Earnings Call Transcript
Qfin Holdings, Inc. (QFIN)
Earnings Call Transcript - QFIN Q2 2024
Karen Ji, Senior Director of Capital Markets
Thank you, Emily. Hello everyone and welcome to Qifu Technology's second quarter 2024 earnings conference call. Our earnings release was distributed earlier today and is available on our IR website. Joining me today are Mr. Wu Haisheng, our CEO; Mr. Alex Xu, our CFO; and Mr. Zheng Yan, our CRO. Before we start, I would like to refer you to our Safe Harbor statements in the earnings press release, which applies to this call as we will make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of the non-GAAP financial measures to GAAP financial measures. Also, please note that unless otherwise stated, all figures mentioned in this call are in RMB terms. Before we start, we would like you to know that today's prepared remarks from our CEO will be delivered in English using an AI-generated voice. Now, I will turn the call over to Mr. Wu Haisheng. Please go ahead.
Wu Haisheng, CEO
Hello everyone. Thank you for joining us today. Despite the ongoing macroeconomic challenges since the start of 2024, we achieved a solid performance by adhering to our prudent execution and quality development strategy. By the end of Q2, our platform empowered a total of 160 financial institutions and served more than 53 million users with approved credit lines on a cumulative basis. During the quarter, we further solidified our business foundation and improved asset quality and operational efficiency with a keen focus on the quality of loans. These efforts enabled us to significantly improve our risk performance and record the highest quarterly profit over the past 11 quarters, highlighting the strong resilience of our business. I would like to thank our entire team for their persistent drive for excellence and ongoing self-development, which has enabled us to navigate an ever-evolving market environment. At the same time, we are building a more open ecosystem and adopting a platform approach to create value for both users and financial institutions, aiming to further expand the boundary of our business. In Q2, our revenue increased by 6.3% year-over-year to RMB4.16 billion, with our net take rate increasing by over 1 percentage point year-over-year to roughly 4.4%. Non-GAAP net income increased by 23% year-over-year to RMB1.41 billion. While non-GAAP net income per diluted ADS increased by 32% year-over-year to RMB9.16. Thanks to our outstanding operational results and efficient capital allocation, our ROE in Q2 continued to outperform industry peers, coming in at 25.4% during the quarter. Despite facing macroeconomic headwinds, our asset quality has steadily improved in Q2. Based on our keen insights into risk, we proactively tightened our overall credit standards over the past three quarters, iterating risk strategies across loan facilitation, credit operations, and post-credit processes to improve risk metrics. Risk indicators for new loans have started improving since November last year and stabilized in the first half of this year. For loan collection, we further optimized collection resources to boost efficiency as line control issues have been largely resolved. Asset quality of the overall loan portfolio steadily improved in Q2 with the day one delinquency rate decreasing by 10 basis points, while 30-day collection rate increased by around 1.2 percentage points sequentially. This positive trend in risk performance continued into Q3. With the optimization of risk strategies already in place, we are confident in our ability to deliver on our operational and financial objectives for the second half of the year. During Q2, liquidity in the financial system was relatively ample and market interest rates remained in a downward trend. With robust asset quality, we maintained our negotiating leverage on the funding side to further drive down costs. We also maintained the pace of ABS issuance with RMB4.6 billion issued in Q2. ABS issuance during the first half of the year increased 30% compared to the same period last year. Overall, funding costs in Q2 decreased by another 56 basis points sequentially, resulting in a total decrease of 132 basis points for the first half of the year. This notably improved the take rate for our capital-heavy business. For the second half of the year, we expect funding costs to maintain largely stable with potential to slightly decrease further. In terms of user acquisition, we focused on acquiring and retaining high-value users, while further diversifying acquisition channels and boosting efficiency. In Q2, we adopted a relatively prudent customer acquisition approach with a reduction in marketing spending. Among new credit line users, unit acquisition costs remained flat sequentially, while the percentage of high-value users increased by 6.8 percentage points. Our acquisition channels further diversified with loan volume from our embedded finance business more than doubling year-over-year. The percentage of new credit line users from this channel increased from 36.4% in Q1 to 37.7% in Q2. We also partnered with a wider range of traffic platforms under the embedded finance model, including e-commerce, O2O, and short-form videos. Leveraging our strong user profiling and risk management capabilities, we have empowered these platforms to better serve a diverse user base. Furthermore, we are proactively exploring collaborations with financial institutions under the embedded finance model. By jointly serving the existing users who are currently underserved by the financial