- Revenue from Continuing Operations: RMB1.416 billion in the first half of 2024, a decrease of 22.8% year-over-year.
- Net Loss from Continuing Operations: Improved to CNY70 million in the first half from CNY114 million in the same period last year, a decrease of about 38% year-over-year.
- Gross Margin: 37.1% in the first half of 2024.
- Adjusted Gross Margin: 39.4% in the first half of 2024.
- Third-Party Revenue from Overseas Customers: Increased by 14.8% year-over-year.
- Net Profit from Continuing and Discontinued Operations: RMB139 million in the first half of 2024, compared to a net loss of RMB190 million in the same period last year.
- Revenue from Lufax: Decreased by 25.5% to RMB54 million in Q2 2024.
- Revenue from Ping An Group: Decreased by 30.9% to RMB401 million in Q2 2024.
- Implementation Revenue: Decreased by 27.7% year-over-year to RMB169 million.
- Business Origination Services Revenue: Decreased by 69% year-over-year to RMB10 million.
- Risk Management Services Revenue: Decreased by 15.9% year-over-year to RMB61 million.
- Operation Support Services Revenue: Decreased by 47.3% year-over-year to RMB131 million.
- Cloud Services Platform Revenue: Decreased by 10.3% year-over-year to RMB289 million.
- Post-Implementation Support Services Revenue: Increased by 8.2% to RMB32 million.
- Gamma Platform Segment Revenue: Decreased by 9.4% year-over-year in Q2 2024.
- Digital Banking Segment Revenue: Decreased by 57.4% year-over-year in Q2 2024.
- Digital Insurance Segment Revenue: Decreased by 33.3% year-over-year in Q2 2024.
- Premium-Plus Customers: Decreased to 93 compared to 121 for the same period last year.
- Gross Profit: RMB253 million in Q2 2024.
- Non-IFRS Gross Margin: 38.8% in Q2 2024.
- Research and Development Expenses: Decreased to RMB186 million from RMB252 million in the prior year.
- Sales and Marketing Expenses: Decreased to RMB44 million from RMB57 million in the prior year.
- General and Administrative Expenses: Decreased to RMB66 million from RMB93 million in the prior year.
- Net Loss from Continuing Operations Attributable to Shareholders: Narrowed to RMB17 million in Q2 2024.
- Net Profit Attributable to Shareholders: RMB243 million in Q2 2024.
Release Date: August 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Profitability has improved significantly, with net loss from continuing operations decreasing by 38% year-on-year.
- Overseas business continues to show strong growth, with third-party revenue from overseas customers increasing by 14.8% year-on-year.
- Gross profit margin and adjusted gross profit margin remained healthy at 37.1% and 39.4%, respectively.
- The company has successfully expanded its product portfolio and deepened customer cooperation, laying a solid foundation for future profitability.
- OneConnect has received multiple industry recognitions, including nine awards in the first half of 2024, reflecting its technical strength and influence.
Negative Points
- Total revenue from continuing operations decreased by 22.8% compared to the same period last year.
- Revenue from third-party customers decreased by 15.9% to RMB480 million in the first half.
- Revenue from Ping An Group, a flagship customer, decreased by 30.9% year-on-year.
- The company is phasing out its cloud services, which is expected to impact top-line performance in the second half and full year of 2024.
- Premium-plus customers decreased to 93 from 121 in the same period last year, indicating a short-term decline in high-value customer engagement.
Q & A Highlights
Q: The company has already made a profit in the first half. Is there a dividend payout plan?
A: (Yongtao Luo, CFO) We are pleased to achieve positive earnings for the first time, including contributions from the sale of PAOB. However, we are still in a crucial development stage. We believe focusing on third-party revenue, R&D, and overseas expansion will generate higher value for shareholders. We will consider dividend payouts based on development needs, financial position, regulatory requirements, and shareholder rewards.
Q: Can management share the strategy for the overseas business and any revenue growth targets?
A: (Chongfeng Shen, CEO) Revenue from overseas customers increased by 14.8%, with strong growth in Hong Kong, Southeast Asia, and South Africa. We are confident in achieving double-digit growth in overseas revenue. Our focus will be on banking solutions, insurance business, and expanding customer engagement in Hong Kong. We will also develop integrated solutions for overseas markets, including P&C solutions, auto financing, AI voice assistance, and eKYC products.
Q: What are the key factors contributing to the company's improved profitability?
A: (Yongtao Luo, CFO) Our profitability improvement is due to product portfolio adjustments, deepening customer cooperation, expanding domestic and overseas markets, disciplined cost control, and resource allocation efficiency. These efforts have laid a solid foundation for achieving medium-term profitability.
Q: How is the company addressing the challenges faced by financial institutions and large SOEs in digital transformation?
A: (Chongfeng Shen, CEO) OneConnect leverages technology and business advantages to improve product capabilities in digital banking, digital insurance, and the Gamma platform. We help financial institutions and enterprises enhance digital operations, service capabilities, business management, service quality, and cost reduction through digital transformation.
Q: What are the company's plans for product upgrades and customer expansion?
A: (Chongfeng Shen, CEO) We are accelerating the export of Ping An Group Technology, upgrading self-developed products, and focusing on high-value products. We have boosted sales team productivity, expanded the pipeline, and increased third-party revenue growth. We are also ramping up efforts in overseas markets to meet international demand.
Q: Can you provide more details on the company's digital banking initiatives?
A: (Chongfeng Shen, CEO) We have upgraded our retail digital banking products to be customer-centered, data-driven, and AI-assisted. These products help refine customer operations, achieve accurate customer segmentation, and improve product quality. Our smart credit system has been widely adopted in Southeast Asia, improving loan processing efficiency and risk control.
Q: What progress has been made in the digital insurance segment?
A: (Chongfeng Shen, CEO) We have deployed several end-to-end SaaS solutions for P&C insurers, addressing claim settlement, underwriting, and servicing pain points. These solutions enhance risk controls, underwriting quality, and customer experience. We have successfully implemented over 10 benchmark cases, improving market reputation and customer expansion.
Q: How is the Gamma platform leveraging AI to enhance financial services?
A: (Chongfeng Shen, CEO) The Gamma platform uses AI technologies like computer vision, ASR, TTS, and graph computing to manage risks and improve efficiency in scenarios such as remote account registration, insurance dual registration, and loan application review. Our AI interview robot has achieved significant cost savings and efficiency improvements.
Q: What are the company's future plans for R&D and technology investment?
A: (Chongfeng Shen, CEO) We will continue to invest in R&D and cutting-edge technology products to meet the core demands of financial institutions. Our focus will be on improving efficiency, optimizing services, reducing costs and risks, and empowering the financial industry's upgrade and transformation.
Q: How has the company's revenue mix evolved, and what are the key trends?
A: (Yongtao Luo, CFO) Revenue from third-party customers decreased by 15.9%, but overseas revenue increased by 14.8%. We are focusing on quality growth and reducing low-margin projects. Our gross margin remained stable at 37.1%. We are also phasing out cloud services, which will impact our top-line performance in the second half of 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
