OCFT OneConnect Financial Technology Co Ltd

Revenue Up by 25% and Net Margin Improvement by 10ppt YoY for Full Year 2021

OneConnect Financial Technology Co., Ltd. (“OneConnect” or the “Company”) (NYSE: OCFT), a leading technology-as-a-service provider for financial institutions in China, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2021.

Fourth Quarter 2021 Financial Highlights

• Revenue increased 19% year-over-year to RMB1,280 million from RMB1,076 million.
• Gross margin expanded year-over-year to 35% from 34%; non-IFRS gross margin1 was 41%, as compared to 43% same period of the prior year.
• Operating loss narrowed year-over-year to RMB380 million from RMB414 million.
• Net loss attributable to shareholders narrowed year-over-year to RMB358 million from RMB365 million.
• Net loss per ADS, basic and diluted, narrowed year-over-year to RMB0.97 from RMB0.99.

Full Year 2021 Financial Highlights

• Revenue increased 25% year-over-year to RMB4,132 million from RMB3,312 million.
• Gross margin was 35%, as compared to 38% in the prior year; non-IFRS gross margin1 was 42%, as compared to 47% in the prior year.
• Operating loss narrowed year-over-year to RMB1,405 million from RMB1,470 million.
• Net loss attributable to shareholders narrowed year-over-year to RMB1,282 million from RMB1,354 million.
• Net loss per ADS, basic and diluted, narrowed year-over-year to RMB3.47 from RMB3.81.

In RMB’000, except percentages and per ADS amounts

 

Three Months Ended December 31

 

 

 

Full Year Ended December 31

 

 

 

2021

 

2020

 

YoY

 

2021

 

2020

 

YoY 

Revenue

 

 

 

 

 

 

 

 

Revenue from Ping An Group

 

715,416

615,966

16.1%

 

2,316,714

1,726,807

34.2%

Revenue from Lufax

 

150,871

76,595

97.0%

 

428,071

343,252

24.7%

Revenue from third-party customers2

 

413,978

383,165

8.0%

 

1,387,572

1,242,231

11.7%

Total

 

1,280,265

1,075,726

19.0%

 

4,132,357

3,312,290

24.8%

Gross profit

 

450,135

368,370

22.2%

 

1,436,651

1,243,456

15.5%

Gross margin

 

35.2%

34.2%

 

 

34.8%

37.5%

 

Non-IFRS gross margin1

 

40.8%

42.8%

 

 

42.1%

46.7%

 

Operating loss

 

-380,173

-413,837

 

 

-1,404,740

-1,470,326

 

Operating margin

 

-29.7%

-38.5%

 

 

-34.0%

-44.4%

 

Net loss to shareholders

 

-358,359

-364,922

 

 

-1,281,699

-1,353,608

 

Net loss ratio

 

-28.0%

-33.9%

 

 

-31.0%

-40.9%

 

Net loss per ADS3, basic and diluted

 

-0.97

-0.99

 

 

-3.47

-3.81

 

 

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 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.

3 Each ADS represents three ordinary shares

Chairman，CEO and CFO Comments

“I am delighted to announce that, in spite of the difficult year just gone, our revenue increased 25% year-over-year, and the strong momentum of the growth of our premium4 and premium plus5 customers base demonstrated customer acknowledgement and market recognition of our products.” said Mr. Ye Wangchun, Chairman of the Board. “In 2021, we entered into our 2nd Stage strategy, focusing on strengthening products integration, deepening customer engagements, and empowering other participants within our ecosystem. We firmly believe it will fuel the long term growth of our company.”

Mr. Shen Chongfeng, Chief Executive Officer, commented “Efficient implementation of second stage strategy is critical to our success as we face a world with changing dynamics. OneConnect has established a strong foothold in the market, where the potential from digital transformation is immense. We will continue to reinforce our products integration and customer upgrade in 2022, to further solidify our position and fulfill our mission of supporting financial institutions to grow efficiently.”

Mr. Luo Yongtao, Chief Financial Officer, commented, “Our customer upgrades continued to bear fruit, evidenced by both the number of our premium and premium plus customers and their revenue expansion,” commented CFO Luo Yongtao. “Our number of premium customers grew from 594 to 796, almost doubled the growth of that of the prior year, and the number of premium plus customers, where is our key focus, grew from 168 to 212. Benefitting from our 2nd stage strategy on deepening customer engagements, the Net Expansion Rate for premium customers also improved to 96% from 84%. Our revenue increased 25% year-over-year. Our net loss ratio of 2021 further narrowed, from 41% to 31% year over year. This achievement reflects solid revenue increase performance as well as disciplined cost management, marking another milestone in the path to profitability. We are ready to go further this year.”

