Gross Margin of Continuing Operations[1] Improved by 0.3ppt and Net Margin of Continuing Operations to Shareholders Narrowed by 0.7ppt for First Quarter 2024
SHENZHEN, China, May 21, 2024 /PRNewswire/ -- OneConnect Financial Technology Co., Ltd. ("OneConnect" or the "Company") (NYSE: OCFT and HKEX: 6638), a leading technology-as-a- service provider for financial services industry in China, today announced its unaudited financial results for the first quarter ended March 31, 2024.
First Quarter 2024 Financial Highlights
- Revenue from continuing operations was RMB723 million as compared to RMB894 million for the same period of the prior year.
- Gross margin of continuing operations increased by 0.3ppt year-over-year to 37.7% as compared to 37.4% for the same period of the prior year; non-IFRS gross margin of continuing operations was 40.0% as compared to 40.1% for the same period of the prior year.
- Operating loss from continuing operations narrowed 15.1% to RMB66 million, as compared to RMB78 million for the same period of the prior year. Operating margin of continuing operations increased to -9.2% from -8.7% for the same period of the prior year.
- Net loss from continuing operations attributable to shareholders narrowed by 25.9% to RMB54 million, as compared to RMB72 million for the same period of the prior year. Net margin of continuing operations to shareholders narrowed by 0.7ppt to -7.4% as compared to -8.1% for the same period of the prior year.
- Net loss from continuing operations per ADS, basic and diluted, was RMB-1.48 as compared to RMB-2.00 for the same period of the prior year.
|
In RMB'000, except percentages | Three Months Ended | ||
March 31 | YoY | ||
2024 | 2023 | ||
Continuing operations | |||
Revenue Revenue from Ping An Group |
421,796 |
536,854 |
-21.4 % |
Revenue from Lufax | 58,256 | 71,357 | -18.4 % |
Revenue from third-party customers[1] | 243,218 | 285,615 | -14.8 % |
Total | 723,270 | 893,826 | -19.1 % |
Gross profit | 272,403 | 334,657 | |
Gross margin | 37.7 % | 37.4 % | |
Non-IFRS gross margin | 40.0 % | 40.1 % | |
Operating loss | (66,348) | (78,142) | |
Operating margin | -9.2 % | -8.7 % | |
Net loss from continuing operations |
(53,696) |
(72,479) | |
Net margin of continuing operations to shareholders | -7.4 % | -8.1 % | |
Net loss from continuing operations per ADS[2], basic and diluted | (1.48) | (2.00)
| |
[1] Third-party customers refer to each customer with revenue contribution of less than 5% of the Company's total revenue in the relevant period. These customers are a key focus of the Company's diversification strategy. |
[2] In RMB. Each ADS represents 30 ordinary shares. |
Chairman, CEO and CFO Comments
Mr. Chongfeng Shen, Chairman of the Board and Chief Executive Officer, commented, "Since the beginning of 2024, we have been continuously optimizing our product and customer structure and focusing on our core businesses under the strategy of "Unite the Core, Empower the Wings" in order to achieve quality development. We have continued to expand our overseas business and have recorded rapid growth. Our revenue from third-party overseas customers from continuing operations increased by 14.8% on a year-over-year basis in the first quarter of 2024. In the same quarter, we achieved remarkable results in costs reduction and efficiency improvement, and our loss continued to narrow."
Mr. Chongfeng Shen further commented, "We have strengthened our research capabilities and introduced high value and high-end products into the ever-involving financial technology industry. Our spirit of innovation has been well-received and recognized in the industry. In the future, we will continue focusing on digital banking, digital insurance and Gamma platform, and continue to optimize our product and customer structure, upgrade our services and further expand into overseas market. With our unique competence in integrating "technology + business", we endeavor to continue to promote the development of new productivity in the financial industry."
