OneConnect Announces Third Quarter and Nine Months Ended September 30, 2023 Unaudited Financial Results

Published

Net Margin to Shareholders Improved to -10.8% for Third Quarter 2023

SHENZHEN, China, Nov. 13, 2023 /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 third quarter and nine months ended September 30, 2023.

Third Quarter 2023 Financial Highlights

  • Revenue was RMB844 million as compared to RMB1,069 million for the same period of the prior year.
  • Gross margin decreased slightly to 35.0% as compared to 35.1% for the same period of the prior year; non-IFRS gross margin increased 1.0 percentage point to 39.4% as compared to 38.4% for the same period of the prior year.
  • Net loss attributable to shareholders was RMB91 million, as compared to RMB133 million for the same period of the prior year. Net margin to shareholders improved by 1.6 percentage points to -10.8% as compared to -12.4% for the same period of the prior year.
  • Net loss per ADS, basic and diluted, was RMB-2.50 as compared to RMB-3.66 for the same period of the prior year.

In RMB'000, except percentages and per ADS amounts

Three Months Ended

 September 30

Nine Months Ended September 30

YoY

YoY

2023

2022

2023

2022

Revenue

 Revenue from Ping An Group

475,866

599,408

-20.6 %

1,593,515

1,830,690

-13.0 %

 Revenue from Lufax

60,970

118,429

-48.5 %

205,469

354,892

-42.1 %

 Revenue from third-party customers[1]

306,761

351,028

-12.6 %

943,959

1,035,986

-8.9 %

 Total

843,597

1,068,865

-21.1 %

2,742,943

3,221,568

-14.9 %

Gross profit

295,106

374,663

991,339

1,133,946

Gross margin

35.0 %

35.1 %

36.1 %

35.2 %

Non-IFRS gross margin

39.4 %

38.4 %

39.7 %

39.1 %

Operating loss

(95,854)

(154,878)

(288,793)

(787,391)

Operating margin

-11.4 %

-14.5 %

-10.5 %

-24.4 %

Net loss attributable to shareholders

(90,901)

(132,563)

(281,366)

(694,937)

Net margin to shareholders

-10.8 %

-12.4 %

-10.3 %

-21.6 %

Net loss per ADS2, basic and diluted

(2.50)

(3.66)

(7.75)

(19.00)

[1] 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.

[2] In RMB yuan. Each ADS represents thirty ordinary shares. In December 2022, the Company effected an ADS ratio change to adjust its ordinary share to ADS ratio from one (1) ADS representing three (3) ordinary shares to one (1) ADS representing thirty (30) ordinary shares, or the Ratio Change. Except otherwise stated, the Ratio Change has been retrospectively applied for all periods presented in this press release.

Chairman, CEO and CFO Comments

"During the reporting period, we faced headwinds that resulted in a decline in our revenue." Said Mr. Shen Chongfeng, Chairman of the Board and Chief Executive Officer. "Several factors contributed to this decrease, including our proactive adjustment to the product mix, competitive pressures, and changing market conditions. However, it is crucial to note that our management actively implemented strategic measures to optimize cost structures and improve operational efficiency, which reduced the impact of the headwinds on our financial results."

Mr. Shen Chongfeng further commented, "We will embrace challenges and opportunities that lie ahead. Our continued investment in technological innovation and organizational capability remains unchanged. We will continue to engage with third-party financial and strategic partners, enhance sales and marketing efficiency and expand our business opportunities. In the third quarter of 2023, OneConnect was named one of the "IDC China FinTech Top 50" by International Data Corporation for the fourth consecutive year. We will speed up the development of high-value product and continue to focus on improving gross margin and profitability."

Mr. Luo Yongtao, Chief Financial Officer, commented, "In the third quarter of 2023, our non-IFRS gross margin increased year-over-year from 38.4% to 39.4%. And our net loss ratio to shareholders improved from -12.4% to -10.8% compared with the same period of last year. This achievement represents a substantial decrease in losses and reflects our commitment to enhancing our financial health. Furthermore, we have been diligent in identifying and improving underperforming areas of our business, and focused on enhancing revenue structure. The improvement in our net loss ratio to shareholders is an encouraging sign of progress and demonstrates the effectiveness of our measures on our journey towards profitability."