Revenue Breakdown

In RMB’000, except percentages

 

Three Months Ended December 31

 

 

 

Full Year Ended December 31

 

 

 

 

2021

 

2020

 

YoY

 

2021

 

2020

 

YoY

Implementation revenue

 

216,622

279,421

-22.5%

 

733,648

851,856

-13.9%

Transaction-based and support revenue

 

 

 

 

 

 

 

 

Business origination services

 

99,685

148,326

-32.8%

 

450,597

605,733

-25.6%

Risk management services

 

216,509

112,854

91.8%

 

534,071

362,530

47.3%

Operation support services

 

330,807

294,898

12.2%

 

1,097,719

1,061,445

3.4%

Cloud services platform

 

304,683

190,519

59.9%

 

1,050,179

314,338

234.1%

Post-implementation support services

 

15,818

20,606

-23.2%

 

49,447

55,678

-11.2%

Others

 

96,141

29,102

230.3%

 

216,696

60,710

256.9%

Total

 

1,063,643

796,305

33.6%

 

3,398,709

2,460,434

38.1%

Total

 

1,280,265

1,075,726

19.0%

 

4,132,357

3,312,290

24.8%

Revenue in 2021 rose 25% to RMB4,132 million from RMB3,312 million in 2020. Risk management and cloud services platform were the key drivers. Revenue from cloud services platform surged by 234% year-over-year. Risk management increased 47% year-over-year due to the increase in demand for an end-to-end risk management solutions. Others, which included revenue from insurer ecosystem participants, increased 257%, benefitting from our ecosystem expansion as part of our 2nd stage strategy.

4 Premium customers refer to our customers that have contributed revenue of at least RMB100,000 since the beginning of the applicable fiscal year, excluding Ping An Group and its subsidiaries, although this category includes certain customers that we have direct contracts with, and provide direct services to, where payments for these services have been made through contractual arrangements that we have with others, including Ping An Group

5 Premium plus customers refer to our premium customers that have contributed revenue of at least RMB1 million since the beginning of the applicable fiscal year.

Full Year 2021 Financial Results

Revenue Revenue increased by 25% to RMB4,132 million from RMB3,312 million in the prior year, primarily driven by more demand for solutions in risk management and cloud services platform. Revenue generated from business origination and implementation declined since we phased out certain products.

Cost of Revenue Cost of revenue was RMB2,696 million, compared with RMB2,069 million in the prior year, primarily driven by higher technology service fees and employee benefit expenses caused by expansion of operation and changes in product solution mix.

Gross Profit Gross profit increased by 16% to RMB1,437 million from RMB1,243 million in the prior year. Gross margin was 34.8%, compared with 37.5% in the prior year, primarily due to changes in product solution mix. Non-IFRS gross margin was 42.1%, compared with 46.7% 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 full year of 2021 amounted to RMB2,855 million, compared with RMB2,772 million in the prior year. As a percentage of revenue, total operating expenses decreased to 69% from 84%.

• Research and Development expenses for the full year of 2021 rose to RMB1,353 million from RMB1,173 million, reflecting investment put into enhancing existing solutions and innovations. As a percentage of revenue, R&D expenses amounted to 33%, compared with 35% in the prior year.
• Sales and Marketing expenses for the full year of 2021 totaled RMB588 million, compared with RMB629 million in the prior year, mainly due to a decrease in marketing and telecommunication expenses. As a percentage of revenue, sales and marketing expenses decreased to 14% from 19%.
• General and Administrative expenses for the full year of 2021 amounted to RMB842 million, compared with RMB835 million in the prior year. As a percentage of revenue, general and administrative expenses decreased to 20% from 25%.
• Net impairment losses on financial and contract assets for the full year of 2021 totaled RMB72 million, compared with RMB135 million for the same period in the prior year, reflecting better management efforts in trade receivables and contract assets. As a percentage of revenue, net impairment losses were 2%, versus 4% in the prior year.

Loss from operations for the full year of 2021 amounted to RMB1,405 million, compared with RMB1,470 million in the prior year. Operating loss margin decreased to 34% from 44% in the prior year.

