FinVolution Group - Q1 2024

Transcript

Operator (participant)

Ladies and gentlemen, hello, and thank you for participating in the first quarter 2024 for earnings conference call for FinVolution Group. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded. I will now turn the call over to your host, Jimmy Tan, Head of Investor Relations for the company. Jimmy, please go ahead.

Jimmy Tan (Head of Investor Relations)

Hello, everyone, and welcome to our first quarter 2024 earnings conference call. The company results were issued via newswire services earlier today and are posted online. You can download the earnings release and sign up for the company email alerts by visiting the IR section of our website at ir.finvigroup.com. Mr. Tiezheng Li, our Chief Executive Officer, and Mr. Jiayuan Xu, our Chief Financial Officer, will start the call with their prepared remarks and conclude with a 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 not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures and reconciliation to GAAP measures, please refer to 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 1995. 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 filings with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Finally, we post a slide presentation on our IR website, providing details of our results for the quarter. I will now turn the call over to our CEO, Mr. Tiezheng Li. Please go ahead, sir.

Tiezheng Li (CEO)

Thanks, Jimmy. Hello, everyone, and thank you for joining our earnings call. This is Tiezheng Li, CEO of FinVolution Group. We are happy to speak with you today. We kicked off 2024 with continued strong execution of our local focus, global outlook strategy, in line with the domestic and international macro trends. China's economic recovery is progressing gradually, while Indonesia and the Philippines are growing more vigorously. There has been a pickup in economic and consumption activities during China's recent holidays, but the M1 financial data in April turned negative year-over-year, sending mixed signals to the market. Bearing such situation in mind, we will continue to closely monitor the macroenvironment, while leveraging on our technologies to increase the efficiency of our operations.

Driven by our local focus, global outlook strategy, we have served around 31 million borrowers across China, Indonesia, and the Philippines as of the end of the first quarter of 2024. Our first quarter's performance highlights our strategy's effectiveness as well as its flexibility. Transaction volume in China reached CNY 46 billion, up 10% year-over-year, while outstanding loan balance increased CNY 64 billion, up 4.4% year-over-year. Notably, our ongoing investment in information feed advertising drove further expansion in the number of new borrowers in the China market, up 3% year-over-year, accounting for 20% of unique borrowers. Transaction volume from new borrowers contributed around 15% of total transaction volume, reflecting potential for our continued progressive growth in the China market.

Meanwhile, we leveraged our leading technologies, strategic agility, and deep experience to overcome various challenges facing our Indonesia operations since last quarter, and delivered solid growth in our international markets. International transaction volume reached CNY 2.21 billion, up 41% year-over-year, while outstanding loan balance expanded to CNY 1.27 billion, up 34% year-over-year, demonstrating our ability to capture opportunities in different countries. Driven by our effective social media strategy, the number of our new borrowers in international markets increased by 13% year-over-year and represented 41% of unique borrowers. International business stands as our second growth driver, and its revenue contribution has been increasing steadily.

For the first quarter, revenue from international business reached CNY 595 million, up 33% from the same period last year, and representing 19% of total revenue. Going forward, we believe this segment's contribution to revenue will continue to increase as we strengthen our existing markets and expand it into new territories. We also continue to make and drive progress on the technology front in the first quarter of 2024. In February, our extensive collaboration with leading global academic institutions produced 3 papers, which were selected for the 38th Annual AAAI Conference on Artificial Intelligence, one of the world's top artificial intelligence conferences, with an acceptance rate of just 24%.... Through our ongoing investment in large language models, we have self-developed a proprietary technology called XCoder.

It increases our programmer's efficiency through auto software bug detection and auto revision of frequently used codes, which greatly reduce human error. We have also utilized AIGC to streamline advertising costs and increase efficiency, producing more than 20% of video content with AI for vivid and precise advertising that resonates with our target borrowers while reducing market costs. On a related note, we leveraged our advertising, social media influence, and video content to expand our brand awareness in our international markets on popular channels such as Facebook, TikTok, and Instagram. Our followers reached 1.1 million, 855,000, and 234,000 on those sites, respectively. During the fourth quarter of 2024, up 87%, 55%, and 10%, respectively, year-over-year. Before I will wrap up, a brief update on our ESG efforts.

