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Operator
Ladies and gentlemen, thank you for standing by and welcome to the Qifu Technologies second quarter 2023 earnings conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please note today's event is being recorded At this time, I would like to turn the conference call over to Ms. Karen Chee, Senior Director of Capital Markets. Please go ahead, Karen.
Karen Chee
Thank you, operator. Hello, everyone, and welcome to Qifu Technologies' second quarter 2023 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 CIO. Before we start, I would like to refer you to our safe harbor statement 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 measures to GAAP measures. Also, please note that unless otherwise stated, all figures mentioned in this call are in R&B terms. Now, I will turn the call over to our CEO, Mr. Wu Haisheng. Please go ahead.
Wu Haisheng
Hello, everyone. Thanks for joining our second quarter earnings conference call. Since the second quarter of this year, we have felt that the recovery of the macroeconomic recovery of the macroeconomic recovery of the macroeconomic recovery of the macroeconomic recovery of the macroeconomic recovery of the macroeconomic recovery of the macroeconomic recovery of the macroeconomic recovery to pursue a reasonable increase. In the second quarter, our total amount of loans reached 12.42 billion yuan, which increased by 26.4% and increased by 13.5%. Compared to the first quarter, it should be said to be a further increase. By the end of the second quarter of this year, our platform has reimbursed 153 financial institutions.
Karen Chee
During the quarter, given the softening microeconomic recovery and a more cautious sentiment among consumer credit users, we remain committed to our prudent operating strategy and pursued meaningful growth while maintaining stable risk performance. In Q2, total loan facilitation and origination volume on our platform reached RMB 124.2 billion, up 26.4% year-over-year, and 13.5% quarter-over-quarter, reflecting an accelerated growth trajectory compared to Q1. By the end of Q2, our platform had empowered a total of 153 financial institutions and accumulatively served more than 47 million users with approved credit lines.
Wu Haisheng
Since this year, We are steadily advancing our strategic upgrade. While pursuing our high-quality growth, we are further improving our profitability, in order to improve our security editor, so that our business model is more resilient in the face of complex chaos. In terms of business growth, we continue to expand our diversified customer channel. We have developed a targeted product that satisfies the needs of users and diversifies them, and provides a new movement of growth for our business. Through all the year, we have made steady progress in advancing our strategic upgrades to further improve profitability while seeking high-quality growth.
Karen Chee
This will allow us to increase the margin of safety and strengthen the resilience of our business model against the complex macro environments. In terms of business growth, we have continued to expand and diversify our customer acquisition channels. By partnering with multiple leading traffic platforms under the embedded finance model, we have effectively expanded our coverage to the targeted users. We have also developed products tailored to different consumer and SME profiles, addressing varied users' needs and providing additional growth engines for our business. In terms of profitability, we have taken further steps to boost operational efficiency, reduce funding costs, and improve risk assessment capabilities to optimize asset allocation and improve the overall profitability of our loan portfolio.
Wu Haisheng
Now let me share some of our highlights in the second quarter. We are working with some of the mass-produced platforms such as Alipay and Alipay Pay, and we are relying on the larger base of this kind of active users from the product side. Through the joint modeling of the two parties, and through some innovative and customized customer identification strategies, our efficiency has been further improved, and we have increased the coverage of our advantageous customers. The number of new customers in the second quarter has increased by 16% compared to the first quarter. Therefore, the efficiency of the customers has been further improved. At the same time, we also used a 4.8% interest rate limit price test to better address a group of high-quality customers with stable new demand. We found that their motivation and demand for revenue are relatively better. This is also an effective supplement to our new customer group. Next, we will continue to explore the customer and contact methods of various customer groups. Through product innovation to meet this diversified user demand.
