Q3 2023 FinVolution Group Earnings Call
Hello, Ladies and gentlemen, thank you for participating in the third quarter of 2020 earnings conference call for evolution.
At this time, all participants are in listen only mode.
After management's prepared remarks, there'll be a question and answer session.
Today's conference is being recorded I'll turn the call over to your host Jimmy Tan head of Investor Relations for the company. Please go ahead.
Okay.
Hello, everyone and welcome to the third quarter 'twenty three earnings Conference call. The company results were issued via Newswire services earlier today and I posted online you can download the earnings release and sign up for the company's E mail alerts by visiting the IR section of our website at <unk> Dot Dot com.
Mr. T agenda, our Chief Executive Officer, and Mr. Jogging, Shea, our Chief Financial Officer will start the call. We've got prepared remarks and comfortably for Q&A session.
During this call we will be referring to several non-GAAP financial measures to review and assess our operating performance. These non-GAAP financial measures are intended to be considered isolation or as a substitute for the financial information prepared.
And presented in accordance with U S GAAP.
Information about these non-GAAP measures and reconciliation to GAAP Magis features with our earnings press release.
Before we continue please note that today's discussion will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 90, 95 forward looking statements involve inherent risks and uncertainties as such the company results may be materially different from the views expressed today.
Further information regarding these and other risks and uncertainties are included in the company's filings with that you asked to correct. Yeah Exchange Commission. The company does not assume any obligation to update any forward looking statements, except as required under applicable law.
Finally, with a slide presentation on our IR website, providing details of our results for the quarter.
I'll now turn the call over to our CEO will inspect here generally Pease go ahead Sir.
South of Jimmy.
Hello, everyone and thank you for joining our earnings call.
As I said generally CEO of pinnacle.
Yeah happy to speak with you.
During the so-called her we steadily executed our local focus global outlook strategy.
Addressing our efforts to build our business throughout the Pan Asian region.
Accumulatively.
We are proud to have.
Or 29 meeting borrower in China.
And as you say to people.
How do we continue to expand our work in these countries.
We have a pipe more deeply into our region.
No.
That's led to point them.
Those are usually the opposite.
Flower original founding partner for.
And now it's about our loan facilitation ratios across different countries.
Currently improving our capability.
To throw more borrowers in our market.
We plan to leverage and to replicate this success.
As we expand into additional countries.
We are also strengthening our presence in.
Existing market.
China is supposed to call it economic recovery.
To progress gradually during the third quarter.
With the micro data, reflecting improvements in different areas.
Yes.
In September.
<unk> confidence index.
But I to late 287 points.
But it's still hovering at a relatively low level.
Also according to data from the nation know their tastes take over the world.
And pull them into rate officially peaked at five 3% in July.
Before trending down two 5% in September.
Although there has been some moderate recovery in the consumption market.
The bulk of the recovery has been in children's education about Mad Medical health care domestic travel and other offline activities.
Purchase intention for big ticket, but so you could take a I tried this property car and the luxury good remained relatively weak.
Meanwhile, the overall macro environment in Indonesia.
Doug it's overseas market.
We remained robust as a region is at you know what's the stage of development.
So yes.
And when you start to consumer confidence confidence index from over there.
October remained high at about 120 Powerpoint.
A positive indicator for increasing consumer spending.
It's employment rates in September also decided to self fund.
8%.
Comparator be five points at night per tonne in the same period of last year.
It's the lowest level since the fourth quarter of 'twenty 'twenty.
Thus far our.
Take our approach of maintaining prudent Hercules progressive growth in China market.
We are pursuing right paid girls in the international market has proven very effective ended their current and even micro condition.
Okay.
Yeah.
They're all making for China's economy to recover at a faster rate.
We have been constantly investing in R&D to further streamline our processes.
Customer experience and achieve operational efficiency improvements.
Since 2018.
We have deployed around the RMB two point full feeling to Dubai developed cutting edge technology technologies.
And then implement.
Our business operation.
In particular.
We made notable progress with Blue B L U.