In line with our core commitment to financial inclusion, we continue to support the backbone of the economy by facilitating loans for small business owners during the first quarter, bolstering the gradual and sometimes fragile recovery. We facilitated a total of CNY 13 billion of loans for small business owners, up 26% year-over-year. Furthermore, we made additional strides with our public welfare program aimed at improving farmers' livelihood through the live stream of agriculture products, created in collaboration with China's national weightlifting team. This initiative has attracted over 2 million viewers and increased farmers' incomes with more than 2,000 online transactions. In summary, we made most of the first quarter's positives through leveraging on our technologies and increasing efficiency.

Firm execution of our local focus, global outlook strategy, ongoing tech innovation, and deep dedication to our vision of financial inclusion propelled our steady progress and long-term sustainable growth. We will remain committed to fostering inclusion, accessibility, and technology as we create value for shareholders and deliver better financial services to borrowers throughout the Pan-Asian region. With that, I will now turn the call to our CFO, Jiayuan Xu, who will discuss our operational and financial results.

Jiayuan Xu (CFO)

Thank you, Li, and hello, everyone. Welcome to our first quarter 2024 earnings call. Let's go through our key results for the first quarter. To be mindful of the length of our earnings call today, I encourage listeners to refer to our first quarter earnings press release for further details. As Li mentioned, China's recent macro data, coupled with the economic activities during the holidays, reflect China's slower than expected economic recovery, with a few bright spots that are outpacing the overall trend. China's GDP expanded by 5.3% in the first quarter compared to the same period last year, and by 1.6% compared to the previous quarter. In March, China's manufacturing activity expanded for the first time in six months, with the manufacturing PMI reaching 15.8 points, up 1.7 points month-over-month.

The manufacturing PMI rose to 53 points, boosting composite PMI to 52.7 points, up 1.6 and 1.8 points month-over-month, respectively. All three indexes are within the expansion range, indicating an acceleration in enterprise production and operational activities. The consumer confidence index improved to reach 89.84 points in March, but still hovering at relatively low levels. As Li mentioned, transaction volume in the China market grew 10% year-over-year, with an annual increase in the number of new borrowers, reflecting our commitment towards progressive growth in China's market. Our average borrowing rate in the first quarter remained stable at IRR 22.3%, validating our commitment towards financial inclusion. Capitalizing our strong presence and the reputation for reliability, we grew our cumulative number of funding partners to 102 institutions during the quarter.

This broad base, coupled with China's recovering economy, boosted our funding partners' confidence in facilitating loans for better quality borrowers, improving our funding cost by an additional 50 basis points on a quarterly basis. Looking forward, we are confident to achieving continuous optimization in our funding costs throughout the rest of the year. Furthermore, we have made great strides in our ABS insurance initiative, which will further diversify our funding source. Regarding risk, we expect our vintage delinquency to remain stable at 2.5% for the fourth quarter. Meanwhile, we drove an improvement in our recent April day one delinquency to 5.2%, through a shift in our loan collection strategy. Loan collection recovery rate towards the end of the first quarter stood at a healthy range of 86%.

Turning now to our international expansion, our crucial second growth driver during the quarter, the cumulative number of borrowers for our international market exceeded 5 million, reflecting our commitment to promoting financial inclusion across all the markets in which we operate. In our first international market, Indonesia, the economy remains robust, with GDP growth of over 5% in 2023, and a further increase to 5.1% in the first quarter of 2024, driven by resilient domestic consumption and increasing investment. Furthermore, Indonesia's PMI has consistently remained above 15 points for the past 2.5 years, indicating a strong position in the expansion zone. In March 2024, PMI increased by another 1.5 points to reach 54.2 points.

Sales of motorcycles, a primary means of transportation in Indonesia, increased 4.5% month-over-month in March to 584,000 units. We are also glad to share that by leveraging our proven experience and technologies in the transition to better quality borrowers in the China market, our operation in Indonesia have largely overcome the recent challenges posed by interest rate adjustments. We will continue to actively monitor regulatory developments and refine our operations accordingly. In the Philippines, our second international market, the government has forecast a GDP growth rate of between 6%-7% for full year 2024. Its PMI index has remained in the expansion zone for eight consecutive months, and the unemployment rate remained low at 3.9% in March 2024.

This further boosted consumption, with growth in household consumption accelerating to 5.3% in the fourth quarter of 2023, up from 5% in the previous quarter. All these positive macro metrics support our strong growth momentum in the Philippines market. Overall, our performance in international markets remained solid for the first quarter of 2024. Transaction volume for the international markets grew 41% year-over-year to RMB 2.221 billion, while outstanding loan balance grew 34% year-over-year to RMB 1.27 billion. Number of unique borrowers in international markets were 849,000, up 15% year-over-year, while number of new borrowers reached 344,000, up 13% year-over-year. These results highlight borrowers' stickiness on our platform, as well as our ability to acquire additional new borrowers through diversified channels with just social media awareness.