Net Loss Net loss attributable to OneConnect’s shareholders totaled RMB1,282 million in 2021, versus RMB1,354 million in the prior year. Net loss attributable to OneConnect’s shareholders per basic and diluted ADS amounted to RMB3.47, versus RMB3.81 in the prior year. Weighted average number of ADSs for the full year was 369,430,420.

Cash Flow For the full year of 2021, net cash used in operating activities was RMB404 million. Net cash generated from in investing activities was RMB388 million, as scale of onshore borrowing using offshore pledges reduced and as a result restricted cash balance decreased. Net cash generated from financing activities was RMB1,612 million.

Conference Call Information

Date/Time

Thursday, February 24, 2021 at 8:00 p.m., U.S. Eastern Time Friday, February 25, 2021 at 9:00 a.m., Beijing Time

Online registration

https://www.incommglobalevents.com/registration/q4inc/10120/oneconnect-financial-technology-co-ltd-fy2021-earnings-release/

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 provider 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 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; 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 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 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 “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 December 31

 

Full Year Ended December 31

 

 

2021

2020

 

2021

2020

 

 

RMB'000

RMB'000

 

RMB'000

RMB'000

 

 

 

 

 

 

 

Revenue

 

1,280,265

1,075,726

 

4,132,357

3,312,290

Cost of revenue

 

-830,130

-707,356

 

-2,695,706

-2,068,834

Gross profit

 

450,135

368,370

 

1,436,651

1,243,456

 

 

 

 

 

 

 

Research and development expenses

 

-389,720

-349,223

 

-1,353,018

-1,173,290

Selling and marketing expenses

 

-164,999

-154,407

 

-588,380

-629,488

General and administrative expenses

 

-280,281

-247,650

 

-841,685

-834,917

Net impairment losses on financial and contract assets

 

-8,955

-63,121

 

-72,229

-134,519

Other income, gains or loss-net

 

13,647

32,194

 

13,921

58,432

Operating loss

 

-380,173

-413,837

 

-1,404,740

-1,470,326

 

 

 

 

 

 

 

Finance income

 

2,899

17,270

 

28,823

77,237

Finance costs

 

-14,634

-32,612

 

-76,637

-150,363

Finance costs – net

 

-11,735

-15,342

 

-47,814

-73,126

Share of losses of associate and joint venture

 

-886

-1,322

 

9,946

-7,802

Loss before income tax

 

-392,794

-430,501

 

-1,442,608

-1,551,254

 

 

 

 

 

 

 

Income tax benefit

 

29,625

43,616

 

112,095

137,131

 

 

 

 

 

 

 

Loss for the period

 

-363,169

-386,885

 

-1,330,513

-1,414,123

 

 

 

 

 

 

 

Loss attributable to:

 

 

 

 

 

 

- Owners of the Company

 

-358,359

-364,922

 

-1,281,699

-1,353,608

- Non-controlling interests

 

-4,810

-21,963

 

-48,814

-60,515

 

 

 

 

 

 

 

Other comprehensive income, net of tax

 

 

 

 

 

 

Items that may be subsequently reclassified to profit or loss

 

 

 

 

 

 

- Foreign currency translation differences

 

-104,778

-395,532

 

-152,542

-608,427

- Changes in the fair value of debt instruments at fair value through other comprehensive income

 

-17

-3

 

-16

-39

Items that will not be subsequently reclassified to profit or loss

 

 

 

 

 

 

- Changes in the fair value of equity investments at fair value through other comprehensive income

 

-1,796

 

 

-1,796

 

Total comprehensive loss for the period

 

-469,760

-782,420

 

-1,484,867

-2,022,589

 

 

 

 

 

 

 

Total comprehensive loss attributable to:

 

 

 

 

 

 

- Owners of the Company

 

-464,950

-760,457

 

-1,436,053

-1,962,074

- Non-controlling interests

 

-4,810

-21,963

 

-48,814

-60,515

 

 

 

 

 

 

 

Loss per ADS attributable to owners of the Company

 

 

 

 

 

 

(expressed in RMB per share)

 

 

 

 

 

 

- Basic and diluted

 

-0.97

-0.99

 

-3.47

-3.81

 

ONECONNECT CONSOLIDATED BALANCE SHEETS (Unaudited)

 

 

 

December 31

December 31

 

 

2021

2020

 

 

RMB'000

RMB'000

 

 

 

 

ASSETS

 

 

 

Non-current assets

 

 

 

Property and equipment

 

244,412

224,284

Intangible assets

 