Our AI powered chatbot.
Which now supports operations.
Six different countries.
Language Akshay.
Chinese and English.
Ah ha and the Spanish.
Furthermore, by integrating blue with our human lung collection personnel for daylight reminder, calls.
We have achieved cost savings of up to 80%.
While maintaining our returns starting to cost efficiency levels.
Produce effectiveness again, showcasing our R&D prowess as well as our ability to improve operational efficiency.
He's a primary pickup yet not yet.
It takes time.
So that it can be seamlessly applied in our operation across different markets.
To begin <unk>.
We continue to leverage Aig's eat to boost social media engagement for our overseas business.
Increasing our campaigns audience targeting accuracy and achieving great Hey, got greater visibility on landing a leading social media platform.
Thanks to our engaging yeah G C driving at a rate where it has been I thought you meant to use of the technology.
Our followers on Facebook is suppressed.
1 million Millstone.
Our followers on peak power grew to around 740000.
As always.
We continue to promote financial inclusion.
And that reflects our commitment to social responsibility and it supports our business goals.
Our average borrowing rate.
China maintained today.
So they both sequentially.
Making our products and services accessible to even more borrower.
I'm pleased to report that despite all the macro uncertainties.
Evolution group total transaction volume for the third of culture.
<unk> to RMB 51 paid it.
Well, our outstanding loan balance grew to RMB 6668 6 billion.
It represented a year over year increase of 13% and a nine perfect.
Respectively.
The results clearly demonstrates that our local focus global Alice I'll look stretching it not only viable but it at.
It's also scalable.
Which is a critical factor for our railcar girls.
On a related note I would like to share a brief update on our recent ESG initiatives.
Our dedication to assist dependability, and giving back to society.
It remains at the heart of our corporate values.
The forms a core part of our identity.
Over the last couple of years. The company has made a favorable chart boat trips to the China.
Market area.
It's a year later, they paid US 300, vegetate renewable energy Xtreme labs to improve if you forget the doctor for the local villagers.
We also organized a unique schooling.
So children at the fee evolution kindergarten at another of our long standing community projects in the area.
Going forward, we will continue to align our ESG and the business goes to maximize our positive have positive societal impact.
They're all creating value for all of our stakeholders.
To summarize the third quarter of 2003 was not without challenges.
But of our firm and the focused execution of our local focus global all loose the judge Street alongside Pike innovation empowered our steady progress and have strengthened our foundation supporting long term that's attainable girls.
It will continue to embrace inclusion accessibility and technology as we seek to serve Barbara throughout the Pan Asian region.
Despite her financial services.
Is that I will now turn the call over to our CFO and she.
Because of our operational and financial results.
Thank you Lee and Hello, everyone.
Welcome to our third quarter, it's hard to tell your story and they call it.
In the interest of time I will not go through all the financial items on this call.
Please refer to our news release for further details.
As he mentioned.
The domestic macro recovery has been gradually and they refracts in either improvements in certain areas.
Well it is the official manufacturing purchasing managers index PMI from August through October fluctuated between.
14, 9.7, 15.2, and 14 nine five points. According to data released by the National Bureau of Statistics, Oh, Tuba City win 1919 on 23.
Meanwhile, total so ship financing data October increased to RMB, one eight trillion up 9% from the same period last year.
Total retail consumption in October increased to RMB four point full Pi three trillion up 7.66% compared with the same period last year.
All are stable and the better quality borrower base and Paul It is to maintain stay fast and the resilient operational metrics that domestically in the third quarter. Despite the uneven microenvironment.
Cumulatively, we have assumed that around 25 million followers in China.
What is the number of unique borrowers remaining stable at around two 3 million.
Additionally, our domestic transaction volume reached RMB 14 9 billion.
11% year over year and 8% sequentially.
Meanwhile, our outstanding loan balance reached RMB 16, 4.6 billion at September 30 tended to do three up 8% year over year and 3% sequentially.
All of these achievements demonstrate our solid Danny in the China market and also highlight our unwavering commitment to serving our customers.