Notably, our Philippines operations continue to outperform expectations, with transaction volume grow 194% year-over-year, and 27% sequentially, contributing 25% of international transaction volume. This outstanding local performance has been widely recognized by regional financial institutions, attracting reputable local funding partners such as SeaBank and the UnionBank. Notably, we have entered into a transactional collaboration with SeaBank to facilitate loans in both our overseas markets. Our credit facility from these two partners in the Philippines alone to total nearly PHP 650 million, greatly enhancing our presence in the country and facilitating our efforts to promote financial inclusion. Looking ahead, we are confident we will continue to attract reputable financial institutions to join us in the quest to advance financial inclusion in the country.

As we strengthen our presence in the Philippines and gain greater recognition from local partners and the regulators, we believe our Philippines operation will assume a bigger role in our international, international business. Now, turning to our financial metrics. Driven by strong execution of our local focus, global outlook strategy, total net revenues for the first quarter grew to RMB 3.17 billion, up 4% year-over-year. Our net income was RMB 532 million, an increase of 1% quarter-over-quarter, reflecting our increased operating efficiency. Meanwhile, sales and marketing expense increased by 13% year-over-year to RMB 449 million, as we continued to strengthen efforts to acquire new borrowers in both our China and international markets....

Furthermore, leveraging our unparalleled industry expertise and operational efficiency, we have achieved an above industry ROE of 3.2%. Our leverage ratio, defined as risk-bearing loans divided by shareholders' equity, remains stable at four times, reflecting opportunities for growth when macro economy normalize.

Our total liquidity position, consisting of cash and cash equivalents plus short-term investments, reach RMB 8.5 billion, up 10% from a year ago, reflecting a robust balance sheet that is well able to support our business growth, exploration of new opportunities and consistently return value to our shareholders. Finally, a brief update on our capital return program. As part of our commitment to consistently return value to shareholders, we deployed up over $22.7 million in the first quarter of 2024 to repurchase our shares on the secondary market. Cumulatively, we have returned a total of $632 million to our shareholders through our capital return program since 2018, demonstrating our consistent and sustainable commitment to our shareholders.

The company reiterated its full year 2024 transaction volume guidance for the China market in the range of RMB 195.7 billion-RMB 205 billion, representing year-over-year growth of around 5%-10%. At the same time, the company expects its full year 2024 transaction volume for its international market to be in the range of RMB 9.4 billion-RMB 11 billion, representing year-over-year growth of around 20%-40%. That concludes my prepared remarks. We will now open the call to the questions. Operator, please continue.

Operator (participant)

Thank you. If you wish to ask a question, please press star then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Thomas Chong... Apologies, your first question comes from Yada Li from CICC. Please go ahead.

Yada Li (Special Assets and Special Solutions)

Hello, management, thanks for taking my questions. I have two questions today, and the first one is about the international branches. I was wondering how to view the regulation, market competition and profit outlook in different regions such as Indonesia and the Philippines, going forward. Secondly, if we take the asset quality trend and pro-profit, and the potential profit overseas into consideration, how to view the trend of take rate for this year and the future?

That's all. Thank you.

Jiayuan Xu (CFO)

好，谢谢Yada，我来回答一下这两个问题。第一，关于我们整个海外业务的情况，我想这个之前在，前面也提到了一些，那我们也就先回顾一下，我们2024年，其实，从印尼角度来讲，我们已经做了6年，然后菲律宾我们也，做了4年，所以累计起来两个国家，其实我们在海外已经有了10年的，这样一个经验。在这几年看来，就是说整个海外我们还是增长是非常快的，在过去3年中呢，我们一个复合增长率其实是达到了100%，然后海外营收啊，也是占比，去年是达到了，这个最终达到的是19%。那从客户数角度来讲呢，总的累计注册用户是2600万，已经占到了，整 个集团总注册人数的14%。那服务的活跃用户呢，是超过了500万，也达到了集团总的借款人数的这个17%。所以毫无疑问，现在海外业务已经成为我们一个确定性非常强的第二增长曲线。那从具体两个国家我再分开再介绍下我们现在看到的一些情况啊。一个呢，是印尼，我们现在最主要的 一个海外市场。那大家知道从去年年底开始就有一个定价方面的一个调整，然后我们在今年年初一月一号啊，在定价层面已经，全部完成了这样的一个调整。那上次我们也提到，呃，那这个定价的调整呢，其实我们是需要时间啊，来进行消化，啊，因为一些关键的一些，关键的一些，经营的要素啊，也需要做相应的这个调整。那现在我们也很高兴地跟大家这个，这 个报告一下，我们大概是在，四五月左右吧，我们整个印尼的这个定价的这个调整，在，啊，在整个业务模式方面已经基本上完成了。啊，业务整个状态呢，已经进入到一个比较稳态的一个，一个情况。那这里具体体现在几个方面。第一个呢，就客群质量是明显提升，啊，我们现在印尼的平均同比上升了10%，啊，附带率也同比上升了5.6，这客户粘性是这个进一步的一个加强。