687,194

917,063

Deferred tax assets

 

683,218

564,562

Financial assets measured at amortized cost from banking operations

 

674

25,283

Investments accounted for using the equity method

 

185,346

175,733

Financial assets at fair value through other comprehensive income

 

640,501

21,828

Contract assets

 

868

16,788

Total non-current assets

 

2,442,213

1,945,541

 

 

 

 

Current assets

 

 

 

Financial assets at amortized cost

 

3,515

 

Trade receivables

 

891,174

838,690

Contract assets

 

227,895

257,830

Prepayments and other receivables

 

749,152

443,328

Financial assets measured at amortized cost from banking operations

 

12,711

576,305

Financial assets at fair value through profit or loss

 

2,071,653

1,487,871

Financial assets at fair value through other comprehensive income

 

482,497

 

Restricted cash

 

1,060,427

2,280,499

Cash and cash equivalents

 

1,399,370

3,055,194

Total current assets

 

6,898,394

8,939,717

Total assets

 

9,340,607

10,885,258

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

Equity

 

 

 

Share capital

 

78

78

Shares held for share option scheme

 

-80,102

-87,714

Other reserves

 

10,512,631

10,639,931

Accumulated losses

 

-6,638,625

-5,356,926

Equity attributable to equity owners of the Company

 

3,793,982

5,195,369

 

 

 

 

Non-controlling interests

 

41,100

89,914

 

 

 

　

Total equity

 

3,835,082

5,285,283

 

 

 

 

LIABILITIES

 

 

 

Non-current liabilities

 

 

 

Trade and other payables

 

313,834

395,514

Contract liabilities

 

19,418

17,683

Deferred tax liabilities

 

9,861

20,080

Total non-current liabilities

 

343,113

433,277

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

 

2,137,099

1,547,781

Payroll and welfare payables

 

515,067

625,330

Contract liabilities

 

153,844

138,547

Short-term borrowings

 

815,260

2,283,307

Customer deposits

 

1,350,171

405,853

Derivative financial liabilities

 

190,971

165,880

Total current liabilities

 

5,162,412

5,166,698

Total liabilities

 

5,505,525

5,599,975

 

 

 

 

Total equity and liabilities

 

9,340,607

10,885,258

 

ONECONNECT CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

 

 

Three Months Ended December 31

 

Full Year Ended December 31

 

 

2021

2020

 

2021

2020

 

 

RMB'000

RMB'000

 

RMB'000

RMB'000

 

 

 

 

 

 

 

Net cash generated from / (used in) operating activities

 

491,478

727,558

 

-404,334

-704,145

Net cash generated from / (used in) investing activities

 

-581,152

601,176

 

388,435

1,315,725

Net cash generated from / (used in) financing activities

 

-388,349

-225,140

 

-1,611,781

1,533,838

Net increase /(decrease) in cash and cash equivalents

 

-478,023

1,103,594

 

-1,627,680

2,145,418

Cash and cash equivalents at the beginning of the period

 

1,893,693

2,080,392

 

3,055,194

1,077,875

Effects of exchange rate changes on cash and cash equivalents

 

-16,300

-128,792

 

-28,144

-168,099

Cash and cash equivalents at the end of period

 

1,399,370

3,055,194

 

1,399,370

3,055,194

 

ONECONNECT RECONCILIATION OF IFRS AND NON-IFRS RESULTS (Unaudited)

 

 

 

Three Months Ended December 31

 

Full Year Ended December 31

 

 

2021

2020

 

2021

2020

 

 

RMB'000

RMB'000

 

RMB'000

RMB'000

 

 

 

 

 

 

 

Gross profit

 

450,135

368,370

 

1,436,651

1,243,456

Gross margin

 

35.2%

34.2%

 

34.8%

37.5%

Non-IFRS adjustment

 

 

 

 

 

 

Amortization of intangible assets recognized in cost of revenue

 

71,270

89,943

 

297,406

293,141

Depreciation of property and equipment recognized in cost of revenue

 

884

305

 

3,633

2,978

Share-based compensation expenses recognized in cost of revenue

 

598

1,569

 

935

6,904

Non-IFRS Gross profit

 

522,886

460,187

 

1,738,625

1,546,479

Non-IFRS Gross margin

 

40.8%

42.8%

 

42.1%

46.7%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220224005790/en/

Investor Relations: OCFT IR Team OCFT_IR@ocft.com

Media Relations: Amy Ding Dingjingmin787@ocft.com