Mr. Yongtao Luo, Chief Financial Officer, commented, "We continued to make steady progress towards its profitability targets in the first quarter of 2024. Gross margin of the Company's continuing operations for the first quarter was 37.7% and increased by 0.3ppt on a year-over-year basis. Benefiting from our success in costs reduction and efficiency improvement, our operating expenses from our continuing operations decreased significantly by 17.7 % on a year-over-year basis. For research and development, we allocated our resources strategically and focused our capital and labor efficiently on high-quality products and projects. As a result, our research and development expenses decreased by 22.8% on a year-over-year basis while we also maximized the value of outputs from these research and development. As a result, our net loss from continuing operations attributable to shareholders decreased by 25.9% on a year-over-year basis. Going forward, we will continue to strictly implement cost control measures and improve operation efficiency. Meanwhile, we will enhance our product competitiveness and endeavor to drive revenue growth, especially third-party revenue growth, from premium-plus customers. These efforts combined will help us reach our profitability targets as early as possible and create more value for our shareholders and customers."
"As previously disclosed, we received notifications from certain subsidiaries and associates of Ping An Insurance (Group) Company of China, Ltd. that they intend to cease to utilize the cloud services we provide under Gamma FinCloud platform. There are uncertainties as to whether any of the other connected customers will continue to utilize our cloud services. We have been actively monitoring the situation and evaluating our business plans and further measures in response to these developments and corresponding financial impact."
Revenue from Continuing Operations Breakdown
Three Months Ended | |||
In RMB'000, except percentages | March 31 | ||
2024 | 2023 | YoY | |
Implementation | 157,459 | 209,934 | -25.0 % |
Transaction-based and support revenue Business origination services |
12,835 |
49,046 |
-73.8 % |
Risk management services | 65,483 | 77,743 | -15.8 % |
Operation support services | 134,062 | 222,545 | -39.8 % |
Cloud services platform | 318,307 | 292,247 | 8.9 % |
Post-implementation support services | 14,921 | 12,341 | 20.9 % |
Others | 20,203 | 29,970 | -32.6 % |
Sub-total for transaction-based |
565,811 |
683,892 |
-17.3 % |
Total Revenue from Continuing Operations | 723,270 | 893,826 | -19.1 % |
Revenue from continuing operations in the first quarter of 2024 declined by 19.1% to RMB723 million from RMB894 million for the same period in the prior year, primarily due to a decline in transaction-based and support revenue as we continued to focus on high value products and reduced customized projects with low margins in the first quarter. Implementation revenue decreased by 25.0% on a year-over-year basis to RMB157 million, mainly due to a reduced demand for banking system products and Gamma Platform data middle platform system products in the first quarter. Revenue from business origination services decreased by 73.8% on a year-over-year basis to RMB13 million, primarily due to declined transaction volumes in Marketing Management Platform under digital retail banking solutions and in loan origination systems under digital credit management solutions. Revenue from risk management services decreased by 15.8% on a year- over-year basis to RMB65 million, mainly due to reduced transaction volume in banking related risk analytic solutions because of slower than expected recovery of banking activities in the first quarter. Revenue from operation support services decreased by 39.8% on a year-over-year basis to RMB134 million, which was primarily due to change of business model in some auto ecosystem services business that the Company migrates from acting as a contractor to a distributor. Revenue from cloud services platform increased by 8.9% on a year-over-year basis to RMB318 million due to the increased transaction volume of cloud services.
Three Months Ended | |||
In RMB'000, except percentages | March 31 | YoY | |
2024 | 2023 | ||
Digital Banking segment | 161,553 | 258,738 | -37.6 % |
Digital Insurance segment | 131,886 | 176,657 | -25.3 % |
Gamma Platform segment | 429,831 | 458,431 | -6.2 % |
Total from Continuing Operations | 723,270 | 893,826 | -19.1 % |
Revenue from Gamma Platform segment, decreased by 6.2% to RMB430 million in the first quarter of 2024 from RMB458 million for the same period last year, contributing 59.4% of the total revenue mainly because of lower demand of implementation services. Revenue from Digital Banking segment decreased by 37.6% to RMB162 million in the first quarter of 2024 from RMB259 million for the same period last year, mainly caused by reduction in transaction volume of our business origination services and risk management services. This revenue decline reflects our continued efforts to phase out lower value products. Revenue from Digital Insurance segment decreased by 25.3% to RMB132 million in the first quarter of 2024 from RMB177 million for the same period in the prior year, primarily due to change of business model in some auto ecosystem services business that the Company migrates from acting as a contractor to a distributor.