Karen Chee
First, we continue to expand and diversify our customer acquisition channels while leveraging innovative approaches to improve marketing efficiency. In July, we entered into partnerships with top-tier traffic platforms, including smartphone video platforms and payment providers, to tap into their massive active user base. Through joint modeling, process innovation, and tailored user identification strategies, we boosted user conversion and enhanced our ability to reach targeted users. With marketing spending largely flagged from Q1, the number of new users making drawdowns increased 16% sequentially. Furthermore, we offered some experimental compelling rates to boost engagement in a more innovative and effective way with high-quality users with stable credit needs stronger intention to borrow, and an appetite for larger credit lines, which also serves as an effective supplement to our existing user base. Moving forward, we will continue to explore effective ways to acquire and manage users from various segments, and address their diverse needs through product innovation.
Wu Haisheng
On the second hand, we have strengthened the user-centered operation. We have achieved a significant improvement in the activity of users. From the needs of users, we have optimized the products, risks, and operation strategies of our users' full life cycle to fully utilize the authenticity of our people and the data of Fan Xiaowei to accurately identify users. In fact, we have provided a more competitive and more flexible payment methods to meet the needs of more and more users. It also greatly improves the motivation of our new users and old users. In addition, we have more ways and means to reach users. In the second quarter, our new M0 kill motivation rate has increased by 13% compared to the first quarter. Second, we improved our user engagement capabilities and achieved a significant boost in user activity. Starting from user needs, we optimized our product
Karen Chee
risk, and operational strategies throughout the user lifecycle. We also enhanced our ability to identify users by leveraging PBOC credit data as well as data related to the broadly defined SME segments. This enabled us to offer more competitive rates and credit lines and a more flexible repayment method catering to varied users' needs while ensuring the stability of our risk performance. As a result, we saw a notable improvement in drawdown intention among new and existing users. In addition, through our diverse user outreach and engagement approaches, the first month drawdown ratio of new borrowers increased by approximately 13% from Q1 and the re-borrowing rate of existing borrowers, meaning the average percentage of existing borrowers with an outstanding loan balance that drawdown again the following month increased by approximately 8% from Q1. On top of this, we also introduced user loyalty programs and offered a broader range of products and benefits to boost users' engagement.
Wu Haisheng
The third aspect is that we continue to maintain stable pricing and a good risk level. We fully utilize our to further optimize our profit model. In the second quarter, we further intensified our cooperation with financial institutions, promoting the further decline of the overall platform capital cost, and the decline should be said to be above the average decline level in the market area. Through the innovation of product design, we have introduced a variety of state-owned banks and stock market-based investment The second quarter's A.B.S. release scale reached 53.4 billion yuan, which increased by 132%. This should further reduce our overall capital costs. As our risk-saving capabilities continue to improve, we have connected with more diversified financial institutions and cooperating partners to improve our ability to collect assets of all types. By continuously optimizing,
Karen Chee
Third, we kept our pricing and risk performance at stable levels, leveraging funding strengths to further optimize our economic model. During the quarter, our deepened cooperation with financial institutions contributed to a further reduction in our funding costs. That far outpaced the market rate cut. In addition, through innovative product design, we secured ABS investments from multiple state-owned banks and major joint stock banks. We issued roughly RMB 5.3 billion of ABS in a quarter, up 132% quarter over quarter, and leading to a further reduction in our overall funding costs. As our credit assessment capabilities steadily improved, we are collaborating with a broader spectrum of financial institutions, which will enhance our ability to optimize asset allocation and boost profitability.
Wu Haisheng
Fourthly, our financial technology strategy has been steadily promoted and has achieved initial results. We have further improved our product verification and resolution plans, It supports the need to diversify the bank. As a group, we have built a professional team that has the initial scale. We can provide more professional services to our financial institutions. For small and medium-sized banks, digital transformation has a very broad and large need. It also raises more questions to provide the needs of all-round technology and energy. We are now gradually entering the delivery phase.
Karen Chee
Fourth, our technology solution business advanced steadily and has begun to take shape. We further optimized our product matrix and solutions to address the diverse needs of our banking partners. In terms of organizational development, we assembled a sizeable team capable of providing professional service to financial institutions. Small and medium-sized banks are particularly keen to push forward the digital transformation with the support of our end-to-end tech solutions. A number of projects are currently in the implementation phase.
