. As a percentage of revenue, R&D expenses amounted to 35.6%, compared with 34.3% in the prior year.

 

·Sales and Marketing expenses for the first quarter of 2022 decreased to RMB109 million, compared with RMB167 million in the prior year, mainly due to a decrease in marketing and telecommunication expenses. As a percentage of revenue, sales and marketing expenses decreased to 10.7% from 20.4%.

 

·General and Administrative expenses for the first quarter of 2022 amounted to RMB211 million, compared with RMB180 million in the prior year, primarily due to cost disciplines. As a percentage of revenue, general and administrative expenses decreased to 20.7% from 22.0%. After excluding listing expense in connection with the Company’s proposed listing in Hong Kong, adjusted general and administrative expenses as a percentage of revenue for the first quarter of 2022 was 17.2%.

 

·Net impairment losses on financial and contract assets for the first quarter of 2022 totaled RMB17 million, compared with RMB7 million for the same period in the prior year, reflecting enhanced periodic review and management efforts in trade receivables and contract assets. As a percentage of revenue, net impairment losses were 1.7%, versus 0.9% in the prior year.

 

 

 

 

Loss from operations for the first quarter of 2022 amounted to RMB355 million, compared with RMB346 million for the same period in the prior year. Operating loss margin decreased to 34.8% from 42.2% in the prior year. After excluding the listing expenses in connection with the Company’s proposed listing in Hong Kong, adjusted loss from operations for the first quarter of 2022 amounted to RMB318 million, compared with RMB346 million for the same period in the prior year. Adjusted operating loss margin narrowed to 31.2% from 42.2% in the prior year.

 

Net Loss

 

Net loss attributable to OneConnect’s shareholders totaled RMB318 million for the first quarter of 2022, versus RMB305 million for the same period in the prior year. Net loss attributable to OneConnect’s shareholders per basic and diluted ADS amounted to RMB-0.86, versus RMB-0.83 for the same period in the prior year. Weighted average number of ADSs for the first quarter was 370,012,917.

 

Cash Flow

 

For the first quarter of 2022, net cash used in operating activities was RMB1,119 million. Net cash generated from in investing activities was RMB1550 million. Net cash used in financing activities was RMB557 million.

 

Conference Call Information

 

Date/Time

Wednesday, May 25, 2022 at 9:00 p.m., U.S. Eastern Time

Thursday, May 26, 2022 at 9:00 a.m., Beijing Time

 

Online registration https://www.incommglobalevents.com/registration/q4inc/10962/oneconnect-financial-technology-co-ltd-1q22-earnings-release/

 

An archived recording and the transcript of the conference call will be available at OneConnect’s investor relations website at ir.ocft.com.

 

About OneConnect

 

OneConnect Financial Technology Co. Ltd. is a technology-as-a-service provider for financial institutions. The Company integrates extensive financial services industry expertise with market-leading technology to provide technology applications and technology-enabled business services to financial institutions. The integrated solutions and platform the Company provides include digital retail banking solution, digital commercial banking solution, digital insurance solution and Gamma Platform, which is a technology infrastructural platform for financial institutions. The Company’s solutions enable its customers’ digital transformations, which help them improve efficiency, enhance service quality, and reduce costs and risks.

 

The Company has established long-term cooperation relationships with financial institutions to address their needs of digital transformation. The Company has also expanded its services to other participants in the value chain to support the digital transformation of financial services eco-system. In addition, the Company has successfully exported its technology solutions to overseas financial institutions.

 

For more information, please visit http://ir.ocft.com.

 

 

 

 

Safe Harbor Statement

 

This announcement contains forward-looking statements. These statements constitute “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. Such statements are based upon management’s current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company’s control. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company’s limited operating history in the technology-as-a-service for financial institutions industry; its ability to achieve or sustain profitability; the tightening of laws, regulations or standards in the financial services industry; the Company’s ability to comply with the evolving regulatory requirements in the PRC and other jurisdictions where it operates; its ability to maintain and enlarge the customer base or strengthen customer engagement; its ability to maintain its relationship with Ping An Group, which is its strategic partner, most important customer and largest supplier; its ability to compete effectively to serve China’s financial institutions; the effectiveness of its technologies, its ability to maintain and improve technology infrastructure and security measures; its ability to protect its intellectual property and proprietary rights; risks of defaults by borrowers under the loans for which the Company provided credit enhancement under its legacy credit management business; its ability to maintain or expand relationship with its business partners and the failure of its partners to perform in accordance with expectations; its ability to protect or promote its brand and reputation; its ability to timely implement and deploy its solutions; its ability to obtain additional capital when desired; disruptions in the financial markets and business and economic conditions; the Company’s ability to pursue and achieve optimal results from acquisition or expansion opportunities; the duration of the COVID-19 outbreak and its potential impact on the Company’s business and financial performance; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in the Company’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and the Company undertakes no obligation to update any forward-looking statement, except as required under applicable law.