第二呢，就是我们优质客群转化率也变得更高了，那现在整个授信成交转化率较定价调整前是上升了23%。第三个也是最重要的，就是我们在风险方面，从去年四季度，到现在整个风险优化了23%。第四个呢，我们在机构合作的数量上也持续在提升，现在已经达到了6家。最后一个呢，就是在获客端，我们看到就是因为这定价的调整呢，其实整个市场的一个竞争，其实是有所减弱的，再叠加我们自己在运营效率的提升，所以我们在获客单价上面也是优化了10%。所以这些因素，最终体现出来的一个结果呢，就是我们在这轮定价调整当中，我们的take rate现在又回到了10%左右，那这个水平跟我们在，之前定价调整前的这个take rate的是基本上的差不多。所以我们接下来，也非常有信心，全年在定价水平下，我们能保持大概在10%左右的take rate。同样呢，就是在基础上的，我们预计，印尼业务能够会在计层面，能实现全年盈利。当然，这个上次也介绍过，会计的这个口径和实际业务口径还是有所不同，那从业务口径来看，实际的这个印尼业务的这个盈利情况其实会更好一些。

Jimmy Tan (Head of Investor Relations)

This is Jimmy, let me do the translation for you first. OK, for the first question, right? Let us do well overall we cap on the international market situation. We have been doing our international market for six years, and for the Philippines we have been in operation for over 4 years, and in total we have over 10 years of experience in our doing international operations. I would say that the international business has been growing very quickly with CAGR growth of over 100%...

with CAGR growth over 100% in revenue for the past 3 years, and revenue contribution from this segment has also reached 19% of total revenue, with total registered users reaching 26 million, representing 14% at group level. And the cumulative numbers of borrowers also exceed 5 million, representing 17% as group level. This international business is confirmed as the group's second growth driver. And as you know, there have been a cap adjustment earlier this year on the borrowing rates, and after 5 months of business adjustment, we have optimized our borrowers cohorts models and data strategy to achieve stable operations.

Our borrowers cohort data, our borrowers cohort quality increase in average ticket size and repeat borrowing rates are up 5, 10% and 5.6% respectively. The conversion rate for higher quality borrowers increase, with approved credit line increasing by 23%. And most importantly, our risk performance improved by 23% on a sequential basis.

And the number our efforts has also been recognized by local financial institutions, with numbers of funding partners increasing to 6. And from customer acquisition, acquisition perspective, we have seen small and midsize platforms reducing their acquisitions, and we managed to reduce our acquisition costs by 10%. And coming to take rate, after that, after this round of adjustment, our take rate we are confident to maintain at around 10% in 2024, and this is similar to what we have in our take rate before the pricing adjustment. And in 2024, we expect our international business to realize profits of over CNY 10 million.

Jiayuan Xu (CFO)

Then let's take another look at our Philippines. Earlier we also shared some numbers. In the first quarter, actually our transaction growth is still very rapid. Then the entire transaction volume reached PHP 560 million. Then year-over-year growth is close to 200%, quarter-over-quarter growth is 27%. Then the entire Philippines transaction also reached 25% of the entire overseas transaction volume. The entire regulatory environment is relatively stable.

The competition situation is also relatively good. So we expect that in the second quarter, the entire transaction will still maintain such a speed of over three digits. On this basis, our Philippines business also received recognition and support from the local financial institutions. We can see that we already have two local relatively large financial institutions that have become our partners. The total credit limit also reached PHP 650 million. So in the future we also have great confidence to continue to obtain more such support and recognition in the expansion of local institutional funding.