institutions, we will create new avenues for user acquisition. So far, we have entered preliminary partnerships with a number of financial institutions. This collaborative model is expected to significantly enhance service efficiency for financial institutions, improve the user experience, and promote financial inclusion over the long term. We are also building a comprehensive credit tech service platform based on users' risk profiles and values. By empowering financial institutions with a diverse range of products, services, and collaborative models, we aim to promote financial inclusion across the board. For financial institutions, we have improved underwriting efficiency by providing more precise user profiling and better fund asset matching tailored to different risk appetites and return preferences. For end users, we have expanded the breadth and depth of our services by introducing a more diverse range of financial institutions and a broader price spectrum. We have also enriched our user loyalty program with additional benefits and improved our long-term retention through differentiated user operations. By upgrading from a loan facilitation model to a platform model, we are expanding our total addressable market and extending the user life cycle, enabling us to boost operational efficiency and long-term profitability, while balancing risks. In Q2, we further optimized the structure of our business with a higher contribution from the capital-light model. The percentage of loan volume under the ICE model increased slightly to 24.6%, with the revenue take rate as a percentage of loan volume increasing by 54 basis points from the same period last year. Our technology solutions business continued to make steady progress. During the first half, we established partnerships with seven additional financial institutions, bringing the total number of financial partners to 12. Our Qifu DigiTech brand has won broad recognition across the banking industry and is now among the first tier players in the market. As of the end of June, our end-to-end technology solutions facilitated nearly RMB2 billion in bank loans cumulatively with outstanding balances exceeding RMB1 billion. Loan volume compound monthly growth rate reached 14% during the first half of the year. Of the new financial partners we onboarded this year, our solutions will be deployed and launched with five of them between August and September, driving further growth for this business. Our technology solutions have achieved an 80% standardization rate, offering financial institutions digital enhancements in operations, risk management, and products based on hybrid deployment. We are also seeing growing synergies between our tech solutions and credit businesses. Through our integrated solutions covering technology empowerment, joint operations, loan facilitation, and user referrals, we will further deepen our support for financial institutions and expand our customer reach. We continue to invest in cutting-edge technologies with a strong focus on expanding the application of AI and large language models in the Fintech sector to enhance user experience and improve operational efficiency. We upgraded over 10 modules in our efficiency-focused AI copilot system, enhancing supervision, summarization, and analysis of collection teams' work to better support supervisors in managing both collection teams and cases. Currently, in the testing phase, the upgraded system processes a 1,000-word call in just 5.3 seconds on average. Once rolled out in full scale, we expect the system to handle around 100,000 calls per day. We're also leveraging the large language model to enhance our chatbot's capabilities and communication efficiency and enrich the variety of scripts, increasing the average number of exchanges per call by over 10% and boosting script iteration efficiency by 40%. Additionally, we are strengthening the copilot systems fundamental capabilities through ongoing upgrades to our automatic speech recognition technology. By integrating our proprietary QiFusion Framework model, we have achieved a speech recognition accuracy rate of more than 93% and an intent recognition accuracy rate of more than 95% in a complex context. QiFusion has also set a new industry benchmark for the lowest character error rate, making us one of the top performers in China. Notably, this achievement was recognized by Interspeech 2024, a leading global conference on the science and technology of spoken language processing. Looking back at the first half of the year, we successfully navigated a challenging macro environment and made significant improvements in both asset quality and profitability. We also upgraded our business model and enhanced user engagement through differentiated strategies. Additionally, we strengthened synergies between our tech solutions and credit businesses, reinforcing our platform position. As we look into the second half of the year, we will maintain prudent operations to effectively manage risks, while continuing to iterate products and services, expand strategic partnerships, and build a sustainable growth engine. We believe many of our current initiatives will continue to generate positive results in the near future. Supported by the steady growth of our earnings, we have proactively optimized capital allocation and maintained a fast pace of share buybacks so far this year. Our combined payout ratio leads the industry as well as the majority of Chinese ADRs. Moving forward, we will continue to create value for shareholders through substantial buybacks and dividends.
