FinVolution Group - Q4 2023

Transcript

Operator (participant)

Hello, ladies and gentlemen. Thank you for participating in the fourth quarter and full year 2023 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 fourth quarter and full year 2023 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.finv olutiongroup.com. Mr. Tiezhen 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 US 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 those expressed today. Further information regarding these and other risks and uncertainties are included in the company's filings with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statement except 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. Tiezhen Li. Please go ahead, sir.

Tiezheng Li (CEO)

Thanks, Jimmy. Hello, everyone, and thank you for joining our earnings call. This is Tiezhen Li, CEO of FinVolution Group. We are happy to speak with you today. When I became CEO one year ago, FinVolution set a clear objective: become a leader in fintech industry, providing inclusive financial solutions for unserved borrowers and small business owners. In 2023, we advanced towards that goal with continued strong execution of our local focus, global outlook strategy, adapting to the unique situation in different markets. I'm thrilled to report that we delivered exceptional progress on all fronts. Throughout the year, we maintained our robust momentum with progressive expansion in China, while pursuing much faster growth internationally, where economic conditions were more favorable. We have achieved leadership positions in both Indonesia and Philippines.

We are also solidifying our success and high quality growth in China as we proactively adjust our strategies to suit China's dynamic economy. Performance-wise, we continue to grow our business across the board, despite evolving macroeconomic challenges. The cumulative number of borrowers we served in China, Indonesia, and the Philippines has reached 13 million, growing at an accelerated pace with a net increase of around 3 million new borrowers year-over-year. For full year 2023, our total transaction volume reached RMB 194 billion, and our outstanding loan balance reached RMB 6-7 billion, representing year-over-year increases of 11% and 4%, respectively. Net revenue for the full year 2023 reached RMB 12.5 billion, up 13% year-over-year. Our international business grew exceptionally well in 2023, propelled by our effective global outlook strategy of pursuing rapid growth in overseas markets.

International transaction volume for 2023 soared to RMB 7.9 billion, and outstanding loan balance rose to RMB 1.3 billion, up 85% and 58%, respectively, compared to the prior year. International market revenue increased to RMB 2.1 billion, up 86% from full year 2022. Over the past year, international revenue contributions to total revenue increased significantly, rising to 17% in 2023 from 10% in 2022. Meanwhile, with our local focus strategy of pursuing high-quality growth in China, we continue to achieve progressive growth domestically. Transaction volume increased to RMB 186 billion, while outstanding loan balance reached RMB 66 billion, up 9% and 4%, respectively, compared to the prior year.

Revenue from the China market in 2023 further expanded to RMB 10.4 billion, up 4% compared to the prior year. Another notable improvement was funding cost, which improved by thirty basis points on a quarterly basis and by around one hundred basis points year-over-year. Our stable borrowing rates, coupled with better than industry delinquency rates and enhanced operational efficiency, enabled us to sustainably deliver higher ROA compared to the industry. We are also strengthening our commitment to small business owners, supported by a prudent approach during this fragile and sometimes volatile recovery period. In 2023, we served over 811,000 small business owners, and facilitated RMB 47 billion of loans for them, up 80.5% compared with last year, and representing 25% of total transaction volume in China.

FinVolution is a fintech front runner with profound expertise across an extensive industry footprint. Part of our commitment to shareholder is to continue propelling the company's sustainable development and industry-wide digital transformation through technology innovation. I'd like to share just a few of the pivotal technological advancements we made throughout the year. We amplified our investment in tech- technological R&D, driving high-quality growth, leveraging cutting-edge technology. We significantly improved and optimized our operational processes across all markets in which we operate. This include increased R&D investment of over RMB 500 million in 2023 to strengthen different aspects of our technologies, such as the automatic speech recognition capabilities, greatly improving its grasp of Chinese dialects while boosting our chatbot's efficiency and accuracy. R&D is critical to our ongoing success, and we continue to invest in our tech and our people.

As of December 31, 2023, we proudly employed a dedicated R&D team of around 700 skilled professionals, and have built a comprehensive IP portfolio that comprise 239 registered software copyrights, and a successful filing of 179 patent applications, including 53 invention patents already granted. Each of our R&D accomplishments enhance our offering to consumers and set new benchmarks for the financial services industry, supporting FinVolution's growth and industry-wide progress. In recognition of these efforts, the Shanghai Municipal Commission of Economy and Information recently honored FinVolution on its Shanghai 2023 Double Hundred lists for software and IT service excellence. We earned prestigious rankings on both lists, securing the 18th and the 26th position, respectively. These accommodations recognized our contributions to technology innovation and the advancement of the industry.