Jimmy Tan (Head of Investor Relations)

coming to our Philippines market, growth in the first quarter has been rapid. Transaction volume in the first quarter reached RMB 560 million, up 194% year-over-year, and 25%-27% sequentially, representing 25% of total volume in the international market. The regulations in Philippines are relatively, relatively stable, and our second quarter growth is expected to be in double digits as well. We have also attracted reputable financial institutions such as SeaBank and UnionBank to be our funding partners of over PHP 650 million. Going forward, we are confident to continue our rapid momentum in the Philippines.

Jiayuan Xu (CFO)

对，然后你第二个问题问到我们，未来我们在take rate的一些变化趋势，那我就分开来看。首先看我们国内，国内我们现在总体定价已经比较稳定了，然后在风险上面，虽然去年下半年我们是，整个风险是有一些波动，是承受一些压力，但现在来看呢，基本上也是稳定下来。

Tiezheng Li (CEO)

...

然后资金成本呢，在一季度继续保持一个快速的下降，优化了50个BPS。然后在二季度呢，我们也很高兴看到这个趋势继续保持。所以一季度，可以看到我们整个take rate是从去年四季度的2.9，已经恢复到了3.0。那这个趋势从目前的情况来看，我们觉得还是可以继续保持，能够有一个比较健康向好的这样的一个take rate的趋势。然后从海外业务，刚才姐姐介绍到，那印尼我们在定价调整以后，整个take rate又是回到了定价调整前的这样的一个水平，所以整个take rate也是这个稳定下来。那菲律宾也是一个非常健康这样的一个情况。所以我们对于，整个未来公司的take rate，我们还是挺有信心，能够保持一个向好的比较稳定的这样的一个趋势。

Jimmy Tan (Head of Investor Relations)

Let me do the translation for this question as well. Although for the China market, there has been some fluctuation in our lease last year, but the situation has stabilized. And you can also see that we have a huge improvement in our funding cost of 50 basis points in the first quarter and going forward in the second quarter, we expect this trend to continue, and this is why our take rate has slightly improved from 2.9% in the previous quarter to 3% in the current quarter. And for our Indonesia market, the take rate has returned to a level of around 10%, similar to what it has been prior to the price adjustment. OK, thank you, Yada.

Operator (participant)

Thank you. Your next question comes from Thomas Chong from Jefferies. Please go ahead.

Thomas Chong (Regional Head of Internet and Media)

谢谢管理层接受我的提问，我的問題是关于科技如何提升资产质量，还有运营效率。Thanks management for taking my question. My question is about how technology can improve asset quality and operational efficiency. Thank you. 谢谢管理层接受我。

Tiezheng Li (CEO)

Hi, Jefferies, Thomas, thank you. I am Tiezheng. I'll answer your question. Regarding technology, actually, it has always been, actually, FinVolution, since our inception, we have always paid close attention and maintained long-term investment. Actually, if we look from 2015 to now, the company has cumulatively invested nearly CNY 3 billion in technology R&D. Currently, the company has about 700 colleagues engaged in technology R&D-related work, among which the proportion of colleagues with master's and doctoral degrees is over 20%. We have also established many long-term collaborations with domestic and international top universities in scientific research and talent development. We believe that technology as a whole, in terms of improving and enhancing our company, is reflected differently on the business side and the cost side.

On the business side, over the past period, through our investment in AI, in AI-powered marketing strategy, including improving our risk accuracy, intelligent voice services, as well as code assistance and other areas, through continuous investment, we have brought a lot of ongoing business improvement and enhancement. Taking the marketing investment as an example, as everyone knows, FinVolution, in terms of information flow investment for customer acquisition, is a key part for us. In the past period, we have actually invested over CNY 2 billion in information flow marketing. In this process, we have also established a comprehensive system, with nearly 100 million decision data points daily, and over 100,000 iterations of marketing strategies, which has helped us build a deep moat.

Through continuous iteration of conversion effects in information flow, and by using these models, we can target different creatives and user interests, and capture user mindshare. Currently, through AI-generated technology videos, we have achieved over 20% of our marketing investment through technology, and our creative costs have also decreased by 60%. In addition, our creative output has also seen a significant increase. On the cost side, through continuous investment in technology, we have also built our technology middle platform, which helps us continuously empower the middle and back office business processes to improve internal operational efficiency. You can see that in the first quarter, with revenue achieving 4% growth, the company's overall G&A ratio quarter-over-quarter also achieved further optimization, reaching...