We continue to employ put at risk measurement techniques and in fact, you broad at the packaging technologies.
Resulting in only minor fluctuations in our rich levels during the quarter.
They wouldn't delinquency rate was 5.7% Y Vinci delinquency rate is expected to be around 2.4% to two 5% for the culture.
Going forward, we will continue to monitor the credit risk performance closely and to make timely adjustments when necessary.
Finally, most needed by the AI powered Chatbot recently mentioned that Liberty our loan collection team kept the loan collection recover rates at around 18, 9%.
Furthermore, we're continuing to add a new founding partners.
When you all were accumulating member to a T H financial institutions with a strong pipeline of potential future upon nursing place.
These are pushing no achievements enabled us to maintain a healthy take rate of around three 1% during the third quarter.
Recognizing the critical Joel is that just more penis play in our economy.
We also upheld our commitment to small business owners with unwavering support during this bumpy recovery period.
During the quarter, we still have that wrong, the forced out of the country and the 48000 small business owners and facilitated RMB 12, 3 billion of loans split them.
Representing an increase of 9% compared with the same period of last year and 7%. So appreciate it.
Now, let me move on to our international expansion efforts.
As a D should Indonesia, our largest overseas market each enjoyed ongoing growth.
Macro economy during the third quarter.
Sales of motorcycles, the most popular mode.
Of transportation in Indonesia has also accelerated.
During the first name was off 23, motorbike sales were up 31% compared with the same period of 2022.
Reaching around 4.7 million units.
A positive indication of growing customer spending.
Give me this promising trends in the data points, we anticipate the Indonesia as a domestic consumption will remain robust.
[noise], we were pleased to report another quarter of significant improvement in all overseas marquee each across multiple operational and the financial metrics.
Cumulatively, we have served over 4 million followers in Indonesia, and the Philippines and it continued to rapidly I tried to new borrowers in these regions.
The number of unique borrowers during the quarter reached another new high edge, NIE hungry and a 28000 of 27% year over year and 18% just accretion.
Furthermore, we continue to increase the publishing of institutional funding either eating Indonesia, as we jessant, our local presence and the board and our local network.
For the third quarter, the percentage of loan facilitated for our local financial institutions and reached 17, 4% compared with 15, 5% for the same period last year.
As a result international transaction volumes surged by 19, 9% year over year, and 21% sequentially and eight two M. B 2.2 billion what is the culture.
We also set a new record in outstanding loan balance and I'm be one 3 billion up one country, and a 2% year over year and 16% sequentially.
As well as the revenue contribution of RMB, five country and 85 million.
67% year over year, and representing around 18% of total revenue.
Leveraging all the extra bad raises of shifting to bad to a quality mall Ross in China. We also take a proactive approach to acquiring bad bad who quality borrowers in the Indonesian market.
Apart from the online lending business. We're also pilot testing and offline business model with a different consumption now raised to provide more holistic service for our borrowers.
Yeah Dishy, we're also actively exploring the acquisition of additional license to better support our local operations.
Yes.
Driven by what dedication to I N D innovation as well as our successful execution of our low cold flow Cris global outlook strategy.
Net revenue was split instead of coach go to RMB, three 2 billion up 8% year over year, and our secretion increase of 4%.
Yeah.
Sales and marketing expense increased by 13%. So of course, you need to be 500, and the $30 million.
Increased efforts to acquire plateau quality borrowers so diversified channels.
Number off of new borrowers in the China market increased by 7% year over year in the 12% just a question or two for country and 6000.
Notably the number of new borrowers in the international market increased by 27% year over year, and 6% sequentially to four country and a 23000.
In total we acquire.
Right around 800, and the 29000, new borrowers during the third quarter up 16% year over year and 23% just to Christianity.
Net income for the quarter was I'm b five country, and 75 million a sequential decrease of 2.6 per se.
Our leverage ratio, which is defined as risk bearing loads divided it by shareholders equity remained stable at four one times, indicating future growth potential as the overall macro economy recovers to a healthier state.