Last but not least, ESG remains a top priority at FinVolution. We diligently enhanced our integrated ESG program throughout 2023, with a focus on inclusion and giving back to society. For example, we have cumulatively offered RMB 120 million of interest-free loans for eligible small business owners to help turn their dreams into reality. Our commitment and efforts have also been recognized by several renowned independent rating agencies with above average industry rating. We celebrate FinVolution's sixteenth anniversary in 2023, a milestone that affords us a glimpse of our future prospects as an enterprise grounded in sustained long-term growth. Over the past 16 years, our business model and strategy have been validated by success in the face of multiple challenges, such as the P2P transition, shift towards better quality borrowers, and international expansion amid the pandemic.

As an independent platform with limited resources, we are proud to have expanded and flourished in all markets in which we operate. Going forward, we will remain committed to serving borrowers in our existing markets, while increasing the pace of our international expansion by acquiring more licenses and expanding into additional countries and regions to deliver innovative financial services to more borrowers. Our local focus, global outlook strategy, will continue to guide us and drive our healthy and sustainable development as we embark on 2024. By leveraging our peerless technologies and operational advantages, we are confident to replicate our domestic and international success in new markets, unlocking value and making the company a world-class fintech enterprise, while consistently returning value to our shareholders.

With that, I will now turn the call over to our CFO, Jiayuan Xu, who will discuss our operational and financial results.

Jiayuan Xu (CFO)

... Thank you, Lee, and hello, everyone. Welcome to our fourth quarter and the full year 2023 earnings call. Let's go through our key results for the fourth quarter. To be mindful of the length of our earnings call today, I encourage listeners to refer to our fourth quarter earnings press release for further details. Despite GDP growth of over 5% in 2023, China's overall economic environment continues to evolve. We leveraged our various strengths to navigate the turbulence and conclude 2023 on a solid note. Our domestic transaction volume reached CNY 50 billion for the fourth quarter, up 6% year-over-year and 2% sequentially, while outstanding loan balance grew to CNY 66 billion, up 4% year-over-year and 2% sequentially.

Achieving growth in both metrics amid such a soft consumer environment is a testament to our business resilience, as well as our outstanding technology, innovation, and operational excellence. We have observed several notable improvements as we move through the first quarter of 2024. During the recent Lunar New Year, consumption activities picked up rapidly, with 474 million tourist trips nationwide, up 19% from the comparable period in 2019. Total tourism spending also climbed 8% to RMB 633 billion from the comparable period in 2019, with air and train travel surpassing 2019 levels by 15% and 36% respectively, reaching new record highs. Box office ticket sales also rebounded and reached more than RMB 8 billion, setting a new record for the holiday period. Furthermore, several micro metrics exhibited varying degrees of improvement.

For example, total social financing in January increased to CNY 6,500 billion, up 9.5% year-over-year. Total retail consumption in December was increased to CNY 4,355 billion, up 7.4% year-over-year. February's manufacturing and the service PMI index also improved slightly to 49.1 points and 15.1 points. We believe these signs reflect the dawn of a new era, wherein consumer spending trends are shifting away from large ticket items, such as automobiles and property, to small ticket items like travel-related expenditures and other consumption activities. Amid these complex dynamics, we drove a modest yet encouraging recovery in our consumer credit demand through our ongoing refinement of borrower demographics and quality, with the number of new borrower applications increasing by between 3%-5%.

Cumulatively, we have served over 25 million borrowers in China, and the number of unique borrowers for the fourth quarter was 2.1 million. In addition, we further enhanced our credit risk assessment and fraud detection technologies during the quarter, which empowered us to navigate the macro headwinds and stabilize our asset quality. Our day one delinquency rate improved to 5.3% in December and further improved to 5-5.2% in February. We expect our vintage delinquency for the most recent three months to be 2.5%, demonstrating our business resilience. Boosted by the deployment of our advanced speech recognition technologies, as well as the AI-powered chatbots we mentioned earlier, our loan collection recovery rate for the recent three months remained healthy at 87%.