最终呢，我们的 G&A 比例是达到了 2.6%。如果我们把时间进一步拉长，回到这个疫情前的 2019 年，我们在那个时候的这个 G&A 的占比呢，大概是在 7.3%。那我们通过这些持续的这些投入，使得公司的整体运营效率得到了大幅度的提升。与此同时呢，在人效端，在一季度我们的这个专业人员的这个产能创造的这个收入的比例也相比呢去年实现了 8.4% 的这个提升。所以以上呢，是我们在科技层面的一些投入带来的一些效果的一些分享。

Jimmy Tan (Head of Investor Relations)

Hi, Thomas. Let me do the translation for our CEO. Technology is the core of evolution, and we have remained consistent investment in technology throughout the year. OK, for example, we have consistently invested in R&D since our establishment with a cumulative R&D investment of nearly CNY 3 billion since 2015. We have around 700 experts in R&D, with 20% holding master's or doctoral degrees. Additionally, we have established long-term academic collaborations, relationships with 7 leading universities. And all these have in our improvements in the aspect of operations and cost can be supported by our technologies. For example, in terms of customer acquisitions, we have invested over CNY 2 billion in our information feeds, and through the accumulations of billions of user data and strategies involving over 100,000 iterations, we have built a deep moat for us.

And more than 20% of our video content is now generated by AI, and this has reduced our video production costs about 60%. And cost wise, we have also been deploying technology with our back end operations, and thereby optimizing our internal operating efficiency. And in the first quarter alone, our revenue achieved a year-over-year growth of 4%, while G&A expenses as a percentage of revenue optimized to 2.6%. And during the period of pre-COVID to COVID, our G&A expenses as a percentage of revenue was 7.3%. And in terms of labor efficiency during the first quarter 2024, average revenue per employee increased to 8.4% year-over-year. And these are the benefits that we have achieved through our tech investment.

Operator (participant)

Thank you! Your next question comes from Alex Ye, from UBS. Please go ahead.

Alex Ye (Greater China Financials Research Analyst)

谢谢，我的问题主要是关于这个，用户需求这一块，就是看到，一季度的状况，不管是从新客，国内新客的获客，还是老客的渗透率，以及，这个新注册用户的转化率，似乎都比去年同期有一个比较显著的下降，但是我们的那个 sales marketing cost 其实是维持差不多的。想请问这一块的，下降的一个原因，主要是由于我们在风险考虑下更加谨慎，还是说在更多是一个整体宏观用户需求方面走弱的一个表现？那，展望来看的话，比如说四到五月份感受到的一个用户需求的情况，不管是同比或者环比的一个趋势，以及跟我们的预期是怎么样的，那对我们全年这个经营的达成有没有一些 indication？那我翻译一下。So, I've noticed that in Q1 for our domestic business, we have seen the new customer new borrow position, repeat borrowers and the conversion ratio for the domestic business has all appeared to have declined on a year-over-year basis. I'm wondering was that mainly driven by our tighten liquidity approval or mainly from weakened credit demand?

And related to that, how to think about the outlook going forward? How has been the credit demand trend in April and May? And what's that indication for our full year target? Thank you.

Tiezheng Li (CEO)

Hi Alex, I am Tiezheng Li. I come to answer your, this related aspects of these questions. First I think, let's review together our past period overall, the macro environment in China where we are, and some, some market environments in the small loan field where we are. For our first quarter, actually overall, we see on one hand our GDP growth reached 5.3%, and in the process, our export rebound, and our manufacturing PMI got a lot of these improvements.

But on the other hand, we also see in the just announced April social financing, including M1 appeared this rare negative growth, and social retail total amount growth is declining, consumer confidence insufficient etc situation. So from the overall macro level, actually it is a relatively complex such a situation. Then we see in the small retail loan field where we are, that in the past period we from demand and risk end also presented some different these changes.

Then in 2023's second half year, we see the market's overall credit risk has risen somewhat. Then at the beginning of first quarter, risk overall presented relatively gradually presenting some stable trends. But from the warming situation, compared to our expected or compared to previous years still slightly lower some. Then future's this risk's trend still depends on some big environments' these changes, right. Second, from the demand's angle to see, we see say this year first quarter, we consider this Spring Festival etc seasonal factor, this influence.