Revenue Breakdown

Three Months Ended

Nine Months Ended September 30

In RMB'000, except percentages

September 30

YoY

YoY

2023

2022

2023

2022

Technology Solution Segment[3]

Implementation

175,240

202,265

-13.4 %

618,263

544,876

13.5 %

Transaction-based and support revenue

 Business origination services

27,262

93,714

-70.9 %

108,389

313,208

-65.4 %

 Risk management services

77,211

104,801

-26.3 %

227,528

303,298

-25.0 %

 Operation support services

195,282

293,777

-33.5 %

666,867

865,882

-23.0 %

 Cloud services platform

297,256

296,600

0.2 %

911,876

961,807

-5.2 %

 Post-implementation support services

13,524

13,739

-1.6 %

39,173

40,533

-3.4 %

 Others

20,932

35,686

-41.3 %

67,596

117,981

-42.7 %

 Sub-total for transaction-based and

  support revenue

631,467

838,317

-24.7 %

2,021,429

2,602,709

-22.3 %

Sub-total

806,707

1,040,582

-22.5 %

2,639,692

3,147,585

-16.1 %

Virtual Bank Business Segment

Interest and commission

36,890

28,283

30.4 %

103,251

73,983

39.6 %

Total

843,597

1,068,865

-21.1 %

2,742,943

3,221,568

-14.9 %

[3] Intersegment eliminations and adjustments are included under technology solution segment.

Revenue in the third quarter of 2023 decreased by 21.1% to RMB844 million from RMB1,069 million compared with the same period in the prior year, primarily due to a decline in transaction-based and support revenue. Implementation revenue also decreased by 13.4% on a year-over-year basis to RMB175 million, mainly due to the sluggish demands from new customers recovering from the pandemic impact.

In terms of transaction-based and support revenue, revenue from business origination services decreased by 70.9% on a year-over-year basis to RMB27 million, primarily due to declined transaction volumes and our proactive actions of phasing out of lower value products in the Digital Banking segment. Revenue from risk management services decreased by 26.3% on a year-over-year basis to RMB77 million, mainly due to reduced transaction volume in banking loan solutions because of slower-than-expected recovery of banking activities. Revenue from operation support services decreased by 33.5% on a year-over-year basis to RMB195 million, which was primarily caused by reduced demand from auto insurance and banking customers in the third quarter due to reduced demand. Revenue from cloud services platform was RMB297 million, increased by 0.2% on a year-over-year basis.

Revenue from Ping An OneConnect Bank, Virtual Banking business in Hong Kong, increased by 30.4% to RMB37 million as compared to the third quarter last year.

Three Months Ended

Nine Months Ended September 30

In RMB'000, except percentages

September 30

YoY

YoY

2023

2022

2023

2022

Digital Banking segment

201,290

343,311

-41.4 %

695,359

1,086,320

-36.0 %

Digital Insurance segment

148,659

229,298

-35.2 %

515,903

617,057

-16.4 %

Gamma Platform segment

456,758

467,973

-2.4 %

1,428,430

1,444,208

-1.1 %

Virtual Bank Business segment

36,890

28,283

30.4 %

103,251

73,983

39.6 %

Total

843,597

1,068,865

-21.1 %

2,742,943

3,221,568

-14.9 %

Revenue from Gamma Platform segment, decreased by 2.4% to RMB457 million on a year-over-year basis, contributing 54.1% of the total revenue, mainly caused by reduced transaction volume of our open platform products. Revenue from Digital Banking segment decreased by 41.4% to RMB201 million in the third quarter of 2023 from RMB343 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 initiative to phase out low value products and the impacts from the unfavorable macro environment. Revenue from Digital Insurance segment decreased by 35.2% to RMB149 million in the third quarter of 2023 from RMB229 million for the same period in the prior year, primarily due to reduced demand in auto ecosystem services. In addition, revenue from Virtual Banking Business segment increased by 30.4% to RMB37 million from RMB28 million for the same period last year.

Third Quarter 2023 Financial Results

Revenue

Revenue in the third quarter of 2023 decreased by 21.1% to RMB844 million from RMB1,069 million for the same period in the prior year, primarily driven by a decline in transaction-based and support revenue.

Cost of Revenue

Cost of revenue in the third quarter of 2023 decreased by 21.0% to RMB548 million from RMB694 million for the same period in the prior year, generally in line with the decrease in revenue.

Gross Profit

Gross profit in the third quarter of 2023 decreased to RMB295 million from RMB375 million for the same period in the prior year. Gross margin decreased slightly by 0.1 percentage point from 35.1% in the third quarter of 2022 to 35.0% in the third quarter of 2023. Non-IFRS gross margin increased to 39.4% from 38.4% 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 2023 decreased to RMB401 million, compared with RMB548 million for the same period in the prior year, primarily driven by decreased labor cost in employee benefits expenses to further improve profitability. As a percentage of revenue, total operating expenses decreased by 3.8 percentage points to 47.5% from 51.3%.