In terms of our funding partners, as our reputation in the industry continued to rise, we have further diversified our funding sources. The cumulative number of our funding partners has expanded to 94 financial institutions as of the end of the fourth quarter, with funding costs improving by around 100 basis points year-over-year. Moving on to our second growth driver, our international expansion, which continues to outperform our targets and expectations. We embarked on our global expansion journey in 2018 and have been deeply investing in elevating FinVolution's visibility worldwide ever since. Indonesia, our first overseas market, continued to record macroeconomic growth, as consumer confidence index remained high at 125 points in January. Full-year sales of the motorcycles, the most popular mode of transportation in Indonesia, surged by 19.4% to 6.2 million units year-over-year.

Our second overseas market, the Philippines, also ended 2023 with positive microdata. The Philippines were among the fastest growing economies in Asia, with fourth quarter GDP growth of 5.6%. Manufacturing PMI was 51 points in February and has remained above 15 points since September. Cumulatively, we have served over 4.8 million borrowers in international markets as we continue to explore diversified consumer acquisition channels to attract new borrowers. The number of new borrowers for international markets increased by 20% year-over-year to 1.37 million, and the number of unique borrowers rose by 18% year-over-year to around 1.9 million in 2023. International transaction volume for the full year 2023 rose by 85% year-over-year, reaching CNY 7.9 billion.

Transaction volume for the fourth quarter reached CNY 2.25 billion, up 64% year-over-year. At the same time, our outstanding loan balance as of December 31, 2023, grew to CNY 1.3 billion, up 58% year-over-year. As we deepened our roots in Indonesia and fortified our reputation, the population of loans facilitated from local financial institutions in Indonesia increased to over 90% from 63% in the same period of 2022, reflecting our credit assessment model's effectiveness, as well as deepening trust from local financial institutions. The Philippines has also demonstrated excellent growth. During 2023, the number of new borrowers in the Philippines grew by over 188%.

This led to exponential growth in its transaction volume and outstanding loan balance, which surged by over 200% on a year-over-year basis, contributing around 20% of international transaction volume in the fourth quarter. Thanks to our proven record as a trusted lending partner, we have also secured institutional fundings in the Philippines and also have a strong pipeline of future institutional partners in place. These accomplishments have boosted our confidence as well as our visibility as we emerge as one of the top players in the Philippines. In 2024, we expect our Philippines operation to maintain its robust, high double-digit growth momentum. International business revenue in the fourth quarter progressively increased to CNY 602 million, up 53% year-over-year, and represented around 19% of the company's total revenue.

For our full year 2023 perspective, international revenue reached RMB 2.1 billion, up 86% year-over-year, as representing 17% of the company's total revenue, marking a significant achievement in our international development. This success has readied us to amplify our international expansion efforts with strategic initiatives such as refining borrower demographics, acquiring license, and venturing into new countries. The outstanding progress we have made in our overseas markets across multiple operational and financial metrics, serves as a springboard for our ongoing expansion and development. On a related note, we continue to build our international business presence and brand awareness on leading social media platforms through AIGC-driven upgrades to our creative advertising campaigns.

As of the end of the fourth quarter, we had more than 1 million followers on Facebook, and our followers on TikTok grew at an accelerated pace to reach over 816,000, up more than 15% quarter-over-quarter. Social media will be a key means of reaching our target audience with our overseas marketing efforts as we enter new countries and debut innovative products. Now, turning to our financial metrics. Driven by strong execution of our local focus, global outlook strategy, net revenues for full year 2023 increased to CNY 12.5 billion, up 13% year-over-year, while net income increased to CNY 2.38 billion, up 5% year-over-year.

As of the fourth quarter, our leverage ratio, which is defined as the risk-bearing loans divided by shareholders' equity, remained stable at 4.1 times, reflecting opportunities for growth when the macroeconomy normalize. Our strong balance sheet and liquidity position continue to enhance shareholders' confidence while providing us with optimal flexibility to execute our strategy. In particular, our cash position remains robust, with over CNY 7.9 billion of cash and short-term liquidity as of the end of December 2023....

representing an increase of 12% year-over-year. We believe our current cash position is sufficient to support our business expansion, while increasing our return of value to our shareholders. Now, let me briefly update you on our capital return program. Since 2018, we have continuously returned value to our shareholders in the form of share repurchase and dividends. Recently, our board of directors approved our sixth annual dividend in the amount of $0.237 per ADS, an increase of 10.2% year-over-year. For full year 2023, we returned a total around of $160 million to our shareholders, consisting of $62 million in dividends and $98 million through share repurchase, representing a capital return rate around 49% of 2023 net income. As of December 31, 2023, the company has cumulatively returned $605 million to our shareholders.