 

Use of Unaudited Non-IFRS Financial Measures

 

The unaudited consolidated financial information is prepared in accordance with International Financial Reporting Standards (IFRS). Non-IFRS measures are used in gross profit and gross margin, adjusted to exclude non-cash items, which consist of amortization of intangible assets recognized in cost of revenue, depreciation of property and equipment recognized in cost of revenue, and share-based compensation expenses recognized in cost of revenue. OneConnect’s management regularly review non-IFRS gross profit and non-IFRS gross margin to assess the performance of our business. By excluding non-cash items, these financial metrics allow OneConnect’s management to evaluate the cash conversion of one dollar revenue on gross profit. OneConnect uses these non-IFRS financial to evaluate its ongoing operations and for internal planning and forecasting purposes. OneConnect believes that non-IFRS financial information, when taken collectively, is helpful to investors because it provides consistency and comparability with past financial performance, facilitates period-to-period comparisons of results of operations, and assists in comparisons with other companies, many of which use similar financial information. OneConnect also believes that presentation of the non-IFRS financial measures provides useful information to its investors regarding its results of operations because it allows investors greater transparency to the information used by OneConnect’s management in its financial and operational decision making so that investors can see through the eyes of the OneConnect’s management regarding important financial metrics that the management uses to run the business as well as allowing investors to better understand OneConnect’s performance. However, non-IFRS financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with IFRS, and may be different from similarly-titled non-IFRS measures used by other companies. In light of the foregoing limitations, you should not consider non-IFRS financial measure in isolation from or as an alternative to the financial measure prepared in accordance with IFRS. Whenever OneConnect uses a non-IFRS financial measure, a reconciliation is provided to the most closely applicable financial measure stated in accordance with IFRS. You are encouraged to review the related IFRS financial measures and the reconciliation of these non-IFRS financial measures to their most directly comparable IFRS financial measures. For more information on non-IFRS financial measures, please see the table captioned “Reconciliations of IFRS and non-IFRS results (Unaudited)” set forth at the end of this press release.

 

 

 

 

ONECONNECT

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

   Three Months Ended March 31 
   2022   2021 
   RMB'000   RMB'000 
Revenue   1,018,938    819,765 
Cost of revenue   -669,907    -541,210 
Gross profit   349,031    278,555 
           
Research and development expenses   -363,013    -281,299 
Selling and marketing expenses   -108,907    -167,054 
General and administrative expenses   -211,301    -180,457 
Net impairment losses on financial and contract assets   -17,214    -7,104 
Other income, gains or loss-net   -3,491    11,229 
Operating loss   -354,895    -346,130 
           
Finance income   2,446    18,157 
Finance costs   -12,124    -26,235 
Finance costs – net   -9,678    -8,078 
Share of losses of associate and joint venture   11,537    4,547 
Loss before income tax   -353,036    -349,661 
           
Income tax benefit   20,728    26,871 
           
Loss for the period   -332,308    -322,790 
           
Loss attributable to:          
- Owners of the Company   -317,585    -304,732 
- Non-controlling interests   -14,723    -18,058 
           
Other comprehensive income, net of tax          
Items that may be subsequently reclassified to profit or loss          
- Foreign currency translation differences   -23,193    50,099 
- Changes in the fair value of debt instruments at fair value through other comprehensive income   12,523    1 
Total comprehensive loss for the period   -342,978    -272,690 
           
Total comprehensive loss attributable to:          
- Owners of the Company   -328,255    -254,632 
- Non-controlling interests   -14,723    -18,058 
           
Loss per ADS attributable to owners of the Company          
(expressed in RMB per share)          
- Basic and diluted   -0.86    -0.83 

 

 

 

 