First Quarter 2024 Financial Results
Revenue from Continuing Operations
Revenue from continuing operations in the first quarter of 2024 decreased by 19.1% to RMB723 million from RMB894 million for the same period in the prior year, primarily due to decline in transaction-based and support revenue. Revenue decline reflects our decision to adopt quality growth strategy focusing on high value products and to reduce customized projects with low margins. We are encouraged to see that gross margin of continuing operations for the quarter improved by 0.3ppt year-over-year to 37.7% because of this strategy. We aim to establish a foundation for a durable and long-term development.
Cost of Revenue from Continuing Operations
Cost of revenue from continuing operations in the first quarter of 2024 decreased by 19.4% to RMB451 million from RMB559 million for the same period in the prior year, primary due to decreased revenue and associated outsourcing labour costs. Cost of revenue declined more than revenue because we phased out lower value products in the first quarter.
Gross Profit from Continuing Operations
Gross profit from continuing operations decreased to RMB272 million from RMB335 million for the same period in the prior year. Gross margin of continuing operations improved to 37.7%, compared with 37.4% in the prior year, increased by 0.3ppt. Non-IFRS gross margin of continuing operations was 40.0%, compared with 40.1% 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 for continuing operations (Unaudited)".
Operating Loss and Expenses from Continuing Operations
Total operating expenses from continuing operations for the first quarter of 2024 decreased to RMB342 million, compared with RMB416 million for the same period in the prior year. As a percentage of revenue, total operating expenses from continuing operations increased by 0.8ppt to 47.3% from 46.5%.
- Research and Development expenses from continuing operations for the first quarter of 2024 decreased to RMB213 million from RMB276 million, mainly due to our initiative to invest in research and development at a reasonable pace and selectively invest in profitable projects. As a percentage of revenue, research and development expenses from continuing operations decreased to 29.5%, compared with 30.9% in the prior year.
- Sales and Marketing expenses from continuing operations for the first quarter of 2024 decreased to RMB49 million, compared with RMB59 million in the prior year, mainly due to enhanced sales capability and efficiency resulting from lowered personnel cost and associated selling costs. As a percentage of revenue, sales and marketing expenses from continuing operations were 6.7%, compared with 6.6% in the prior year.
- General and Administrative expenses from continuing operations for the first quarter of 2024 increased to RMB81 million from RMB80 million in the prior year. As a percentage of revenue, general and administrative expenses from continuing operations increased to 11.1% from 9.0%, primarily due to decreased revenue in the first quarter.
Operating loss from continuing operations for the first quarter of 2024 decreased notably to RMB66 million, compared with RMB78 million for the same period in the prior year. Operating margin of continuing operations increased to -9.2% from -8.7% in the prior year.
Net Loss from Discontinued Operations
Net loss from discontinued operations in the first quarter of 2024 increased by 39.1% to RMB51 million from RMB36 million in the prior year.
Net Loss from Continuing Operations Attributable to Shareholders
Net loss from continuing operations attributable to OneConnect's shareholders decreased by 25.9% to RMB54 million for the first quarter of 2024, versus RMB72 million for the same period in the prior year. Net loss from continuing operations attributable to OneConnect's shareholders per basic and diluted ADS decreased to RMB-1.48, versus RMB-2.00 for the same period in the prior year. Weighted average number of ordinary shares for the first quarter was 1,089,589,125.
Cash Flow
For the first quarter of 2024, net cash used in operating activities was RMB155 million. Net cash generated from investing activities was RMB256 million. Net cash used in financing activities was RMB101 million.