I wanted to jump balance sheet, and our liquidity position continues to enhance shareholders' confidence why providing us optimal flexibility to execute our strategy.
In particular.
Our cash position remains robust with over RMB, eight 5 billion of cash and short term liquidity at the end of September 'twenty to 'twenty three.
Representing an increase of 58% year over year, and 4% quarter over quarter.
We believe our current cash position is sufficient to support our business expansion and the route to value to our shareholders.
Before I conclude let me briefly update you on our share repurchase program.
For the first nine months of the year, we have deployed around U S 66 million to repurchase our shares in the market.
As of September 33, we have cumulatively returned the U S five country and $11 million to our shareholders in the form of share repurchase and the dividend distribution.
Blacking, almost junk commitment to enhancing shareholder value.
In summary.
Our solid results for the third quarter, a testament to the effectiveness of our local focus global outlook strategy.
As well as our nimble business model and the technology call advantages.
We have used our time wisely doing China and you impose the Kobe recovery and are poised to be at four point of the industry when the recovery accelerates.
Looking ahead, we will remain focused on developing and implementing cutting age technology, while expanding our healthy customer base.
We're driving growth and creating greater value by making fallacious always better.
With that I will conclude my prepared remarks, we will now open the call to the question.
Operator, please continue.
Well now begin the question answer session.
That's good question Press Star then one on your Touchtone phone.
Using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
This time, we'll pause momentarily to assemble the roster.
For the benefit of all participants on today's call. If you wish to ask questions to management in Chinese.
We ask the couponing, we repeat your question in English.
First question will be from Alex Xie of UBS. Please go ahead.
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Okay.
Hello, Alex This is Jamie let me translate for Alexis.
The overall economy in China, such as the PMI Coca.
Protests, which are financing.
A recovering very slowly and being affected by these factors our base metrics have some fluctuations during the quarter.
For example, during the during our day, one delinquency was around five 7% and they want to 30 days long collection recovery rate was around 80%.
89%, while 90 days, but couldn't continue with around 167% and we had actually done certain things such as increasing.
Chrissie and update the model of our period and more of this.
Such as truly a repositioning of data mining data analyzing and user behavior analyzing we have increase.
And how does the credit Union, a crazy and we have also exactly use every payment willingness and probably be off.
Default rates for post Malone modest.
We have deployed different tools, such as wechat push I via an automated loan collection robust.
To design a combination of remodel strategy.
Such combination strategies have proven to be effective.
Action in delinquency rate of up to 0.5% absolute amount.
And for borrowers with probability of missing payments due to carelessness, we would also remind that in advance.
On our collections costs, we spent members into different categories, such as prepayment behavior.
Ending loan balances.
And changes in that boardroom with debt levels and using all of these strategies our repayment, we actually increased by around 2%.
The slow recovery in economy, and slow recovery in consumer confidence.
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And past really important metrics for us and based on all these strategies that we have deployed our day one metric in the fourth quarter of high school should remain at similar level with the third quarter.
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Hello, Alex Let me do the translation for Aleksey.
Indonesia overwhelmed macro economy is much more robust in the China market. It comes off and preliminary consumer confidence index et cetera, and the risk metrics for our Indonesia market has been stable over the last one year in.
In the third quarter I believe you have also noticed that we have acquired many new borrowers to maintain Brexit proof and this is the reason why we are having more flexible more flexibly default risk metrics.
And we will segment, our ballroom awards into different segments in order to achieve a better and more accurate.
Profiling.
And also the U S interest rate increase is ending student and which will be very beneficial for our international business.
Oh, Hi, Alex the washer ticking quite hear you need other conditioner from Canada.
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Hello, Alex Let me do the translation for team.
Alexey suspension of the China economy is recovery slowly and past have some fluctuation in the risk metrics and in Q3 days, it's sort of a small credit cycle ongoing and going forward in 'twenty four we beat our credit risk will be better and fulfill dilution.
I'm, all along our credit our asset quality has been better than.
