OneConnect Announces Fourth Quarter and Full Year 2021 Unaudited Financial Results

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.

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 2^nd 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 2^nd 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

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 2^nd stage strategy.

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

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.

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