These actions underscore our consistent commitment to enhancing shareholder value. Before I conclude my remarks, I would like to provide some additional color on our business outlook for 2024. Despite the evolving macro environment, our business continues to thrive and progress. We are gaining substantial momentum as we focus on advancing our international initiatives, preparing technological innovation, expanding our healthy consumer base, and optimizing our product profile. As a result, we expect our transaction volume in the China market in 2024 to be in the range of RMB 195.7 billion-RMB 205 billion, representing an increase of around 5%-10% year-over-year. In addition, we expect international transaction volume in 2024 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 proceed.

Operator (participant)

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, we ask that you please kindly repeat your question in English. At this time, we will pause momentarily to assemble our roster. The first question comes from Yada Li with CICC. Please go ahead.

Yada Li (Analyst)

好，关总好，感谢给我这个提问的机会。我今天有两个问题，那第一个问题呢，想请教一下，结合当前宏观环境的不确定性，那针对放款策略、获客以及风控啊等这些层面，我们都做了哪些积极的调整？那基于上述的调整，如何去看待公司未来资产质量的这样一个变化趋势？然后第二个问题呢，也还想请教一下关于海外业务的这个具体的进展，啊，今年以及明年整体印尼和菲律宾业务的增长，以及这个盈利前景如何去判断？好，谢谢关总。然后 I'll do the translation. Firstly, considering the current macro environment, I was wondering, what adjustment have we done in the lending strategy, customer acquisition and risk management?

With the help of these measures, how to view the asset quality going forward? Secondly, for the international branches, what are the growth and profit outlooks for Indonesian and Philippine markets, respectively? That's all. Thank you.

Jiayuan Xu (CFO)

好，谢谢Yada。那个我先回答一下你的第一个问题啊，就是我们现在整个宏观环境的一个情况。嗯...

那从我们目前就国内的宏观指标以及相关的一些研究结果来看，那我们觉得总体国内现在经济还是处于一个相对比较疲弱的一个态势。但预期呢，会持续有一个缓慢的一个回升。从去年第三季度左右，我们其实也看到，就整个行业也是受到了环境的一个影响，在资产质量上是出现了一些波动，那我们呢也是很快速地做了一些应对和调整。那比如说在获客方面，我们是削减了相对，低质量的一些渠道的投放，在更高品质的信息流渠道上，我们是快速迭代了相关的 一个模型。那在人群方面呢，就针对，那些高负债的这样的一些客户，我们是调整了额度和通过率。那在一些核心指标方面，我们也是密切关注，像D1的预期率，...

回款率，90%的预期率，这些核心的指标。那针对呢，这些就是各评价各时期放贷的数据，我们进行了非常非常多的大数据的一个分析。

细化我们在各个策略上的一个执行的一个颗粒度，来确保在总体风险收紧可控的这个策略下，那也保证了我们相对于更优质的那些，中低负债水平的人群的这个金融的服务。还有一个呢，在贷后方面，大家知道，就去年下半年，整个电信对于通讯线路的收紧，其实对电催还是产生了一些影响的。那得益于我们之前有比较前瞻性的资源储备，使得我们还是能够比较从容应对这些冲击，那我们的额度的整个资源的这个供应还是能够满足我们整个贷后电催的需求。所以虽然我们的回款率也受到一些影响，从89%降到了87%，但这个数据在整个行业当中仍然是保持非常领先的这样一个水平。这些措施做完以后呢，我们其实很快在12月份就看到了一些积极和正面的效果啊。那从最近三个月，我们看到Day One的数字，从之前，这个5.7，降到了5.3。那两个月呢，都降到了5.25左右。回款率呢，能够稳定在87%左右，那最终的这个损失率，也回到了2.55左右。那应该说我们这个数据应该是行业里面比较快，这个企稳的。那从今年展望来看呢，虽然整个这个大环境，现在还是，还是有很大的不确定性，但我们仍然是有信心能够在今年继续保持，在行业这个领先的资产质量水平，并不断取得这个优化的结果。