Conference Call Information
Date/Time Tuesday, May 21, 2024 at 8:00 a.m., U.S. Eastern time
Tuesday, May 21, 2024 at 8:00 p.m., Hong Kong time
Online registration https://www.netroadshow.com/events/login'show=f962eec4&confId=64991
The financial results and an archived transcript 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 services industry. 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 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 ir.ocft.com.
Safe Harbor Statement
Use of Unaudited Non-IFRS Financial Measures
Contacts
Investor Relations:
OCFT IR Team
[email protected]
Media Relations:
[email protected]
ONECONNECT | ||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||
(Unaudited) | ||
Three Months Ended March 31 | ||
2024 RMB'000 | 2023 RMB'000 | |
Revenue | 723,270 | 893,826 |
Cost of revenue | (450,867) | (559,169) |
Gross profit | 272,403 | 334,657 |
Research and development expenses | (213,183) | (276,146) |
Selling and marketing expenses | (48,500) | (59,202) |
General and administrative expenses | (80,520) | (80,213) |
Net impairment losses on financial and contract assets | (13,690) | (24,065) |
Other income, gains or loss-net | 17,142 | 26,827 |
Operating loss | (66,348) | (78,142) |
Finance income | 10,340 | 5,790 |
Finance costs | (4,278) | (6,141) |
Finance costs - net | 6,062 | (351) |
Share of gain of associate and joint venture - net | - | 7,157 |
Impairment charges on associate | - | (7,157) |
Loss before income tax | (60,286) | (78,493) |
Income tax (expense)/benefit | (89) | 1,872 |
Loss from continuing operations | (60,375) | (76,621) |
Loss from discontinued operations (attributable to equity |
(50,638) |
(36,394) |
Loss for the period | (111,013) | (113,015) |
Loss attributable to: - Owners of the Company |
(104,334) |
(108,873) |
- Non-controlling interests | (6,679) | (4,142) |
(111,013) | (113,015) | |
Three Months Ended March 31 | ||
2024 RMB'000 | 2023 RMB'000 | |
Other comprehensive income/(loss), net of tax: Items that may be subsequently reclassified to profit or loss - Foreign currency translation differences |
1,334 |
(3,203) |
- Exchange differences on translation of discontinued operations | 177 | (11,651) |
- Changes in the fair value of debt instruments measured at | ||
fair value through other comprehensive income of discontinued operations |
6,056 |
(3,724) |
Item that will not be reclassified subsequently to profit or loss - Foreign currency translation differences |
1,942 |
(30,655) |
- Changes in the fair value of equity instruments measured at fair value through other comprehensive income |
- |
- |
Total comprehensive loss for the period | (101,504) | (162,248) |
Total comprehensive loss attributable to: - Owners of the Company |
(94,825) |
(158,106) |
- Non-controlling interests | (6,679) | (4,142) |
(101,504) | (162,248) | |
Total comprehensive loss attributable to owners - Continuing operations |
(50,420) |
(106,337) |
- Discontinued operations | (44,405) | (51,769) |
(94,825) | (158,106) | |
Loss per share for loss from continuing operations | ||
- Basic and diluted | (0.05) | (0.07) |
Loss per ADS for loss from continuing operations | ||
- Basic and diluted | (1.48) | (2.00) |
Loss per share for loss attributable to the owners | ||
- Basic and diluted | (0.10) | (0.10) |
Loss per ADS for loss attributable to the owners | ||
- Basic and diluted | (2.87) | (3.00) |
ONECONNECT | ||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
(Unaudited) | ||
Three Months Ended March 31 | ||
2024 RMB'000 | 2023 RMB'000 | |
ASSETS Non-current assets Property and equipment |