Amongst which we believe will be very beneficial for us when the economy recover.
Yes.
Okay. Thank you.
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Yes.
Thank you next question will be from Yodlee Hep C. N C. C. Please go ahead.
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Then I'll do the translation Hello management. Thank you for taking my questions.
And that's my first question is regarding the looming demand during.
During June 23, we are doing kind of recovery of user demand and are looking forward to the end of next year I was wondering if how to view the overall growth trend and what artists a consensus that we may have accelerated or slowed down the pace of our loan growth.
And the second question is about international business what.
What it will be the volume revenue and appropriate contribution from the overseas branches. This year and next year and we were in the nature of maintaining the high growth trend and how to view the profitability and the prospects of the auto branches. So she has a very punitive than it would be unknown.
Thank you.
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Hello, Eric I'll, let me translate for Alex's.
Okay front in China, we think that the demand is growing as we continue to invest in the acquisition of Newport concurrently working to reactivate inactive repeat borrowers.
We can have a few data.
From internal demand right.
The application rate for free people has maintained a steady growth of around 3% and four new boat I'm sorry.
And from new borrowers.
You shouldn't read also showed an increase of between 4% to 7%, we think that consumer must be recognized our brand and it's much more active.
Based on the current weakness recovered weakness on the recovery of the macro environment, we need to have a certain judgment.
And we need to balance.
The growth in demand and also our risk metrics and we believe we need to have more patients.
In the overall recovery as is our top priority metrics right now and we would balance the risk metrics together with the loan demand of the consumers in order to achieve high quality group.
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Well my target single city being say a junior when you go out and go to the changer talk I'd be shunyata equate them to authenticate yourself.
Uh huh.
We'll learn through the <unk>.
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Uh huh.
Well most of it just keep watch out.
So yeah, we should do all of them once we at TV now.
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Yeah hard to forgive me I'm afraid I can't call Yeah.
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Can they go mobile phone shop.
No.
We spoke of and I'm not sure. They can shop usual send you the woman's at Hooker for Amanda to go to Oh, we have a lot of good even if gotcha.
So quite a change though.
Yes.
So you know, it's all moved chancel, even as you could tell me it sounds like you guys will have with him.
Yeah.
No I'm, just asking that it used to do when they go to shoot about Ghansham Calder could shoot that don't need to go deeper in that you cannot actually you could see that it's actually going to equal.
Yes.
Yeah, well, let me do the translation for the second question.
The macro environment of Indonesia, and the Philippines is much more robust when compared to our China monkeys, and all these positive macro environment factors actually support our rapid development in these countries.
You can see that.
Our transaction volume.
And during the third quarter was about $2 1 billion, while our outstanding loan balance was about 1.29 billion outstanding.
Outstanding balance was up 102% per year and transaction volume was up 99%.
And the number of new Ballroom was also weak.
Hi, all 423000 up 27% year over year, and 36% quarter over quarter.
Over quarter. Please also note that this is the first time, we've had a number of international new borrowers exceed the number of new borrowers in China.
We still think that there is a huge market potential.
In the Indonesia market down over 100 Pizza players and we are currently ranked number three in terms of outstanding loan balance with a market share of around 6%. Let me briefly touch on the Philippines market. We believe Philippines has very strong growth potential and the transaction volume for this year is expected to.
Grew around three pumps.
And.
Indonesia right.
I forgot to answer just now that Indonesia household debt ratio.
And it's way below those of the developed countries and Theres a lot of potential.
Regarding profitability, we are in the stage of Brett Pete development, we've had would be LTV and our main priority mountains to grow rapidly and increase market share increasing the macro shock of a much more important priority for us now.
Profit is being affected by many factors such as our continued investment in customer acquisition and the timing difference created by accounting principles, we believe that as long as we're able to maintain how do you feel like development.
It will be a need to results of our operations.
Okay. Thank you with that.
Yeah.
Thank you again, if you have a question. Please press Star then one.
Next question will be from Sidney Huang of China Renaissance. Please go ahead.