Jimmy Tan (Head of Investor Relations)

let me do the translation. From observation and study, China macro economy is still facing uncertainties but expect to have a gradual recovery. Around the third quarter last year, we have observed some negative impact on the industry, which results in asset fluctuations. We have been quick with our responses. For example, we have reduced customer acquisitions from lower quality channels and step up our model updates from higher quality channels, updating the models, tightening the approval rates and credit limit for borrowers whom are more prone to economy uncertainties, such as those with a higher level of debts. We have also closely monitor changes in our core metrics, such as day one delinquency and loan collection recovery rates for the dispersed loans. Through the analysis of different borrowers, segments and tight approval rates, we have ensured financial services for higher quality borrowers, for example those with lower debt levels remain intact. For post loans, I believe you are aware of the impact on loan collections due to the reductions of telephone lines. The impact on us is minimal due to our sufficient advanced preparations of telephone lines, which are able to satisfy the needs of our post loan collection team. Although our loan collection recovery rate slightly declined from 89% to 87%, we are still leading ahead of the industry. With the implementation of these efforts, we have seen positive results in December. For recent three months, our day one delinquency rates improved to 5.3% from 5.7% in the third quarter, and further improved to 5.25% in February. While loan collection recovery rate remains stable at 87% with vintage delinquency returning to 2.5%. Our recovery should be ahead of the industry, and we are confident to maintain industry leading asset quality with continuous improvement going into 2024.

Jiayuan Xu (CFO)

你的第二个问题是关于我们整个海外业务的一个情况，那我想，就分几个国家来，说一下。那第一个是我们现在海外最大的这个印尼业务。印尼业务在去年四季度呢，其实受到一些监管要求的一些影响，其实是在定价方面，在2024年是需要做相应的一个调整。那这块工作呢，我们在2024年这个1月1号已经全部完成了，已经完全符合这个监管的要求。那这个定价方面的调整呢，其实会意味着我们自己在业务当中，这个人群，模型，数据，策略方面，它是需要做一系列的相关调整和调优。那按照我们过去的经验呢，这大概需要6个月左右的时间来完成所有的这些工作。那从目前的进展来看呢，这些工作还是进展得非常顺利，也看到了一些积极的效果。比如说，在风险端，我们是通过人群结构的调整，我们看到整个风险的数据，已经相比之前是下降了20%。在获客端，因为这个定价调整以后，其实我们看到很多中小平台它也是退出了市场，所以在整个这个投放和获客的竞争上面，其实也是有很明显的一个减弱。所以我们在获客单价上是下降了8%。所以这些质量上升和竞争减弱，其实能有效地减少，定价调整所带来的影响。那在今年整个印尼的这个业务节奏上呢，我们上半年还是以这个产品调整，结构调优为主，不会特别去追求，过快的这个增速。那下半年呢，我们会结合这些调整的结果和外部，这个情况的一些变化，来再判断一下这个下半年的具体的经营的策略。那在整个业务盈利性上面呢，我们是非常有信心保持在一个健康的水准。那今年2024年，我们预计印尼业务会全面实现盈利，啊。...

那这里呢，也提醒一下，就是说因为会计准则的这个原因，所以我们业务上看到的这个经营，其实比上面反映的其实还会更好一些。然后菲律宾也是我们这一次，特别披露了一些相关的数 据，因为这几年其实菲律宾业务发展的也非常快，也非常健康。那菲律宾整个，就环境来看呢，它的经 济环境和监管环境都是比较稳定的，所以我们会期待今年继续保持一个比较快速的增长。那我们在当地现在已经是处于第二，那今年目标是能够成为这个市场的这个第一。然后在盈利方面，菲律宾又表现也非常不错，我们会期待在今年下半年左右，能够实现在这个准则下的单月盈利，所以这是一个菲律宾的一个情况。那总的来说呢，就是我们在印尼和菲律宾，我们在业务上都已经是实现了，在一定规模下的盈利能力。那未来呢，我们会继续考虑，就是比如说在牌照方面我们会加大投入，因为更丰富的牌照能够帮助我们去开拓一些更多的业务品种，以及我们产品的一个深度，同时也能提升我们的一个品牌形象，进一步巩固我们在当地的这样的一个护城河。那在这两个国家以外呢，我们也会积极开拓新的国家，而且我们也不局限于东南亚，在这个业务层面上呢，我们也会考虑更多样的合作方式，来综合加速我们这个第二增长曲线海外战略的这个实施。