Alex Xu, CFO
Thank you, Haisheng. Good morning and good evening everyone. Welcome to our second quarter earnings call. While the macro environment remains challenging, we have made significant progress in optimizing our operations, improving efficiencies, reducing risk exposure, and achieving strong financial results in the second quarter. Total net revenue for Q2 was RMB4.16 billion, compared to RMB4.15 billion in Q1 and RMB3.9 billion a year ago. Revenue from credit-driven services, which are capital-heavy, was RMB2.91 billion in Q2, down from RMB3.02 billion in Q1 and up from RMB2.79 billion a year ago. The year-on-year growth was primarily driven by an increase in on-balance sheet loans and contributions from other value-added services, slightly offset by a decrease in off-balance sheet loans. On-balance sheet loans represented over 28% of total loan volume in Q2. Our overall funding costs decreased by over 50 basis points sequentially and over 150 basis points year-on-year, thanks to our strong relationships with financial institution partners and new ABS issuance. Revenue from platform services, which are capital-light, was RMB1.25 billion in Q2 compared to RMB1.14 billion in Q1 and RMB1.13 billion a year ago. This year-on-year growth was mainly due to robust contributions from ICE and other value-added services, which more than offset the decline in capital-light loan facilitation. The contribution from platform services further increased as we aim to balance risk-bearing and non-risk-bearing assets in an unpredictable macro environment. In Q2, we continued to see sequential improvements in revenue take rates for both capital-heavy and capital-light businesses. The average internal rate of return of the loans we originated and/or facilitated was 21.6%, slightly up from 21.5% in the prior quarter. Looking ahead, we expect pricing to fluctuate around this level. Sales and marketing expenses decreased by 12% quarter-on-quarter and 16% year-on-year, as we carefully manage the pace of user acquisition in this uncertain environment. We added around 1.3 million new credit line users in Q2, down from 1.45 million in Q1. The unit cost of acquiring new credit line users remained stable quarter-on-quarter. We will continue to adjust the pace of new user acquisition as needed based on the macro environment and diversify our acquisition channels. At the same time, we will focus on re-engaging our existing user base, as repeat borrowers have historically contributed significantly to our business. The 90-day delinquency rate was 3.4% in Q2, calculated by dividing the outstanding balance of on and off-balance sheet loans that were three months past due by the total outstanding balance of these loans across our platform at the end of the quarter. As we actively reduce exposure to certain risk-bearing assets, the total outstanding balance of loans decreased by approximately 15% sequentially in Q2. Consequently, the 90-day delinquency rate was artificially elevated by about 18%, which may be misleading. We encourage investors to focus on key leading risk indicators such as day one delinquency and 30-day collection rates. The day one delinquency rate for Q2 was 4.8%, down from 4.9% in Q1. The 30-day collection rate was 86.3%, compared to 85.1% in Q1, and has recently returned to similar levels observed in Q3 2023. We anticipate ongoing gradual improvement in these risk metrics in the upcoming quarters. Given the persistent micro uncertainty, we continue to adopt a cautious approach to provisioning for potential credit losses. The total net provisions for risk-bearing loans in Q2 were approximately RMB1.31 billion versus RMB1.38 billion in Q1. The slight sequential decline in new provisions was mainly due to a decrease in off-balance sheet capital-heavy loan volume, although the new provision booking ratio has risen sequentially. We had around RMB480 million in write-backs of previous provisions in Q2. As our portfolio risk metrics improve, we expect further write-backs in the coming quarters. The provision coverage ratio, defined as total outstanding provisions divided by total outstanding delinquent asset-heavy loans between 90 and 180 days, was 421% in Q2, up from 44% in Q1. Non-GAAP net profit for Q2 was RMB1.41 billion compared to RMB1.2 billion in Q1, with the notable improvement in profitability attributed to better asset quality, operational efficiency, and favorable mix changes. The effective tax rate for Q2 was 33.1%, compared to our typical rate of about 15%. This higher rate was largely due to approximately RMB380 million withholding tax provision related to significant cash distributions from onshore to offshore associated with dividend payments and share repurchase programs during the quarter. With solid operating results and increased contributions from capital-light models, our leverage ratio, defined as the risk-bearing loan balance divided by shareholders' equity, stood at a historical low of 2.4% in Q2. We expect this leverage ratio to remain stable around this level in the near future. We generated about RMB1.96 billion in cash from operations in Q2, flat quarter-on-quarter, and total cash and cash equivalents were RMB8.5 billion in Q2 compared to RMB8.3 billion in Q1. Non-restricted cash amounted to approximately RMB6.3 billion in Q2 compared to RMB5.3 billion. Continuing to generate strong cash flow from operations, we believe our current cash position is adequate to support business development and return value to our shareholders. In line with our dividend policy, our Board has approved a dividend of $0.30 per Class A ordinary share or $0.60 per ADS for the first half of 2024, payable to holders of record as of the close of business on September 27, 2024, in both Hong Kong and New York time. This marks the second consecutive