Wu Haisheng
Let's go back to the beginning of this year. Although the cultural environment faces many challenges, we also use our very stable business strategy to balance growth and risk. It should be said that it has achieved a very good performance. In the second half of the year, we will further expand our channel and product line, enhance our user connectivity, and further deepen the relationship We will continue to maintain a leading position in this industry.
Karen Chee
Looking back at the first half of 2023, despite the softening macroeconomic environment, we balanced the growth and risk through our prudent operational practice and delivered solid results. In the second half, we will further expand our channel presence and product offerings to enhance users' stickiness, forge closer partnerships with financial institutions, and optimize our asset allocation to improve our top-line On June 20,
Wu Haisheng
announced a return of $1.5 billion in the next 12 months. From the announcement to today, we have been very actively implementing our return plan. We are very confident in the long-term profit and cash flow of the company, so we will continue to return our shareholders through these plans to create more value for shareholders.
Karen Chee
On June 20, we announced a share repurchase program under which we may repurchase up to US$115 million worth of shares over the next 12 months. Since the announcement, we have been actively executing the program. We have strong confidence in the company's long-term profitability and cash flow performance and remain committed to rewarding and creating value for our shareholders.
Wu Haisheng
through those shareholder return initiatives.
Karen Chee
With that, I will now turn the call over to our CFO, Alex Xu, who will walk you through our financial results for the quarter.
Alex Xu
Okay. Thank you, Haisheng. Good morning and good evening, everyone. Welcome to our second quarter earnings call. Despite the slower than expected micro recovery, we continue to see modest improvement in many aspects of our patients throughout the first half of the year. Users' activity levels measured by drawdown ratios continue to improve in recent months, which led to the accelerated long-volume growth in Q2. Although the pace of micro recovery is still uncertain, We are proactively taking some actions to optimize our product and service offerings, strengthen relationship with key partners, and ultimately to drive long-term sustainable quality growth. In Q2, the quality of our user base remains solid. Key leading risk indicators were relatively stable near the best level of recent quarters. Day 1 delinquency was 4.2% in Q2 versus record-setting 4.1% in Q1. The slight uptick in Day 1 delinquency somewhat reflect Bauer's sentiment toward the ongoing micro uncertainties. 30-day collection rate was 87.2% in Q2 versus 86.2% in Q1. This sharp rebound mainly reflects seasonal factors as well as some improved collection efficiency. As economic recovery remains uncertain, we may continue to see some fluctuation of these metrics in the near future, although overall risk level should be relatively stable in our continued effort to proactively mitigate risks. Total net revenue for Q2 was $3.9 billion versus $3.6 billion in Q1 and $4.2 billion a year ago. Revenue from credit driven service capital heavy was $2.8 billion in Q2 compared to $2.6 billion in Q1 and $2.9 billion a year ago. The year-on-year decline was mainly due to overall decline in expected average tenure of new loans as well as lowered average interest rates. The sequential increase reflect growth in loan volume under capital heavy and the relatively stable effective tenants. Early repayment levels were relatively stable in Q2 versus Q1. Unbalanced loans continue to grow nicely and account for nearly 19% of the total loan volume. We issued a record 5.3 billion ABS up 143% and 132% year-on-year and sequentially, respectively, which helped us further lower our overall funding costs and drive for better utilization of our microlending licenses. Revenue from platform service, Capital Light, was $1.13 billion in Q2 compared to $969 million in Q1 and 1.24 billion a year ago. The year-on-year decline was mainly due to overall decline in expected average of the loans and also the modest decline in average prices. For Q2, capitalized loan facilitation, ICE, and other technology solutions combined account for roughly 58% of the total loan volume compared to roughly 56% in the prior quarter. We expect this ratio to be gradually trending down for the remainder of the year to a normalized level. Also, we are evaluating different components of our operations and seeking a better mix between risk-bearing and non-risk-bearing solutions based on microenvironment and operational conditions. During the