Then we think overall demand relatively is comparatively stable, relatively is comparatively stable. But in entering second quarter after, then demand is has some decline. Then everyone just saw this social financing's data, actually, April's social financing data also is has some verified. Recent years we in domestic's this in facing such some complex these situations, then we mainly take is a kind high quality, high quality growth's this strategy. Then specifically can be expressed as several aspects. Then first, we actually through more precise risk, improve risk.

通过识别的这个精准度，以及一定程度的这个策略收紧，那我们实现了我们的这个总体风险，进入到了一个比较稳定的状态。前面这个Alex Ye也介绍到，这个我们的这个风险，目前大概是在2.5%的这个，vintage大概是2.5的水平，我们的入催率跟回款率，目前也都是相对比较稳定的这样状态。 那第二个层面，就是说我们通过在过程中，我们通过技术和运营的这个双驱动，我们实现了较大的这个效率的改善。大家看到说，一季度我们的整个资金成本环比下降了50个basis points，同比下降了超过120个basis points。另外，我们在获客费比上面，也实现了这个，两位数的17%的这个优化。与此同时，在G&A上面，我们环比也实现了这个一定程度的改善，那最终也实现了我们一个相对合理的这样的一个收益水平。前面有介绍到，我们的take rate

目前是在3.0左右这样的一个状态。 那第三个，我们通过合理的这个获客投入，以及在老客户上面精细的这个运营，我们也实现了一定程度的这个业务的稳健增长。那我们在第一季度，我们的新客的这个交易规模占比达到了这个15%，那我们的老客，因为过往我们的这个在客户的持续投入跟沉淀，所以，我们的老客的这个留存率，三年以上的这个老客的留存率超过30%，那我们的复贷率，超过80%。那这样，也有效缓解了需求下滑和风险收紧带来的这个，业务上的这个压力。

对，然后，展望，2024年全年，那我们看到如果从，宏观和行业面，会面对一些挑战。对，但回到信也自身，我们也看到了，内部通过我们内部的这个优化跟改善，我们也看到了一些机会点，那这些机会点，也包括了说，我们现在看到风险基本稳定，那略有向好的有些趋势。另外，我们的资金成本还会进一步的下降，以及我们在技术驱动我们的运营效率的这个提高上面，我们还是有，持续的这个改善的空间。另外，在围绕在高质量获客和老，老客户的这个持续的精细化运营上面，也能够进一步地帮我们这个在实现一定程度的这个业务的这些增长。所以，回顾，展望2024年，我们虽然面对这些挑战和不确定性，那我们也有信心，通过我们的这些努力来应对这些冲击。那整个公司，在国内，在保证，在优先保证风险和合理的收益的情况下，我们实现一定程度的这个业务增长。

Jimmy Tan (Head of Investor Relations)

this is Jimmy. Let me do the translation for the team. OK, first of all, let us recap the China macro economy and the micro credit industry that we are in. China economy presents a complex situation with GDP growth between 5.3% in the first quarter, along with a rebound in export and improvement in manufacturing PMI. However, do note that there was also a rare contraction in social financing and M1, along with a decrease in social retail sales and with consumer confidence.

This is a rather mixed signal, and for the industry which we operate, we have also observed changes from the demand and risk, and overall credit risk increased in the second half of 2023 and remain relatively stable in the first quarter, but the recovery is still slightly below our expectation, and demand was relatively stable in the first quarter due to seasonal factors such as Chinese New Year, but fluctuates when entering the second quarter, validated by the mixed signals that we have seen earlier. Under this complex macro environment, FinVolution has implemented various strategies to counter this complex macro environment by enhancing our risk assessment model and patterning approval rates to ensure the overall stability of our risk metric.

As Alexis has introduced earlier, our vintage delinquency has maintained stable at 2.5%, with day one delinquency rates at 5.2%, while loan collection recovery rate was at 86%. Leveraging our dual role effect of technology and operation efficiencies, we have seen a sequential decline of 50 basis points in our funding costs and a year-over-year decline of 120 basis points in our funding costs, while customer acquisition costs were optimized by 17% compared to the last quarter.

G&A expenses also decreased by 7% year-over-year, and all these measures enable us to achieve a stable take rate of 3%. Our consistent investment in customer acquisitions, with in-depth focus on repeat customers, has led to a stable business growth. For example, 30% of our borrowers have maintained on our platform for more than 3 years, and over 80% of the loans were facilitated for repeat borrowers, effectively elevating the pressure caused by fluctuating demand and tightening approval rates. Looking ahead in 2024, China economy has some challenges and also in our industry as well. We have also seen some opportunities, such as the stabilization of risk, funding cost improvement and our enhancing on our efficiencies and a focus on repeat borrowers.