  • Research and Development expenses for the third quarter of 2023 decreased to RMB230 million from RMB287 million, mainly due to decreased labor cost and 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 increased to 27.3%, compared with 26.9% in the prior year.
  • Sales and Marketing expenses for the third quarter of 2023 decreased to RMB77 million, compared with RMB94 million in the prior year, mainly due to a decrease in labor cost in employee benefits expenses. As a percentage of revenue, sales and marketing expenses increased to 9.1% from 8.8%.
  • General and Administrative expenses for the third quarter of 2023 decreased to RMB94 million from RMB167 million in the prior year, primarily due to stringent cost control measures and our continued efforts to optimize our business processes. As a percentage of revenue, general and administrative expenses decreased to 11.1% from 15.7%.

Operating loss for the third quarter of 2023 narrowed notably to RMB96 million, compared with RMB155 million for the same period in the prior year. Operating margin improved to -11.4% from -14.5% in the prior year.

Net Loss Attributable to Shareholders

Net loss attributable to OneConnect's shareholders totaled RMB91 million for the third quarter of 2023, versus RMB133 million for the same period in the prior year. Net loss attributable to OneConnect's shareholders per basic and diluted ADS decreased to RMB-2.50, versus RMB-3.66 for the same period in the prior year. Weighted average number of ADSs for the third quarter was 36,319,638.

Cash Flow

For the third quarter of 2023, net cash used in operating activities was RMB190 million. Net cash generated from investing activities was RMB218 million. Net cash used in financing activities was RMB92 million.

Conference Call Information

Date/Time                     Monday, November 13, 2023 at 7:00 p.m., U.S. Eastern Time                                      Tuesday, November 14, 2023 at 8:00 a.m., Hong Kong Time

Online registration        https://www.netroadshow.com/events/login?show=b14db843&confId=56908

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

This press release 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 comply with existing or future laws and regulations related to data protection or data security; 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; 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; litigation and negative publicity surrounding China-based companies listed in the U.S.; 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, lagging effect of businesses' recovery 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 U.S. Securities and Exchange Commission. 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 measures 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 "Reconciliation of IFRS and non-IFRS results (Unaudited)" set forth at the end of this press release.

 

 

ONECONNECT

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended September 30

Nine Months Ended September 30

2023

2022

2023

2022

RMB'000

RMB'000

RMB'000

RMB'000

Revenue

843,597

1,068,865

2,742,943

3,221,568

– Technology Solution

806,707

1,040,582

2,639,692

3,147,585

– Virtual Bank Business

36,890

28,283

103,251

73,983

Cost of revenue

(548,491)

(694,202)

(1,751,604)

(2,087,622)

Gross profit

295,106

374,663

991,339

1,133,946

Research and development expenses

(230,189)

(287,221)

(758,228)

(1,027,734)

Selling and marketing expenses

(76,627)

(93,800)

(205,879)

(312,142)

General and administrative expenses

(93,790)

(167,382)

(335,908)

(569,303)

Net impairment losses on financial and contract assets

(3,863)

(148)

(42,506)

(15,073)

Other income, gains or loss-net

13,509

19,010

62,389

2,915

Operating loss

(95,854)

(154,878)

(288,793)

(787,391)

Finance income

8,063

4,185

19,579

9,421

Finance costs

(2,573)

(8,344)

(14,271)

(28,005)

Finance costs – net

5,490

(4,159)

5,308

(18,584)

Share of (losses)/gains of associate and joint venture – net

(2,550)

6,100

4,607

26,402

Impairment charges on associates

(7,157)

Loss before income tax

(92,914)

(152,937)

(286,035)

(779,573)

Income tax (expense)/benefit

(1,341)

12,228

(6,743)

48,672

Loss for the period

(94,255)

(140,709)

(292,778)

(730,901)

Loss attributable to:

– Owners of the Company

(90,901)

(132,563)

(281,366)

(694,937)

– Non-controlling interests

(3,354)

(8,146)

(11,412)

(35,964)

Other comprehensive income, net of tax

Items that may be subsequently reclassified to profit or loss

– Foreign currency translation differences

(3,888)

47,405

13,482

76,345

Changes in the fair value of debt instruments measured

 at fair value through other comprehensive income

3,299

(3,901)

4,356

(188)

Item that will not be reclassified subsequently to profit or loss

– Foreign currency translation differences

(7,314)

193,046

36,877

397,827

Total comprehensive income/(loss) for the period

(102,158)

95,841

(238,063)

(256,917)

Total comprehensive income/(loss) attributable to:

– Owners of the Company

(98,804)

103,987

(226,651)

(220,953)

– Non-controlling interests

(3,354)

(8,146)

(11,412)

(35,964)

Loss per ADS attributable to owners of the Company

 (expressed in RMB per share)

– Basic and diluted

(2.50)

(3.66)

(7.75)

(19.00)

 

 

ONECONNECT

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

September 30

December 31

2023

2022

RMB'000

RMB'000

ASSETS

Non-current assets

Property and equipment

99,207

151,401

Intangible assets

493,054

570,436

Deferred tax assets

767,963

765,959

Financial assets measured at amortized cost from

 virtual bank

148

Investments accounted for using the equity method

199,200

Financial assets measured at fair value through

 other comprehensive income

903,804

821,110

Total non-current assets

2,264,176

2,508,106

Current assets

Trade receivables

1,161,064

940,989

Contract assets

85,497

122,628

Prepayments and other receivables

1,085,314

1,078,604

Financial assets measured at amortized cost from virtual bank

3,354

44

Financial assets measured at fair value through other

 comprehensive income

1,240,457

1,233,431

Financial assets at fair value through profit or loss

686,540

690,627

Derivative financial assets

45,556

56,363

Restricted cash and time deposits with initial terms

 over three months

409,668

343,814

Cash and cash equivalents

1,451,556

1,907,776

Total current assets

6,169,006

6,374,276

Total assets

8,433,182

8,882,382

EQUITY AND LIABILITIES

Equity

Share capital

78

78

Shares held for share incentive scheme

(149,544)

(149,544)

Other reserves

11,014,858

10,953,072

Accumulated losses

(7,792,265)

(7,510,899)

Equity attributable to equity owners of the Company

3,073,127

3,292,707

Non-controlling interests

(21,630)

(14,652)

Total equity

3,051,497

3,278,055

LIABILITIES

Non-current liabilities

Trade and other payables

110,675

132,833

Contract liabilities

17,855

19,977

Deferred tax liabilities

2,858

5,196

Total non-current liabilities

131,388

158,006

Current liabilities

Trade and other payables

2,324,032

2,531,273

Payroll and welfare payables

362,852

431,258

Contract liabilities

125,397

166,650

Short-term borrowings

176,419

289,062

Customer deposits

2,172,792

1,929,183

Income tax payable

6,218

Other financial liabilities from virtual bank

82,587

89,327

Derivative financial liabilities

9,568

Total current liabilities

5,250,297

5,446,321

Total liabilities

5,381,685

5,604,327

Total equity and liabilities

8,433,182

8,882,382

 

 

ONECONNECT

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended September 30

Nine Months Ended September 30

2023

2022

2023

2022

RMB'000

RMB'000

RMB'000

RMB'000

Net cash used in operating activities

(189,646)

(128,004)

(822,560)

(921,060)

Net cash generated from investing activities

217,770

24,874

515,889

1,532,768

Net cash (used in)/generated from financing activities

(92,331)

61,575

(181,232)

(630,700)

Net decrease in cash and cash equivalents

(64,207)

(41,555)

(487,903)

(18,992)

Cash and cash equivalents at the beginning of the period

1,519,513

1,445,058

1,907,776

1,399,370

Effects of exchange rate changes on cash and

 cash equivalents

(3,750)

52,264

31,683

75,389

Cash and cash equivalents at the end of period

1,451,556

1,455,767

1,451,556

1,455,767

 

 

ONECONNECT

RECONCILIATION OF IFRS AND NON-IFRS RESULTS

(Unaudited)

Three Months Ended September 30

Nine Months Ended September 30

2023

2022

2023

2022

RMB'000

RMB'000

RMB'000

RMB'000

Gross profit

295,106

374,663

991,339

1,133,946

Gross margin

35.0 %

35.1 %

36.1 %

35.2 %

Non-IFRS adjustment

 Amortization of intangible assets recognized

  in cost of revenue

34,797

34,912

89,962

120,779

 Depreciation of property and equipment recognized

  in cost of revenue

1,149

597

4,514

2,157

 Share-based compensation expenses recognized

  in cost of revenue

1,188

517

2,524

1,939

Non-IFRS Gross profit

332,240

410,689

1,088,339

1,258,821

Non-IFRS Gross margin

39.4 %

38.4 %

39.7 %

39.1 %

 

 

Cision View original content:https://www.prnewswire.com/news-releases/oneconnect-announces-third-quarter-and-nine-months-ended-september-30-2023-unaudited-financial-results-301986275.html

SOURCE OneConnect Financial Technology Co., Ltd.

In This Story

OCFT