quarter, average IRR of the loans we originated and or facilitated remain stable Q-on-Q well within the regulatory rate cap requirement. Looking forward, we expect pricing to be continued relatively stable for the coming quarters. Sales and marketing expense increased slightly Q-on-Q as we remained prudent and continued to diversify user acquisition channels. We added approximately 1.5 million new credit line users in Q2, roughly flat versus first quarter. Unit cost to acquire a new credit line user also increased marginally Q1Q at approximately 296. While we will continue to drive for efficiency in our operations, we may adjust the pace of our new user acquisition based on micro condition throughout 2023. Meanwhile, we will continue to focus on reenergizing existing user base as repeat borrowers historically contribute vast majority of our growth. Although we will continue to take a prudent approach in booking provisions against potential credit losses, we should expect further right back of provisions from previous periods as overall risk profile of our loan portfolios has been stabilizing to improving. Total new provision for risk-bearing loans in Q2 were approximately $1.9 billion. And the write-backs of previous provisions were approximately $525 million. Provision coverage ratio, which is defined as total outstanding provision divided by total outstanding delinquent loan balance between 90 and 180 days, or 511% in Q2. compared to 432% in Q1. With solid operating results and stable contribution from cap-light model, our leverage ratio, which is defined as risk-bearing loan balance divided by shareholders' equity, was again at a historical low of 3.3 times in Q2, compared to four times a year ago. We expect to see leverage ratio fluctuated around this best level in the near future. We generate approximately $1.8 billion cash from operations in Q2, roughly flat Q on Q. Total cash and cash equivalent was $8.5 billion in Q2 compared to $9 billion in Q1. Non-restricted cash was approximately $5.3 billion in Q2 compared to $5.1 billion in Q1. The sequential decline in cash position was mainly due to increased cash usage in our balance sheet lending. As we discussed earlier, we will continue to look for opportunities to deploy resources to launch new initiatives, develop new technology, and expand service offerings. Non-GAAP net profit was $1.147 billion in Q2 compared to $976 million in Q1. As we continue to generate healthy cash flow from operations, we believe our current cash position is sufficient to support our business development and to return to our shareholders. In Q1's earnings call, we announced to increase our dividend payout ratio to 20 to 30% and switch to a semiannual dividend distribution schedule. Today, we're glad to declare a semiannual dividend of 25 cents per ordinary share or $0.50 per ADS in US dollar bills, which represent approximately 30% of the payout ratio. Also, in June 20, 2023, we announced a share buyback plan to repurchase up to $150 million over a 12-month period. As of August 18, 2023, we have already bought approximately $28 million worth of our ADS in open market and an average price of $18.03. We will continue to execute the buyback program in accordance with the relative rules and regulations. With the full execution of the repurchase program and the dividend plan, we may return more than half of our net profit to our shareholders. Going forward, we will continue to optimize our capital allocation plan and make timely adjustments to generate higher returns to our shareholders. Finally, regarding our outlook. Well, we see accelerated year-on-year growth in long-volume in Q2, which is in part driven by easy comp. We do notice continued uncertainty in microeconomy. At this junction, we still see a slow recovery in consumer credit. with a growth rate somewhat depending on micro conditions for the rest of the year. As such, we would like to adjust our full-year total long-volume target for 2023 to between RMB $470 billion and RMB $485 billion, representing a year-on-year growth of 14% to 18%. As always, this forecast reflects the company's current and preliminary view, which is subject to material changes. With that, I would like to conclude our prepared remarks. Operator, we're now open to take some questions.
Operator
Thank you. As a reminder, to ask questions, you will need to press star 11 on your telephone. For those who can speak Chinese, please kindly ask your questions in Chinese first, followed by English translations. In addition, in order to have enough time to address everyone on the call, please skip it to one question and one follow-up, and return to the queue if you have more questions. Please stand by while we compile the Q&A roster. First question comes from the line of Alex Yeh from UBS. Please go ahead.