...with all these measures that we have implemented, we are still confident to maintain a healthy level of growth amidst challenging macro environment.

Operator (participant)

Thank you. Your next question comes from Hannah Han from Nomura. Please go ahead.

Hannah Han (Equity Structuring Associate)

谢谢，关于让我提这个问题，我这里有两个，第一个呢，是关于你当前的股东回购计划，就是是否能提供更多的进展和细节，那，这个管理层是否有一个计划来进一步增加股东价值。那第二个问题呢，就是我也观察到这个第一季度现金的增加，那想问一下未来关于这些现金的使用计划，然后呢，能请公司详细的说一下如何提高这个运营效率，谢谢。

Yeah, let me translate the question. Like the first question regarding the share repurchase program. Also, does management have a new plan to further increase in the shareholder value? For the second question, we observe an increase in cash in 1Q, and could you provide more colors on the future use of this cash? And additionally, how does the company plan to increase operating efficiency? Thank you.

Jiayuan Xu (CFO)

Hello, Hannah, let me do the translation. For our share repurchase in the first quarter, we have deployed $27.2 million, which increased by around one time compared to last year and represents around 28%. And we still have $93 million for our buyback program in our quota. And we have also completed our share dividend distribution of $62 million, and coupled with our share repurchase of around $100 million for the year of 2023, the total payout ratio was around 49% of net income. For share repurchase and dividend, we have been doing it consistently for the last six years, and have returned around $630 million for our shareholders.

Going forward, we will continue to create long-term value for our shareholders through high quality growth and a leading capital return program through a combination of dividends and buyback.

对，然后第二个问题是关于我们这个现金使用。首先第一个我们是要保证这个业务的一个健康的这个增长啊，其实刚才我们也介绍了很多啊，那我们这个海外其实整个啊，增长的趋势还是非常不错啊。那印尼在整个定价这个调整完以后啊，那我们还是保持一个非常健康的一个，这个经营的一个模式和这个单个的一个利润的一个情况。然后菲律宾啊，我们是现在增长速度是，是非常快，所以我们在这个增长方面呢，就是，应该是要保证这个现金的这个供给啊。那这里呢，会涉及到一些像新客户这个投入啊，那另外还有一些比较大型的一个牌照的获取。那我们在印尼和这个菲律宾，其实在牌照方面其实都已经取得了一些，这个比较显著的这样的进展，但现在这个，还，当中还有一些流程需要走，所以我们等到整个流程走完以后，这个就完全明确的情况下，我们会跟市场再来报告一下我们这个牌照方面的一个具体的一个进展情况。那在这个保证我们能够健康成长的基础下啊，我们刚才其实也提到，我们会持续地去给股东创造这个长期的价值啊，那主要的形式是分红和回购。那从过去六年大家这些数据上可以看到，我们其实一直在做，而且，做的力度其实也是在不断的一个加强。六年来，六，六，六年来，我们累计通过分红和回购，已经，已经向市场，回馈了$630 million。其实这个数字，跟我们市值相比的话，已经是接近一半的一个水平啊。以，在我们整个业务非常这个健康的这个经营情况下，以及比较充分的这个现金的储备下，我们有信心也有能力，能够持续地保持这样的一个这个回报的一个水平。

Jimmy Tan (Head of Investor Relations)

Hannah, let me do the translation for Alexis. OK, first of all, we need to ensure sufficient cash for the development of our business, especially our international business growth has been very rapid. Our Indonesia business, after the cap adjustment, has maintained healthy take rates, whereas Philippines is also growing at a very fast momentum. In terms of local licenses, we have achieved significant progress in all our markets that we intend to have more local licenses, and we will share more when there is more concrete information available. Coming back over the last six years, right?

We have cumulatively returned $630 million to our shareholders, which is around half of our current market cap, and we are confident to maintain a healthy return to our shareholders while delivering high quality growth in our business.

OK, thank you, Hannah.

Operator (participant)

Thank you. There are no further questions at this time. I'd like to turn the call back over to management for closing remarks.

Tiezheng Li (CEO)

Thank you once again for joining us on our conference call. If you have any further questions, please feel free to contact FinVolution Group Investor Relations Team. Thank you everybody! This does conclude our conference call for today. You may now disconnect your line. Thank you.