Revenue Growth of 50.7% and Gross Margin
Gain of 4.1ppt YoY
OneConnect Financial Technology Co., Ltd. (“OneConnect” or the
“Company”) (NYSE: OCFT), a leading technology-as-a-service platform
for financial institutions in China, today announced its unaudited
financial results for the third quarter ended September 30,
2020.
Third Quarter 2020 Financial Highlights
- Revenue increased 50.7% year-over-year to RMB881 million from
RMB585 million.
- Gross margin expanded to 42.7% from 38.6%; non-IFRS gross
margin1 expanded to 51.2% from 50.2%.
- Operating loss was RMB250 million, compared with RMB305 million
for the same period in the prior year.
- Net loss attributable to shareholders was RMB243 million,
versus RMB286 million for the same period in the prior year.
- Net loss per share, basic and diluted, was RMB0.23, against
RMB0.31 for the same period in the prior year.
In RMB’000, except percentages and per
share amounts
Three Months Ended September
30
YoY
Nine Months Ended September
30
YoY
2020
2019
2020
2019
Revenue
Revenue from Ping An Group
491,023
239,118
105.3%
1,110,841
677,292
64.0%
Revenue from Lufax
88,083
54,649
61.2%
266,657
184,601
44.5%
Revenue from third-party
customers2
302,341
290,972
3.9%
859,066
693,030
24.0%
Total
881,447
584,739
50.7%
2,236,564
1,554,923
43.8%
Gross profit
375,968
225,646
66.6%
875,086
507,013
72.6%
Gross margin
42.7%
38.6%
39.1%
32.6%
Non-IFRS gross margin1
51.2%
50.2%
48.6%
49.0%
Operating loss
-250,471
-305,172
-1,056,489
-1,119,645
Operating margin
-28.4%
-52.2%
-47.2%
-72.0%
Net loss to shareholders
-243,025
-286,308
-988,686
-1,041,191
Net loss per share, basic and diluted
-0.23
-0.31
-0.94
-1.11
1 For more details on this non-IFRS
financial measure, please see the section entitled “Use of
Unaudited Non-IFRS Financial Measures” and the table captioned
“Reconciliations of IFRS and Non-IFRS Results (Unaudited)” set
forth at the end of this press release.
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.
CEO and CFO Comments
“We are pleased to report another solid quarter, highlighted by
continuous balancing of growth and profitability,” said Mr. Ye
Wangchun, Chairman of the Board and Chief Executive Officer of
OneConnect. “Achieving over 50% topline growth while carrying out a
change in business mix was a tremendous accomplishment. Although
there was some temporary slowdown in third-party customers, it was
a healthy development. The result underscores our strategic
decision to steer away from legacy solutions that do not fit our
TaaS focus, such as some of those in business origination. It is a
necessary step that will ensure more efficient resource allocation
and sustainable long-term growth.”
Mr. Jacky Lo, Chief Financial Officer, commented, “OneConnect
has been prioritizing product optimization and our initial success
has been reflected in the numbers. Gross margin increased by 4.1ppt
to 42.7% year over year, following the termination of low-value
solutions sales and further strengthening of existing offerings.
Net loss in the quarter narrowed to RMB243 million from RMB286
million. As a percentage of revenue, it fell to 27.6% from 49.0%.
We are confident about keeping our second-half guidance unchanged.
Most of all, profitability has improved significantly and
OneConnect is on track to meet all its mid-term targets.”
Operational Highlights
- Retail loans processed amounted to RMB19.5 billion in the third
quarter, compared with RMB32.7 billion for the same period in the
prior year.
- SME loans processed amounted to RMB14.7 billion in the third
quarter, compared with RMB9.2 billion for the same period in the
prior year.
- Number of fast claims checks amounted to 1.6 million in the
third quarter, compared with 1.5 million for the same period in the
prior year.
Revenue Breakdown
In RMB’000, except percentages
Three Months Ended September
30
YoY
Nine Months Ended September
30
YoY
2020
2019
2020
2019
Implementation revenue
217,151
115,793
87.5%
572,435
336,002
70.4%
Transaction-based and support
revenue
Business origination services
130,245
210,651
-38.2%
457,407
569,188
-19.6%
Risk management services
95,239
91,730
3.8%
249,676
271,860
-8.2%
Operation support services
314,415
139,031
126.1%
766,547
311,553
146.0%
Cloud services platform
97,229
-
NA
123,819
-
NA
Post-implementation support services
15,148
14,349
5.6%
35,072
35,413
-1.0%
Others
12,020
13,185
-8.8%
31,608
30,907
2.3%
Total
664,296
468,946
41.7%
1,664,129
1,218,921
36.5%
Total
881,447
584,739
50.7%
2,236,564
1,554,923
43.8%
Revenue in the third quarter of 2020 increased by 50.7% to
RMB881 million from RMB585 million for the same period in the prior
year. By size of revenue, operation support services was the
largest, up by 126.1% to RMB314 million, on continued strong
momentum in AI customer service. The cloud services platform was
another key driver. It was launched in the second quarter this year
and is now individually presented as its revenue contribution
exceeded 10% of the total.