Alex Yeh
Hello, Mr. Guan. Thank you for your question. My question is, in the past two years, especially in the second quarter, we have seen that the amount of loans has exceeded expectations and exceeded the internal expectations of Mr. Guan. However, we have seen that the receivables seem to be a little slower, including the including the interest rate of the loan is also slower than the volume. I would like to ask if the reason behind this is still related to some structural changes in the period of repayment mentioned earlier, or is it that our product structure has actually changed a bit? As mentioned earlier, there have been some changes in the product offering. How should we look at the future income takeaway trend? So my question is, so there appears to be some dislocation between the strong volume growth and the less strong revenue growth in the past two quarters. So is it mainly due to the higher rate of payment issue, or there is some product make change that lead to such changes? So how should we expect the revenue take rate trend going forward? Thank you.
Alex Xu
Sure. I think I would take this one, Alex. And you're probably right. Basically, the reason that the loan balance grows as well as the revenue grows slower than the loan volume grows is mainly because of the duration of the loans, at least so far this year, are shortening. which in part because of the issue we encountered in the first quarter of the early repayment. If you recall, in the first quarter there was a pretty significant impact on the revenue stream because of early repayment. Even though the second quarter, you know, we saw that the early repayment sort of peaked around the April timeframe. and then start to gradually, although marginally trending kind of to the right direction for us, but still compared to sort of historical average, we're still seeing a shorter kind of duration of the loan book. That shorter duration would definitely result in a kind of a slower accumulation of the loan balance and also the slower or kind of a slower growth in revenue relative to the loan volume. We are, I guess, from product mix perspective, they didn't have too much significant kind of directional impact, say, you know, we're taking in a bunch of new products that happen to be shorter duration. No, I don't think that's a significant factor, and it's more so has to do with the issue I mentioned earlier Then going forward, we are, ever since the second quarter, we are taking some kind of measures to gradually kind of move the duration or move the tenure of the loans to a longer period. As I mentioned, since May, from May to July, we see a gradual kind of improvement, you know, so far. And for the second half, you know, we'll continue to take some actions to manage the duration. And hopefully the second half, the revenue take rate, you will see a little bit improvement or increase compared to what you're seeing in the first half.
Operator
Okay. Thank you very much.
Alex Yeh
Thank you.
Operator
Thank you for the questions. One moment for the next question. Next question comes from the line of Frank Zheng from Credit Suisse. Please go ahead.
Frank Zheng
感谢管理层给我提问的机会。 我是瑞幸的郑豪。 那第一个问题是关于波倍和冲毁的。 那基于目前咱们看到最近的一些宏观环境的发展, 以及基于公司目前这个刚刚说到Provision Cup Ratio已经有进一步的提升, In the future, will we have more cautious arrangements or more space for recovery? The second question is a follow-up to the first question about the new 9-7. Can the management give us some specific measures to improve the new 9-7? Thank you management for giving me the opportunity to ask questions. This is Frank from Credit Suisse. The first question is, Based on the latest microenvironment and the critical risk performance of the portfolio, do we foresee any extra provision we need to take, or is there any more room for extra write-back going forward, especially considering the provision cut ratio recorded another step up to over 500% this quarter? And the second question is a follow-up of the previous question, could the management give us more specific measures taken to improve the duration of loans? And I just want to just curious that in the current macro environment, are we preferring, you know, longer duration or shorter duration? Thank you.