increase in our semiannual dividend. On March 12, 2024, we announced a new share repurchase plan to buy back up to RMB350 million in ADS over a 12-month period starting April 1, 2024. As of August 13, 2024, we have purchased approximately 10.7 million ADS in the open market for a total of about $211 million, including commissions, at an average price of $19.7 per ADS under this plan. The pace of the repurchase has been significantly quicker than anticipated. This proactive execution of our share repurchase plan further highlights management's confidence and commitment to the company's future, with intentions to continue using share repurchases for long-term accretion of EPADS. With the full execution of the current share repurchase program and our dividend policy, we are delivering the highest combined yield on a recurring basis among Chinese ADRs for our shareholders. Before discussing our financial outlook, I'd like to briefly touch on our technology solutions business. We initiated large-scale offerings of technology solutions in early 2022, which provide on-site deployed risk management SaaS modules to financial institutions, helping them improve credit assessment outcomes. In Q2, these solutions facilitated approximately RMB22.56 billion in loan volume, but have only yielded marginal returns even after over two years, failing to meet our internal ROA targets. Consequently, we have decided to phase out this service by the end of 2024, which we expect to have a negligible impact on our overall financial metrics. Meanwhile, since mid-2023, we have begun providing end-to-end technology solutions to financial institutions covering various aspects of their operations, which should generate higher returns once fully scaled. However, the ramp-up of these end-to-end solutions is still in early stages, contributing approximately RMB685 million in loan volume in Q2. Given these developments, starting Q3 2024, we will provide separate pro forma information regarding loan volume and loan balance for both the ongoing and intended discontinued business to clarify year-on-year and sequential trends. We urge investors and analysts to adjust their financial models accordingly. Looking ahead, while we are beginning to see some tentative signs of marginal improvement in demand, we will maintain a prudent approach and concentrate on boosting profitability and operational efficiency for the second half of 2024. Additionally, the shifts in our business mix over the past few quarters will influence the pace of revenue booking, and we anticipate continued overall take rate improvement for the remainder of the year. For the third quarter of 2024, we expect to generate non-GAAP net income between RMB1.55 billion and RMB1.65 billion, reflecting a year-on-year growth of 31% to 40%. This outlook represents our current preliminary assessment and is subject to change. With that, I would like to end our prepared remarks. We can now take some questions.
Operator, Operator
Thank you. We will now take our first question from Richard at Morgan Stanley. Richard, your line is open; please ask your question.
Richard Xu, Analyst
I have two questions. First, what is the expected loan volume for the second half of 2024, not 2025, and are there any anticipated changes in the take rate? Secondly, the profit guidance for the quarter looks quite strong; what factors are driving that? Thank you.
Wu Haisheng, CEO
I have two questions. First, what is the loan volume expected for the second half of 2024, and are there any anticipated changes in the take rate? Second, the profit guidance for the quarter looks quite strong; could you share what is driving that? Thank you.
Karen Ji, Senior Director of Capital Markets
Okay, I will do the translation. First, regarding the loan volume growth, we expect loan volume to grow in the second half of the year compared to the first half, mainly because of a few reasons. The first one on the demand side, we observed that credit demand is relatively stable recently, and the user activity level has slightly increased in June and July with the login initiation rate of app users rising by about 7% compared to May. Second, on the risk side, the improvement of risk metrics is on track and the momentum continues in Q3, which gives us more comfort that we can open up a little bit our past ratio and the credit line to enhance the activity of our existing users. Third, in terms of new customers, we have diversified our channels and improved our efficiency in customer acquisition in the first half of this year. And the quality of new customers has been significantly optimized. Thus, we may try to invest more to attract new users through diverse channels in the second half. Fourth one, our platform strategy is basically to use diverse cooperation models with more financial institutions to serve a more diversified user base, which will enhance our customer coverage and the conversion rate. So, in summary, we have done a lot of work in the first half of this year, giving us more room to try and open a bit, given the improving demand and risks. So, we believe that loan volume in the second half of the year will increase to some extent. At the same time, this work is also laying a foundation for our longer-term growth.
Wu Haisheng, CEO
We have been exploring various cooperation models with additional financial institutions to cater to a more diverse user base, which will improve our customer reach and conversion rates. In summary, we have accomplished a lot in the first half of this year, providing us with the opportunity to expand slightly in light of the improving demand and associated risks. Therefore, we anticipate an increase in loan volume during the second half of the year. Additionally, this effort is establishing a foundation for our long-term growth.