Retail loan volume processed by the Company’s systems during the
quarter amounted to RMB19.5 billion, compared with RMB32.7 billion
for the same period in the prior year, due to the continuous
phasing out of low-value solutions and caution in lending
activities among financial institutions. The amount of SME loans
processed increased to RMB14.7 billion from RMB9.2 billion,
reflecting new customers added. However, the increase in SME
activities was not able to offset the decline in retail, causing a
drop in business origination services revenue. Total fast claims
checks carried out during the quarter rose to 1.6 million from 1.5
million in the same period last year, benefiting from growth in the
auto insurance industry.
Third Quarter 2020 Financial Results
Revenue
Revenue for the third quarter of 2020 increased by 50.7% to
RMB881 million from RMB585 million for the same period in the prior
year, primarily driven by more demand for solutions in operation
support and cloud services
Cost of Revenue
Cost of revenue for the third quarter of 2020 was RMB505
million, compared with RMB359 million for the same period in the
prior year, as the scale of the business improved.
Gross Profit
Gross profit in the third quarter of 2020 increased by 66.6% to
RMB376 million from RMB226 million for the same period in the prior
year. Gross margin expanded to 42.7% from 38.6% for the same period
in the prior year, due primarily to lower channel fees from changes
in product mix and labor costs. Non-IFRS gross margin was 51.2%,
compared with 50.2% for the same period 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 third quarter of 2020 amounted
to RMB663 million, compared with RMB547 million for the same period
in the prior year. As a percentage of revenue, total operating
expenses decreased to 75.3% from 93.6%.
- Research and Development expenses in the third quarter of 2020
rose to RMB296 million from RMB199 million, reflecting the
investment put into enhancing existing solutions and innovations.
As a percentage of revenue, R&D expenses amounted to 33.5%,
compared with 33.9% for the same period in the prior year.
- Sales and Marketing expenses in the third quarter of 2020
totaled RMB154 million, compared with RMB193 million for the same
period in the prior year, due to less marketing and advertising
fees, and less employee expenses following business optimization.
As a percentage of revenue, sales and marketing expenses decreased
to 17.5% from 32.9%.
- General and Administrative expenses in the third quarter of
2020 amounted to RMB201 million, compared with RMB147 million,
primarily due to an increase in headcount and professional service
fees. As a percentage of revenue, general and administrative
expenses decreased to 22.7% from 25.2%.
- Net impairment losses on financial and contract assets in the
third quarter of 2020 totaled RMB13 million, compared with RMB9
million for the same period in the prior year, primarily due to an
increase in provisions in response to longer payment periods. As a
percentage of revenue, net impairment losses remained flat at
around 1.5% year over year.
Loss from operations in the third quarter of 2020 amounted to
RMB250 million, compared with RMB305 million for the same period in
the prior year. Operating loss margin decreased to 28.4% from 52.2%
for the same period in the prior year.
Net Loss
Net loss attributable to OneConnect’s shareholders totaled
RMB243 million, versus RMB286 million for the same period in the
prior year. Net loss attributable to OneConnect’s shareholders per
basic and diluted share amounted to RMB0.23, versus RMB0.31 for the
same period in the prior year.
For the quarter ending September 30, 2020, the Company’s
weighted average number of shares used in calculating per share net
loss was 1,072,180,905. Number of outstanding shares as of
September 30, 2020 was 1,169,980,664.
Cash Flow
For the three months ended September 30, 2020, net cash used in
operating activities was RMB311 million. Net cash used in investing
activities was RMB527 million, due to the purchase of financial
assets at fair value through profit or loss. Net cash generated
from financing activities was RMB2,431 million, which reflects the
proceeds from issuance of new shares.
Conference Call Information
Date/Time
Tuesday, November 3, 2020 at 8:00 p.m.,
U.S. Eastern Time
Wednesday, November 4, 2020 at 9:00 a.m.,
Beijing Time
Online registration
http://www.directeventreg.com/registration/event/7268903
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 is a leading technology-as-a-service platform for
financial institutions in China. The Company’s platform provides
cloud-native technology solutions that integrate extensive
financial services industry expertise with market-leading
technology. The Company’s solutions provide technology applications
and technology-enabled business services to financial institutions.
Together they enable the Company’s customers’ digital
transformations, which help them increase revenue, manage risks,
improve efficiency, enhance service quality and reduce costs.
Our technology-as-a-service platform strategically covers
multiple verticals in the financial services industry, including
banking, insurance and asset management, across the full scope of
their businesses – from sales and marketing and risk management to
customer services, as well as technology infrastructure such as
data management, program development, and cloud services.