Alex Xu
Okay. I think I will take the first part, and then I will let our CRO, Mr. Zheng, answer the second part. So in terms of provisions, as you know, we have been on a very consistent policy to book our provisions conservatively and make sure that all the provisions are more than enough to cover the potential risks there. And if you look at a historical kind of financial report of us, basically, other than the very special quarter, one or two quarters, for the majority of the period, we have the write-backs from the previous provisions. As I mentioned in my prepared remarks, I think right now we see it relatively stable, although some fluctuation in the risk profile. So you should continue to see write-backs in the coming quarters, although the size of a write-back we can determine at this point. It's up to a multiple, the third-party evaluation and also all the other factors. But directionally, you will continue to see write-backs in the coming quarters. And we will, in terms of continue booking additional provision, we will take more prudent approach based on our observation of the microenvironment. And if we feel necessary, we will book more provisions to counter the potential risk. The provision coverage ratio we mentioned, the 511% versus last quarter's 430-something, that's not a metrics we have a target on. It's more than a, rather than it's a calculated number. So we booked provision and then, you know, when we do the calculation, it happened to be 511. And so that's, that's not a something indication that we're targeting a higher coverage ratio or something. No, it's more, you know, we book provision basically based on that quarter's loan volume and the third party's evaluation. I will stop here, and the second part of the question, I will hand over to Mr. Jim.
Zheng
Okay, I will say it in Chinese. Can you hear me? Yes. Hello? I will say it in Chinese, and then please, Kevin, help me translate it. Okay, and then the loan deadline, in fact, is composed of the loan contract deadline and two parts of the advance payment rate. We believe long duration is a combined result of contract retainer and early repayment. So first, I will talk about the early repayment.
Karen Chee
Early repayment was steadily declining, mainly due to the macro environment changes. And the second reason is our operational efforts. 从宏观因素来讲的话,我们现在客户的期间还款需求现在是看到是在降温的。
Zheng
We observed that from April to July, the supply and demand rate of history's stock assets has been steadily decreasing for four consecutive months. The second part is the operation action. Recently, we have also been optimizing some operation strategies to reduce the supply and demand rate. Mainly, it includes three actions. One is to release the latest phone sales basic law, and use the supply and demand rate as a test indicator. Under this basic law, its number of pictures and customer selection will be inclined to allow customers to lower the return rate in advance. The second is that we have added some benefits to restore some customers in the return page in advance. The third is that we have optimized a strategy for our issuance of vouchers. We have reduced the usage ratio of 7-day vouchers under certain scenarios. Under this optimized strategy, our return rate in advance will also decrease further.
Karen Chee
From macro perspective, the early repayment sentiment was cooling off. We have observed that the early repayment ratio for our historical loan portfolio has been decreasing for four consecutive months from April to July. And from operation perspective, we have refined our operation strategy to reduce the early repayment in three ways. The first is we applied a new telemarketing rules to incorporate the early repayment ratio into the KPI of the salesperson, so the salesperson can to control this ratio. Second, we offer some benefits to retain the users when they have the intention for early repayment. Three, we reduced the seven-day interest-free coupon to avoid those short-term borrowers. Based on those optimizations, we have seen improvement in our early repayment situation.
Zheng
we will aim to give them a longer period of time to reduce the return pressure of customers. However, if we face a customer whose long-term return capacity is relatively low, but short-term return capacity is still acceptable, we will aim to reduce the risk threshold of customers, and at the same time shorten the payment period of customers to control the risk performance. The different risk attributes and payment amount of customers will have different impacts on long-term and short-term credit risks. We will further replace the GBS-T model that we mentioned before, which is the T-degree survival rate model, to improve the compatibility and adaptability of the client's deadline, so as to balance revenue and risk. Overall, we feel that under the influence of the red light factor and our active management, we expect a three-week delay rate indicator to go down further, and in fact, 97% will increase.
Karen Chee
As for contract retainer, we won't say shorter the better or vice versa. We offer the tenure based on the user's profile. For example, for those who have stable income and higher credit worthiness, we tend to offer a longer tenure to lower their repayment pressure. But for those who have less long-term disabilities, we tend to reduce the risk exposure and shorten the tenure to control the risk. So different user profile and ticket size will have different impact on the short-term and the long-term credit risk. We will further upgrade our self-developed GBST model, the gradient survival tree model, to improve the fitness of long tenure and balance the profitability and risks. In conclusion, Under current macro conditions and our proactive management, we expect the early repayment ratio will further decline and our effective loan duration will increase in Q3.
Zheng
I hope this answers your question.
Operator
Thank you for the questions. We move on to the next questions from the line of Emma Xu from Bank of America Securities. Please go ahead.