Karen Ji, Senior Director of Capital Markets
Regarding the take rate, I would like to address that the main drivers of our profit growth in Q3 are mainly attributed to three reasons. The first reason is that credit costs and funding costs will continue to decline in Q3. The second reason is that through our platform strategy, we not only enhance our users' coverage, but also achieve better monetization. And the third reason is that in Q3, the proportion of the asset-light business model will be further increased and the revenue recognition pace of the asset-light model is relatively faster, which is also a reason for the rise in our take rate in Q3. So, based on these reasons, we believe that the take rate in Q3 may not be a normal level and we won't expect our take rate to rise continuously in the future given we have been continually improving on the take rate in the past quarters. So, in the long run, we believe 4% to 4.5% is a relatively reasonable level for our sustainable take rate. Thank you.
Richard Xu, Analyst
Thank you.
Operator, Operator
Thank you. Our next question comes from the line of Emma Xu from Bank of America. Please ask your question, Emma.
Emma Xu, Analyst
Congratulations on the impressive results despite the macro challenges. We noticed that Mr. Zhou Hongyi has resigned as the Chairman and Director of the company. What are the main factors behind these decisions, and will it affect the company's operations?
Wu Haisheng, CEO
Congratulations on the very strong results amid the macro challenges. We noticed that Mr. Zhou Hongyi has resigned as the Chairman and Director of the company, so what are the main considerations behind these decisions and will it have an impact on the company's operations?
Karen Ji, Senior Director of Capital Markets
Okay, I will do the translation. Thanks, Emma. Mr. Zhou has resigned from his position as Chairman and Director of the Board of the company, mainly due to personal reasons. We also believe that the company has become a mature enterprise in the Fintech space and hopes that the company can develop more independently, maintaining its own brand and development strategy. As our largest shareholder, Mr. Zhou is very confident in the company's long-term development and has been increasing his holdings in the company's stock in the secondary market over the past two years. According to our annual report, Mr. Zhou and his affiliates increased his holdings by 1.58 million ADS between February 2023 and February 2024, and he also increased his holdings during the window period this year. Mr. Zhou has not been involved in the company's day-to-day operations in the past, so his resignation will have no impact on the company's operations. In the future, Mr. Zhou will continue to provide his valuable insight to the company, particularly in areas of strategy and AI. So, on behalf of our management team, I would like to express our heartfelt gratitude to Mr. Zhou for his contributions to the company during his tenure as Chairman. Thank you.
Operator, Operator
Great. Our next question comes from the line of Alex Ye from UBS. Please ask your question, Alex.
Alex Ye, Analyst
We have noticed that the company has accelerated the pace of share buybacks since the Q1 results in mid-May, exceeding the original one-year schedule for the RMB250 million buyback quota. What is the reasoning behind this? Should we expect the company to maintain this buyback pace for the rest of the year? Thank you.
Alex Xu, CFO
Okay, Alex, I will take this one. So, yes, as of August 13th, we have purchased $211 million worth of stock out of the RMB350 million authorization, which is about 60% into the program, much faster than the time schedule. And the reason we are accelerating our repurchase during that period is, for one, the macro environment is still pretty challenging. And the market itself is still very much undervaluing the company's stock. We want to use that opportunity to do more repurchase. And this will allow us to create additional EPS accretion and ultimately, maximize the value of our existing shareholders. Since we already finished 60% in about one-third of the time of the plan, going forward, we will continue to execute the repurchase program based on market conditions. And if the market consistently undervalues our equity, we will probably maintain a continued very active pace in the market and complete the current program ahead of the time schedule.
Alex Ye, Analyst
Thank you.
Operator, Operator
Thank you. Our next question comes from the line of Yada Li from CICC. Please go ahead, Yada.
Yada Li, Analyst
Hello management. Thank you for taking my questions. My first question is about the decline in average funding cost. What are the main factors contributing to this decrease? Is it due to ABS insurance or increased discounts on required returns from financial institutions? If we examine these two aspects separately, how much potential is there for further reductions in funding costs going forward? Secondly, the asset quality of the company has stabilized and improved. What are the key reasons for this trend? From a credit cost standpoint, when we see asset quality returning to normal levels, how much improvement can we expect and at what pace will this optimization occur? That's all. Thank you.
Wu Haisheng, CEO
How much room is still available for the decrease of funding costs in the future? Additionally, the asset quality of the company has stabilized and improved. What are the main reasons for this trend? From the perspective of credit cost, when we observe the asset quality returning to levels typical of normal years, how much will it be optimized and how quickly should we expect this optimization to occur in the future? That's all. Thank you.