For more information, please visit 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 our 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 September
30
2020
2019
RMB'000
RMB'000
Revenue
881,447
584,739
Cost of revenue
-505,479
-359,093
Gross profit
375,968
225,646
Research and development
expenses
-295,552
-198,504
Selling and marketing
expenses
-154,043
-192,616
General and administrative
expenses
-200,509
-147,167
Net impairment losses on
financial and contract assets
-13,251
-8,792
Other income, gains or
loss-net
36,916
16,261
Operating loss
-250,471
-305,172
Finance income
17,973
28,929
Finance costs
-33,337
-42,238
Finance costs – net
-15,364
-13,309
Share of losses of associate and
joint venture
-1,254
-6,438
Loss before income tax
-267,089
-324,919
Income tax benefit
18,267
33,830
Loss for the period
-248,822
-291,089
Loss attributable to:
- Owners of the Company
-243,025
-286,308
- Non-controlling interests
-5,797
-4,781
Other comprehensive income, net
of tax
Items that may be subsequently
reclassified to profit or loss
- Foreign currency translation
differences
-325,549
146,628
- Changes in the fair value of
debt instruments at fair value through other comprehensive
income
4
-
Total comprehensive loss for
the period
-574,367
-144,461
Total comprehensive loss
attributable to:
- Owners of the Company
-568,570
-139,680
- Non-controlling interests
-5,797
-4,781
Loss per share attributable to
owners of the Company
(expressed in RMB per
share)
- Basic and diluted
-0.23
-0.31
ONECONNECT CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30
December 31
2020
2019
RMB'000
RMB'000
ASSETS
Non-current assets
Property and equipment
225,592
314,505
Intangible assets
884,872
976,948
Deferred tax assets
517,698
423,786
Investments accounted for using
the equity method
176,900
118,829
Financial assets at fair value
through other comprehensive income
22,570
393,448
Contract assets
37,840
40,998
Total non-current
assets
1,865,472
2,268,514
Current assets
Trade receivables
1,183,886
710,123
Contract assets
282,454
211,276
Prepayments and other
receivables
473,525
528,277
Financial investments measured at
amortized cost
191,610
-
Financial assets at fair value
through profit or loss
2,303,481
1,690,967
Placements with financial
institutions
250,500
-
Restricted cash
2,505,410
3,440,289
Cash and cash equivalents
2,080,392
1,077,875
Total current assets
9,271,258
7,658,807
Total assets
11,136,730
9,927,321
EQUITY AND LIABILITIES
Equity
Share capital
78
73
Shares held for share option
scheme
-87,714
-88,280
Other reserves
11,028,540
8,461,637
Accumulated losses
-4,992,004
-4,003,318
Equity attributable to equity
owners of the Company
5,948,900
4,370,112
Non-controlling interests
111,877
150,429
Total equity
6,060,777
4,520,541
LIABILITIES
Non-current
liabilities
Trade and other payables
288,021
420,873
Contract liabilities
14,716
12,700
Deferred tax liabilities
23,360
33,291
Total non-current
liabilities
326,097
466,864
Current liabilities
Trade and other payables
1,435,820
1,075,576
Payroll and welfare payables
522,684
538,132
Contract liabilities
111,201
104,960
Short-term borrowings
2,451,609
3,218,566
Customer deposits
122,070
-
Derivative financial
liabilities
106,472
2,682
Total current
liabilities
4,749,856
4,939,916
Total liabilities
5,075,953
5,406,780
Total equity and
liabilities
11,136,730
9,927,321
ONECONNECT CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (Unaudited)
Three Months Ended September
30
2020
2019
RMB'000
RMB'000
Net cash generated from / (used in)
operating activities
-310,618
-446,051
Net cash generated from / (used in)
investing activities
-527,324
260,928
Net cash generated from / (used in)
financing activities
2,431,075
64,221
Net increase /(decrease) in cash and
cash equivalents
1,593,133
-120,902
Cash and cash equivalents at the beginning
of the period
535,122
1,048,916
Effects of exchange rate changes on cash
and cash equivalents
-47,863
-12,858
Cash and cash equivalents at the end of
period
2,080,392
915,156
ONECONNECT RECONCILIATION OF IFRS AND
NON-IFRS RESULTS (Unaudited)
Three Months Ended September
30
2020
2019
RMB'000
RMB'000
Gross profit
375,968
225,646
Gross margin
42.7%
38.6%
Non-IFRS adjustment
Amortization of intangible assets
recognized in cost of revenue
70,490
66,581
Depreciation of property and
equipment recognized in cost of revenue
947
656
Share-based compensation expenses
recognized in cost of revenue
4,020
582
Non-IFRS Gross profit
451,425
293,465
Non-IFRS Gross margin
51.2%
50.2%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201103005582/en/
Investor Relations: Patricia Cheng patricia.cheng@ocft.com
Media Relations: Ying Zhou zhouying150@ocft.com
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