Yeah.
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Right now what I want.
Just a quick question.
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Thank you.
They'll come to us.
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Yeah.
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Ah shall ensure they've got that now.
I'll put it out there then that you got your charts you show that she might be.
Again, thank you guys.
Sure.
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Gordon.
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Hey, you got sometimes you take a gotcha.
Not one of them quite frankly.
You sound like a lunch.
Thank you for taking my question I have two questions. The first question is related to introduce shop. So that's one after that.
Has been restricted buy now pay later this year.
Indonesia, so any opportunity.
Oh forgot gain market shares from Ikea and yeah do you have any color in terms of shelf like material.
Got into new shop business strategy.
One question that keeps your outlook.
Second question is regarding to the sponsor.
Should we see commodities thanks.
Arthropathy change sequentially.
Suddenly behind it.
So can you breakdown that domestic fashion.
Customer acquisition costs.
Do you expect the customer acquisition cost.
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Okay.
Yeah.
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We took all the way.
So you would at Hawaii gas has actually gone down.
So you'll see you'll see Oh, she's engine yanda, John that one job tenant decided to sit out onto Oracle how does it change your gotcha.
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That's what I can do that well.
Because I think we can keep I don't think either.
He or she can tell you.
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Yeah.
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Hi, Chi shellfish, usually wants it.
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King.
I'm, assuming it does so it keeps them pay you a warm welcome to you.
Oh, Oh Oh.
No, we'll keep them without that because that's the shelf either.
I think the attention now.
Not just yet.
Uh huh.
Is it ourselves, but also home and she can unite what a whole bunch of people figure out you can't even call that although you Godfather, California.
Yeah.
Yeah.
Hello, Cindy let me translate the question.
Okay, Indonesia right.
Huge opportunity opportunities grew from multiple different ex Tac as regulation tightening.
Peers will be effective, but we believe the market will consolidate we do with a better quality players.
Players from the company perspective right.
Oh, sorry, I was saying that the entry barrier will increase when regulations tightened for example, the registered capital for nucleus increased to 25 billion RP from just 1 billion RP.
And we can share what we are currently doing.
Apart from unlike information fees.
We are also doing offline.
Customer acquisitions monkey products installment loans electronics installments and buy now pay later, coupled with multiple scenarios such as mobile phone electric arc home electronics and furniture to reap the borrowers Indonesia has had this trend of young population of lots of young population and it tends to change.
Mobile phones whenever there's a new release, possibly happens would be kind of accretion.
Opal around normal bottle manufacturer to provide such services for them.
So I'll tell you the way you alone.
Well, let me see therefore, they'll say oh in EMEA and a total nerds as it can be tough.
And EMEA.
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And to do that.
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When a woman to the he said if we can dial that.
Type LNG Sheesley chatting with you soon.
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Tableau when deemed other eco ships.
That's all we ladder tower like Oh, but you did see the high school.
Joe You said the cargo planes, you can call them and they got hope on that.
Tony Sanchez yard to like kind of a.
Sure.
Well mature then guy should keep us hopefully Paul it's John to your point John that you got some time on.
That one would you say oh well.
E ticketing neighborhood, but you can see why.
Like she said to fund me the Eagle showed you hook a shovel.
Yeah.
Hello, Cindy let me do the translation for F. N M costs, right about 70% of them apples, China about 20% to 30% is probably international market from the TPS perspective into Q3.
China market optimize about.
The overall Cps optimize about 6%, while China market optimize about 7% International's EPS maintained stable going forward.
Pending on the macro environment and our company when strategy, we believe our sales and marketing costs will remain stable.
And we true.
The company strategies of upgrading the models on customer acquisition of autos. We believe all these schools all of these costs will be further optimized.
Okay. Thank you.
Yes.
Thank you there are no further questions well conclude our question and answer session now and turn the call back over to management for closing remarks. Thank you.
Thank you all for joining the call. If you have any other further questions. Please reach out hoping pollution investor relations team. Thank you all.
Yes.
Sure.
Conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.