Karen Ji, Senior Director of Capital Markets
Okay, thanks, Yada. First, in terms of the overall funding cost reduction, the significant reduction in the funding costs for our capital-heavy loan facilitation this quarter is the most important driving factor. And the cost of ABS, which was already quite low, has further decreased this quarter. In addition, we have seen a slight increase in the proportion of ABS from a funding structure perspective. So, these three factors have collectively led to an overall decrease in the funding cost by 56 basis points sequentially in Q3. Looking ahead, we believe that funding costs will remain largely stable with a possibility of a slight decrease, but room for further reduction is quite limited.
Wu Haisheng, CEO
The cost of ABS, which was already quite low, has further decreased this quarter. Additionally, we have observed a slight increase in the proportion of ABS from a funding structure perspective. These three factors have together resulted in an overall decrease in the funding cost by 56 basis points sequentially in Q3. Looking ahead, we believe that funding costs will remain largely stable with a possibility of a slight decrease, although there is limited room for further reduction.
Karen Ji, Senior Director of Capital Markets
Our overall risk indicators, mainly in the day one delinquency rate and the 30-day collection rate showed stability and improvement in Q2, mainly for three reasons. First, in light of the macro uncertainties, we took a more cautious approach in new loan origination in Q1 and Q2, significantly improving the quality of new loans through a substantial optimization of risk models and strategies compared to Q3 and Q4 of last year. Second, in Q2, we further optimized the structure of asset and funding merchants by selectively introducing more financial institutions that can complement our risk capabilities or risk appetite. We have formed a differentiated and complementary cooperative model with these financial institutions in risk management, making our asset quality more robust and solid. Third, in terms of managing the risk of the existing loan balance, we continue to optimize post-loan operations in Q2. For example, by strengthening advanced reminders for customer repayments, we effectively reduced our day one delinquency rate. At the same time, we optimized the management and the performance review of the external collection team, which also helped us to improve the collection rate. Regarding the second half of the year, based on the current risk performance, as Haisheng just mentioned, we may moderately open up a bit in terms of our credit ratio and the credit limits to enhance the engagement of our existing customers. At the same time, we have clear management measures to further optimize the user base structure, including further optimizing line credit limits and the pricing combination, comprehensively upgrading customers' rights, and optimizing the customers' experience on our app product side. This will increase the portion of high-quality users in the overall asset portfolio. Thus far, we believe second half overall risk performance should be better than the first half and on a relatively stable trend.
Yada Li, Analyst
Thank you.
Operator, Operator
Thank you. We will now take our last question from the line of Cindy Wang from China Renaissance. Please go ahead, Cindy.
Cindy Wang, Analyst
The company has been cautious in acquiring customers during the first half of this year. What does management anticipate regarding the pace of customer acquisition in the second half, and will the customer acquisition cost be similar to that of the first half? Thank you.
Wu Haisheng, CEO
The company has maintained a relatively conservative pace of customer acquisition in the first half of this year. What is the management's view on the pace of customer acquisition in the second half of this year? Will customer acquisition cost be roughly the same as in the first half? Thank you.
Karen Ji, Senior Director of Capital Markets
Okay, let me do the translation. Thanks, Cindy. Regarding your question, we will say in the second half of the year, we may accelerate a bit our customer acquisition pace compared to the first half. This is because all the efforts we have put into profitability improvement in the first half are bearing fruit, giving us more confidence to acquire new customers. Furthermore, we are continuously expanding our customer acquisition channels, making our customer acquisition approach increasingly diversified. Our customer acquisition is not just limited to information flow advertising, but quite diversified. Over the past few quarters, our embedded finance model has maintained rapid growth with the ROA also being continuously optimized. At the same time, we are expanding two more API channels, such as e-commerce, short video, and other scenarios. We are also exploring embedded finance model with banks' apps. We are also referring some of our high-quality dormant users to the banks. All these initiatives will help us expand our customer reach or boost our loan volume. In other words, we are not simply pursuing loan volume growth, but quality loan growth, thus achieving an overall improvement in our business overall. Even at a similar scale, the quality of our business now is significantly better.
Cindy Wang, Analyst
Thank you.
Operator, Operator
Thank you. We have now reached the end of the question-and-answer session. Thank you very much for all your questions. I'll now turn the conference back to the management team for closing comments.
Alex Xu, CFO
Okay. Thanks again for everyone to join us for the call. If you have additional questions, please feel free to contact us offline. Thank you. Have a good day.
Operator, Operator
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.