91,815 |
85,076 |
Intangible assets | 344,356 | 471,371 |
Deferred tax assets | 768,582 | 768,276 |
Financial assets measured at fair value through other comprehensive income |
3,204 |
1,372,685 |
Restricted cash | 5,319 | 5,319 |
Prepayments and other receivables | 6,961 | 6,663 |
Total non-current assets | 1,220,237 | 2,709,390 |
Current assets Trade receivables |
899,489 |
710,669 |
Contract assets | 105,393 | 95,825 |
Prepayments and other receivables | 908,338 | 905,691 |
Financial assets measured at amortized cost from virtual bank | - | 3,081 |
Financial assets measured at fair value through other comprehensive income |
- |
853,453 |
Financial assets measured at fair value through profit or loss | 629,173 | 925,204 |
Derivative financial assets | 47,778 | 38,008 |
with an initial term over three months | 36,827 | 447,564 |
Cash and cash equivalents | 1,252,102 | 1,379,473 |
3,879,100 | 5,358,968 | |
Assets classified as held for sale | 3,042,329 | - |
Total current assets | 6,921,429 | 5,358,968 |
Total assets | 8,141,666 | 8,068,358 |
EQUITY AND LIABILITIES Equity Share capital |
78 |
78 |
Shares held for share option scheme | (149,544) | (149,544) |
Other reserves | 11,000,514 | 10,989,851 |
Accumulated losses | (7,977,948) | (7,873,614) |
Equity attributable to equity owners of the Company | 2,873,100 | 2,966,771 |
Non-controlling interests | (25,658) | (18,979) |
Total equity | 2,847,442 | 2,947,792 |
Three Months Ended March 31 | ||
2024 RMB'000 | 2023 RMB'000 | |
Trade and other payables | 39,242 | 28,283 |
Contract liabilities | 16,131 | 17,126 |
Deferred tax liabilities | 1,299 | 2,079 |
Total non-current liabilities | 56,672 | 47,488 |
Trade and other payables | 2,175,142 | 1,981,288 |
Payroll and welfare payables | 284,602 | 385,908 |
Contract liabilities | 156,674 | 138,563 |
Short-term borrowings | 162,068 | 251,732 |
Customer deposits | - | 2,261,214 |
Other financial liabilities from virtual bank | - | 54,373 |
2,778,486 | 5,073,078 | |
Liabilities directly associated with assets classified as held for sale |
2,459,066 |
- |
Total current liabilities | 5,237,552 | 5,073,078 |
Total liabilities | 5,294,224 | 5,120,566 |
Total equity and liabilities | 8,141,666 | 8,068,358 |
ONECONNECT | ||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
(Unaudited) | ||
Three Months Ended March 31 | ||
2024 RMB'000 | 2023 RMB'000 | |
Net cash used in operating activities |
(115,236) |
(613,264) |
Net cash generated from investing activities | 255,848 | 407,066 |
Net cash used in financing activities | (100,971) | (44,421) |
Net increase/(decrease) in cash and cash equivalents | 39,641 | (250,619) |
Cash and cash equivalents at the beginning of the period | 1,379,473 | 1,907,776 |
Effects of exchange rate changes on cash and cash equivalents | 1,777 | (10,726) |
Cash and cash equivalents at the end of period | 1,420,891 | 1,646,431 |
ONECONNECT | ||
RECONCILIATION OF IFRS AND NON-IFRS RESULTS | ||
(Unaudited) | ||
Three Months Ended March 31 | ||
2024 RMB'000 | 2023 RMB'000 | |
Gross profit from continuing operations | 272,403 | 334,657 |
Gross margin of continuing operations | 37.7 % | 37.4 % |
Non-IFRS adjustment | ||
Amortization of intangible assets recognized in cost of revenue | 15,542 | 22,209 |
Depreciation of property and equipment recognized in cost of revenue | 1,152 | 1,354 |
Share-based compensation expenses recognized | 228 | 436 |
Non-IFRS gross profit from continuing operations | 289,325 | 358,656 |
Non-IFRS gross margin of continuing operations | 40.0 % | 40.1 % |
SOURCE OneConnect Financial Technology Co., Ltd.
