OneConnect Announces Third Quarter 2021 Unaudited Financial Results
11/18/2021 - 05:00 PM
Revenue Growth of 20.8% and Net Loss Ratio Improvement of 2.3ppt YoY
SHENZHEN, China --(BUSINESS WIRE)--
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 and nine months ended September 30, 2021 .
Third Quarter 2021 Financial Highlights
Revenue increased 20.8% year over year to RMB 1,065 million from RMB 881 million for the same period last year.
Gross margin was 35.5% , as compared to 42.7% for the same period last year; non-IFRS gross margin1 was 42.2% , as compared to 51.2% for the same period last year.
Operating margin was -26.6% , as compared to -28.4% for the same period last year.
Net loss attributable to shareholders was RMB 270 million , as compared to RMB 243 million for the same period last year.
Net loss per share, basic and diluted, was RMB 0.24 , as compared to RMB 0.23 for the same period last year.
In RMB’000, except percentages and per share amounts
Three Months Ended
Sept 30
YoY
Change
Nine Months Ended
Sept 30
YoY
Change
2021
2020
2021
2020
Revenue
Revenue from Ping An Group
600,998
491,023
22.4%
1,601,298
1,110,841
44.2%
Revenue from Lufax
112,562
88,083
27.8%
277,200
266,657
4.0%
Revenue from third-party customers2
351,021
302,341
16.1%
973,594
859,066
13.3%
Total
1,064,581
881,447
20.8%
2,852,092
2,236,564
27.5%
Gross profit
378,359
375,968
986,516
875,086
Gross margin
35.5%
42.7%
34.6%
39.1%
Non-IFRS gross margin1
42.2%
51.2%
42.6%
48.6%
Operating loss
-283,078
-250,471
-1,024,567
-1,056,489
Operating margin
-26.6%
-28.4%
-35.9%
-47.2%
Net loss to shareholders
-269,658
-243,025
-923,340
-988,686
Net loss per share, basic and diluted
-0.24
-0.23
-0.83
-0.94
Net loss ratio
-25.3%
-27.6%
-32.4%
-44.2%
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 customers with revenue contribution of less than 5% of total. These customers are a key focus of the Company’s diversification strategy.
3
Some numbers do not add up due to rounding.
Chairman and CFO Comments
“We achieved a solid result this quarter. Our revenue grew steadily, rose by 20.8% year over year to RMB 1,065 million . As we continued to deepen our relationships with customers, it is encouraging seeing early signs of 3rd party revenue starting to pick up. For example, third-party customers’ revenue growth rate rose by 16.1% year-over-year to RMB 351 million in the third quarter. In the third quarter, the number of premium customer reached 601, rose by 29.5% , exceeding that in 2020 full year. Again, benefiting from our customer relationships deepen strategy, we are delighted to see the number of premium plus customers1 reached 150, rose by 24.0% , close to that in 2020 full year. The strong growth momentum of the numbers of premium and premium plus customers, demonstrated customer acknowledgement and market recognition of our products.” said Ye Wangchun, chairman of OneConnect. “As we announced on OCFT’s investor open day in September, we have now entered our second stage development, where we focus on strengthening products integration, deepening relationships with customers, and empowering other participants within our ecosystem. We firmly believe this will fuel the long term growth of our company.”
“We are delighted to see the progress in the third quarter in terms of a significantly broader base of solutions and customers,” commented CFO Luo Yongtao. “While gross margin 35.5% held slightly better sequentially to the second quarter. With the scale and cost discipline, net loss ratio further narrowed, from 27.6% to 25.3% year over year in the quarter.
1
Premium plus customers refer to our customers that contribute annual revenue of at least RMB1 million , excluding Ping An Group and its subsidiaries, Lufax & phased out products.
Revenue Breakdown
In RMB’000, except percentages
Three Months Ended
Sept 30
YoY
Change
Nine Months Ended
Sept 30
YoY
Change
2021
2020
2021
2020
Implementation revenue
189,003
217,151
-13.0%
517,026
572,435
-9.7%
Transaction-based and support revenue
Business origination services
114,662
130,245
-12.0%
350,912
457,407
-23.3%
Risk management services
112,585
95,239
18.2%
317,562
249,676
27.2%
Operation support services
280,196
314,415
-10.9%
766,912
766,547
0.0%
Cloud services platform
302,936
97,229
211.6%
745,496
123,819
502.1%
Post-implementation support services
8,953
15,148
-40.9%
33,629
35,072
-4.1%
Others
56,246
12,020
367.9%
120,555
31,608
281.4%
Total
875,578
664,296
31.8%
2,335,066
1,664,129
40.3%
Total
1,064,581
881,447
20.8%
2,852,092
2,236,564
27.5%
Revenue for the third quarter of 2021 increased year over year by 20.8% to RMB 1,065 million from RMB 881 million and revenue of nine months ended Sept 30 increased year over year by 27.5% to RMB 2,852 million from RMB 2,237 million . Among our various solutions, the cloud services platform was the biggest driver of our revenue increase. Launched last year, cloud service platform now made up 28.5% of our total revenue in the quarter. Another major contributor of our revenue increase was revenue from risk management services, which increased 18.2% year over year to RMB 113 million from RMB 95 million , reflecting the growth of solutions. However, revenue from business origination services decreased to RMB 115 million from RMB 130 million , due to change of operating environment and product optimization.