Emma Xu
Thank you for giving me the opportunity to ask this question. I would like to ask about the loan demand and loan interest in the third quarter. We saw that in July, the short-term loan of residents dropped 4.2 billion yuan. I have two questions. The first one is about the long demand in third quarter. We see the short-term consumption, household consumption loan declined $42 billion in July, and it seems the consumption recovery remained lackluster. So what do you see the loan demand at your site? And the second question is about loan pricing. So will the lackluster loan demand impact your loan pricing? And with the LPR being cut for twice since June, do you also need to adjust down your loan pricing? Thank you.
spk00
Thank you, Emma. Let me answer your question.
Wu Haisheng
We also noticed that in July, there was a decrease in the transfer rate. From our own perspective, we noticed that Thank you, Emma. I will answer your question. We also noticed that the citizens' short-term loan has decreased in July. From our perspective, our loan balance continues to increase in July and August.
Karen Chee
Unlike the declining trend of the citizen's short-term loan balance.
Wu Haisheng
From the perspective of demand, we have also found some structural changes since this year. This structural change is reflected in several aspects. The first is from the perspective of user quality. We found that some of the best customers is more likely to pay in advance. For some free customers, the demand is relatively stable. Another aspect is the use. In terms of use, there is a decrease in the demand for consumer products. The demand for micro-customers is a steady rise. In terms of industry, it is reflected in the construction industry. From demand perspective,
Karen Chee
Since the beginning of this year, we have seen some structural changes in terms of users' demand. From user quality perspective, the highest quality users tend to repay the loan earlier, while the lower quality users have relatively stable demand. And from the usage perspective, the borderline defined SME users are more active than the consumer credit users. especially for those in the construction, transportation, tourism, hotel, and catering industries. Plus our operational efforts, we have gained efficiency improvement in managing the broadly defined SME segment.
Wu Haisheng
In this kind of low-cost consumption, we may be able to Given the software consumer credit amount, we expect to increase our spending on the broadly defined SME users.
Karen Chee
we will increase our penetration in the broadly defined customer segment in new user acquisition. And for the existing users, we will improve our service qualities to improve the users' stickiness.
Wu Haisheng
Regarding the price of the loan you mentioned, we judge that the price will be relatively stable in the future. From a history point of view, we believe
Karen Chee
In terms of the pricing, we expect the pricing will be stable in the future. From our past experience, the LPR rise or cut had very little impact on our pricing. Our pricing is mainly determined by the supply and demand in this market.
Emma Xu
我就这些,看有没有回答你。 谢谢,非常有帮助。 Thank you for the questions.
Operator
One moment for the next question. Next question is from the line of Yada Li from CICC. Please go ahead.
Yada Li
Hello, management. Thanks for taking my question. This is Yada with CICC, and today I just have one quick question. I was wondering, could you please elaborate more about the consideration behind the $150 million share repurchase program this time? And should we consider it as a regular way to return value to the shareholders?
spk00
Thank you.
Alex Xu
Okay. Thanks for your question. You know, basically every quarter, We are reviewing our cash position as well as our capital allocation kind of a strategy. And when we determine that there are actual, we consider the free cash sitting there idle without making too much of a return, then we would like to deploy that cash either in the form of the dividends or in the form of the buyback. So that's an ongoing process in the future quarters as well. And we consider an optimal balance between the buyback and a dividend is the best way to return to the shareholders. So, like I said, the first thing first, we need to complete this $150 million U.S. buyback program. And along the way, we will do our pre-article review to determine what to do afterwards there. But longer term, I would say some kind of a combination between the buyback and the division.
spk00
Thank you.
Operator
Thank you for the questions. In the interest of time, I'll now conclude the Q&A session. I would like to hand the call back to management for closing remarks.
Alex Xu
Okay. Thanks for everyone joining the conference. Since we have our peers right behind us in their learnings course. So to the courtesy, we just conclude our call here. If you have additional questions, please contact us offline. Thank you.
Operator
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
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