ONECONNECT

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   March 31   December 31 
   2022   2021 
   RMB'000   RMB'000 
ASSETS          
Non-current assets          
Property and equipment   259,506    244,412 
Intangible assets   653,232    687,194 
Deferred tax assets   707,342    683,218 
Financial assets measured at amortized cost from Virtual bank        674 
Investments accounted for using the equity method   196,883    185,346 
Financial assets at fair value through other comprehensive income   735,926    640,501 
Contract assets   145    868 
Restricted cash   9,000      
Total non-current assets   2,562,034    2,442,213 
           
Current assets          
Financial assets at amortized cost        3,515 
Trade receivables   1,274,817    891,174 
Contract assets   198,986    227,895 
Prepayments and other receivables   890,640    749,152 
Financial assets measured at amortized cost from Virtual bank   9,307    12,711 
Financial assets at fair value through profit or loss   917,561    2,071,653 
Financial assets at fair value through other comprehensive income   782,730    482,497 
Restricted cash   475,314    1,060,427 
Cash and cash equivalents   1,270,695    1,399,370 
Total current assets   5,820,050    6,898,394 
Total assets   8,382,084    9,340,607 
           
EQUITY AND LIABILITIES          
Equity          
Share capital   78    78 
Shares held for share option scheme   -79,752    -80,102 
Other reserves   10,513,082    10,512,631 
Accumulated losses   -6,956,210    -6,638,625 
Equity attributable to equity owners of the Company   3,477,198    3,793,982 
           
Non-controlling interests   26,377    41,100 
           
Total equity   3,503,575    3,835,082 
           
LIABILITIES          
Non-current liabilities          
Trade and other payables   323,322    313,834 
Contract liabilities   19,041    19,418 
Deferred tax liabilities   8,347    9,861 
Total non-current liabilities   350,710    343,113 
           
Current liabilities          
Trade and other payables   2,107,183    2,137,099 
Payroll and welfare payables   314,429    515,067 
Contract liabilities   164,269    153,844 
Short-term borrowings   294,829    815,260 
Customer deposits   1,424,078    1,350,171 
Derivative financial liabilities   223,011    190,971 
Total current liabilities   4,527,799    5,162,412 
Total liabilities   4,878,509    5,505,525 
           
Total equity and liabilities   8,382,084    9,340,607 

 

 

 

 

ONECONNECT

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Three Months Ended March 31 
   2022   2021 
   RMB'000   RMB'000 
Net cash generated from / (used in) operating activities   -1,118,694    -460,783 
Net cash generated from / (used in) investing activities   1,550,267    1,028,447 
Net cash generated from / (used in) financing activities   -557,038    -1,264,659 
Net increase /(decrease) in cash and cash equivalents   -125,465    -696,995 
Cash and cash equivalents at the beginning of the period   1,399,370    3,055,194 
Effects of exchange rate changes on cash and cash equivalents   -3,210    2,681 
Cash and cash equivalents at the end of period   1,270,695    2,360,880 

 

 

 

 

ONECONNECT

RECONCILIATION OF IFRS AND NON-IFRS RESULTS

(Unaudited)

 

   Three Months Ended March 31 
   2022   2021 
   RMB'000   RMB'000 
Gross profit   349,031    278,555 
Gross margin   34.3%   34.0%
Non-IFRS adjustment          
Amortization of intangible assets recognized in cost of revenue   44,436    76,746 
Depreciation of property and equipment recognized in cost of revenue   812    600 
Share-based compensation expenses recognized in cost of revenue   880    921 
Non-IFRS Gross profit   395,159    356,822 
Non-IFRS Gross margin   38.8%   43.5%

 

   Three Months Ended March 31 
   2022   2021 
   RMB'000   RMB'000 
Operating Loss   -354,895    -346,130 
Operating loss margin   -34.8%   -42.2%
Net Loss to shareholders   -317,585    -304,732 
Net loss ratio   -31.2%   -37.2%
Adjustment          
Listing expense in connection with the Company’s proposed listing in Hong Kong   36,486    0 
Adjusted Operating Loss   -318,409    -346130 
Adjusted Net Loss   -281,099    -304,732 
Adjusted Operating loss margin   -31.2%   -42.2%
Adjusted Net loss ratio   -27.6%   -37.2%

 

Investor Relations:

OCFT IR Team

[email protected]

 

Media Relations:

Amy Ding

[email protected]

 

Source: OneConnect Financial Technology Co., Ltd.

 

 

 



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