Third Quarter 2021 Financial Results
Revenue
Revenue for the third quarter of 2021 increased year over year by 20.8% to RMB 1,065 million from RMB 881 million and revenue of nine months ended Sept 30 increased year over year by 27.5% to RMB 2,852 million from RMB 2,237 million , mainly driven by cloud services platform and risk management services.
Cost of Revenue
Cost of revenue amounted to RMB 686 million , as compared to RMB 505 million for the same period last year, mainly attributable to an increase in technology service expenses related to the cloud services platform.
Gross Profit
Gross profit increased by 0.6% to RMB 378 million from RMB 376 million for the same period last year. Gross margin fell to 35.5% from 42.7% , following changes in the mix of solutions. Non-IFRS gross margin decreased year over year to 42.2% from 51.2% for the same reason. For a reconciliation of the Company’s non-IFRS gross margin to IFRS gross margin, its most comparable IFRS measure, please refer to “Reconciliation of IFRS and Non-IFRS Results (Unaudited).”
Operating Expenses and Loss from Operations
Total operating expenses amounted to RMB 642 million in the third quarter of 2021, as compared to RMB 663 million for the same period last year. As a percentage of revenue, total operating expenses decreased to 60.3% from 75.3% .
Research and Development expenses amounted to RMB 323 million in the third quarter of 2021, as compared to RMB 296 million for the same period last year, reflecting expenses relating to supporting the development of new solutions. As a percentage of revenue, R&D expenses decreased year over year to 30.4% from 33.5% .
Selling and Marketing expenses amounted to RMB 131 million in the third quarter of 2021, as compared to RMB 154 million for the same period last year, primarily due to reduced spending on telecommunication and advertising. As a percentage of revenue, selling and marketing expenses decreased year over year to 12.3% , as compared to 17.5% previously.
General and Administrative expenses amounted to RMB 170 million , as compared to RMB 201 million for the same period last year, reflecting consistent management resource optimization. As a percentage of revenue, general and administrative expenses decreased to 15.9% from 22.7% .
Loss from operations for the third quarter of 2021 amounted to RMB 283 million , as compared to RMB 250 million for the same period last year. Operating loss margin was 26.6% , as compared to 28.4% for the same period last year.
Net Loss
Net loss attributable to OneConnect’s shareholders amounted to RMB 270 million , as compared to RMB 243 million for the same period last year. Net loss attributable to OneConnect’s shareholders per basic and diluted share amounted to RMB 0.24 , as compared to RMB 0.23 for the same period last year.
For the quarter ended September 30, 2021 , the Company’s weighted average number of shares used in calculating per share net loss was 1,109,081,051. The number of outstanding shares as of September 30, 2021 was 1,169,980,653.
Cash Flow
As of September 30, 2021 , the Company had cash and cash equivalents of RMB 1,894 million and financial assets at fair value through profit or loss of RMB 1,361 million . For the quarter ended September 30, 2021 , net cash generated in operating activities was RMB 333 million . Net cash generated in investing activities was RMB 657 million , mainly due to the purchase of financial assets at fair value through profit or loss. Net cash used in financing activities was RMB 20 million .
Conference Call Information
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 platform 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 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 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; 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; 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, including the emergence of COVID variants, 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 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
Sept 30
Nine Months Ended
Sept 30
2021
2020
2021
2020
RMB'000
RMB'000
RMB'000
RMB'000
Revenue
1,064,581
881,447
2,852,092
2,236,564
Cost of revenue
-686,222
-505,479
-1,865,576
-1,361,478
Gross profit
378,359
375,968
986,516
875,086
Research and development expenses
-323,328
-295,552
-963,298
-824,067
Selling and marketing expenses
-130,658
-154,043
-423,381
-475,081
General and administrative expenses
-169,763
-200,509
-561,404
-587,267
Net impairment losses on financial and contract assets
-18,374
-13,251
-63,274
-71,398
Other income, gains or loss-net
-19,314
36,916
274
26,238
Operating loss
-283,078
-250,471
-1,024,567
-1,056,489
Finance income
2,866
17,973
25,924
59,967
Finance costs
-17,402
-33,337
-62,003
-117,751
Finance costs – net
-14,536
-15,364
-36,079
-57,784
Share of losses of associate and joint venture
770
-1,254
10,832
-6,480
Loss before income tax
-296,844
-267,089
-1,049,814
-1,120,753
Income tax benefit
26,870
18,267
82,470
93,515
Loss for the period
-269,974
-248,822
-967,344
-1,027,238
Loss attributable to:
- Owners of the Company
-269,658
-243,025
-923,340
-988,686
- Non-controlling interests
-316
-5,797
-44,004
-38,552
Other comprehensive income, net of tax
Items that may be subsequently reclassified to profit or loss
- Foreign currency translation differences
22,821
-325,549
-47,764
-212,895
- Changes in the fair value of debt instruments at fair value through other comprehensive income
0
4
1
-36
Total comprehensive loss for the period
-247,153
-574,367
-1,015,107
-1,240,169
Total comprehensive loss attributable to:
- Owners of the Company
-246,837
-568,570
-971,103
-1,201,617
- Non-controlling interests
-316
-5,797
-44,004
-38,552
Loss per share attributable to owners of the Company
(expressed in RMB per share)
- Basic and diluted
-0.24
-0.23
-0.83
-0.94
ONECONNECT
CONSOLIDATED BALANCE SHEETS
Sept 30
December 31
2021
(Unaudited)
2020
(Audited)
RMB'000
RMB'000
ASSETS
Non-current assets
Property and equipment
243,273
224,284
Intangible assets
745,617
917,063
Deferred tax assets
656,136
564,562
Financial assets measured at amortized cost from banking operations
424,739
25,283
Investments accounted for using the equity method
186,236
175,733
Financial assets at fair value through other comprehensive income
21,659
21,828
Contract assets
1,816
16,788
Total non-current assets
2,279,476
1,945,541
Current assets
Trade receivables
1,377,393
838,690
Contract assets
311,740
257,830
Prepayments and other receivables
768,551
443,328
Financial assets measured at amortized cost from banking operations
574,528
576,305
Financial assets at fair value through profit or loss
1,361,436
1,487,871
Restricted cash
1,276,959
2,280,499
Cash and cash equivalents
1,893,693
3,055,194
Total current assets
7,564,300
8,939,717
Total assets
9,843,776
10,885,258
EQUITY AND LIABILITIES
Equity
Share capital
78
78
Shares held for share option scheme
-80,600
-87,714
Other reserves
10,608,658
10,639,931
Accumulated losses
-6,280,266
-5,356,926
Equity attributable to equity owners of the Company
4,247,870
5,195,369
Non-controlling interests
45,910
89,914
Total equity
4,293,780
5,285,283
LIABILITIES
Non-current liabilities
Trade and other payables
352,215
395,514
Contract liabilities
22,576
17,683
Deferred tax liabilities
11,376
20,080
Total non-current liabilities
386,167
433,277
Current liabilities
Trade and other payables
1,744,921
1,547,781
Payroll and welfare payables
535,866
625,330
Contract liabilities
119,412
138,547
Short-term borrowings
1,182,573
2,283,307
Customer deposits
1,426,992
405,853
Derivative financial liabilities
154,065
165,880
Total current liabilities
5,163,829
5,166,698
Total liabilities
5,549,996
5,599,975
Total equity and liabilities
9,843,776
10,885,258
ONECONNECT
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
Sept 30
Nine Months Ended
Sept 30
2021
2020
2021
2020
RMB’000
RMB'000
RMB'000
RMB'000
Net cash generated from / (used in) operating activities
332,706
-310,618
-895,812
-1,431,703
Net cash generated from / (used in) investing activities
657,160
-527,324
969,587
714,549
Net cash generated from / (used in) financing activities
-20,116
2,431,075
-1,223,432
1,758,978
Net increase / (decrease) in cash and cash equivalents
969,750
1,593,133
-1,149,657
1,041,824
Cash and cash equivalents at the beginning of the period
920,826
535,122
3,055,194
1,077,875
Effects of exchange rate changes on cash and cash equivalents
3,117
-47,863
-11,844
-39,307
Cash and cash equivalents at the end of period
1,893,693
2,080,392
1,893,693
2,080,392
ONECONNECT
RECONCILIATION OF IFRS AND NON-IFRS RESULTS
(Unaudited)
Three Months Ended
Sept 30
Nine Months Ended
Sept 30
2021
2020
2021
2020
RMB'000
RMB'000
RMB'000
RMB'000
Gross profit
378,359
375,968
986,516
875,086
Gross margin
35.5%
42.7%
34.6%
39.1%
Non-IFRS adjustment
Amortization of intangible assets recognized in cost of revenue
69,496
70,490
226,136
203,198
Depreciation of property and equipment recognized in cost of revenue
1,551
947
2,749
2,673
Share-based compensation expenses recognized in cost of revenue
47
4,020
338
5,335
Non-IFRS gross profit
449,453
451,425
1,215,739
1,086,292
Non-IFRS gross margin
42.2%
51.2%
42.6%
48.6%
View source version on businesswire.com : https://www.businesswire.com/news/home/20211118005791/en/
Investor Relations:
OCFT IR Team
OCFT_IR@ocft.com
Media Relations:
Amy Ding
dingjingmin787@ocft.com
Source: OneConnect Financial Technology Co., Ltd.