Jimmy Tan (Head of Investor Relations)

let me do the translation. Your question is on the whole international expansion, and we will break down the explanation into different countries. For example, Indonesia has a new price cap in 2024, and our Indonesia operations in the fourth quarter has been impacted by local regulation change. Since January 1, 2024, all our new loans has met regulatory requirements and full compliance. The pricing adjustments means that our borrowers cohort model, data and rules have to undergo a series of adjustments. Based on our past experience, we will need around six months to complete all these changes. From the current outcome, these changes has been positive. Example, through adjusting our borrowers cohort, our risk metrics have improved by 20%, reducing the impact of rate reductions.

Also, from a customer acquisition perspective, we have seen many small and medium platforms reducing their customer acquisition efforts, which led to an 8% decrease in our customer acquisition costs, and this further helps to reduce the impact of price reduction in Indonesia. Thus, in the first half of 2024, Indonesia operation focus will be on product adjustment and improving the quality instead of a rapid growth. During the second half of 2024, we will reevaluate our strategies based on macro situation. In 2024, we expect Indonesia to achieve profitability. The profitability from the business view will be better compared to the financial view due to the rules of the accounting policies.

In addition, we have also disclosed some additional data points for our Philippines operations. Over the past few years, Philippines operations has been developing very rapidly, and from current observation, Philippines country's economic and regulatory environment has been relatively stable. We will expect the rapid growth to continue into 2024, and we are currently number 2 in the segment of the market. We believe we can achieve our target of number 1 by the end of the year. Additionally, we expect that our Philippines operations can achieve profitability in the second half of the year under the relevant accounting rules.

We have managed to achieve profitability in both Indonesia and Philippines, and going forward, we will consider to strengthen our investment in different types of licenses, diversify our operations, and enhance our brand image to further increase our competitive advantage. We are also actively exploring new countries, and these countries are not limited to Southeast Asia, and we also consider other methods of expansion to speed up our international footprint.

Jiayuan Xu (CFO)

OK，thank you，Yada。

Jimmy Tan (Head of Investor Relations)

Thank you, Yada.

Yada Li (Analyst)

Thank you very much.

Operator (participant)

The next question comes from Cindy Wang with China Renaissance. Please go ahead.

Cindy Wang (Director of Equity Research)

哎，谢谢帮你转播这个问题的机会。那我这边有两个问题请教一下，第一个的话，因为我们今年在海外这边还是会布局得比较快速嘛，所以可不可以告诉我们一下，今年在获客成本端的话，我们这边是怎么评估的？然后第二个的话呢，想请教一下菲律宾市场，那菲律宾市场这边的话，2023年其实整体的一个增长是非常的快速，那现在目前公司在菲律宾也是第二名了嘛，可不可以再帮我们展开一下，就是说目前菲律宾的一个竞争环境，然后我们要怎么样能够今年达成第一名的一个leading position，然后预期菲律宾这边的话，可以贡献在海外的一个整体的revenue，大概是几个%在2024年。那我很快地翻译一下我的问题。Thank you for taking my call, and I have a question here. So the first question is related to the customer acquisition cost. Since you are aggressively on the international market expansion, so what is your CA target this year? ... And the second is related to the Philippine market. As Philippine market growth seems very strong in 2023, can you talk about the competitive landscape and how do you achieve to be a first number one market share position this year?

How would that contribute to the international market revenue in 2024? Thank you.

Jiayuan Xu (CFO)

好的，谢谢Cindy。那我现在回答一下关于海外获客这个问题。那我想分开两个来说吧，一个就是我们在印尼市场。印尼市场其实我们也做了好多年了，到现在应该是有6年时间。那我们在整个当地市场的开拓和理解，应该已经也达到相当的程度。那从我们整个过去的策略来看，我们还是通过这个以信息流为主的方式去获得我们觉得相对比较优质的客户人群。那从去年年底我就之前提到了，就整个在监管层面，在定价方面还是有相关的调整的要求，所以我们在整个这个客群的准入模型方面是快速做了相应的迭代。那从今年年初我们调整完后的结果来看，这个效果还是相对来说是不错的。一方面我们也观察到，就是随着客户质量的上升，那我们可以给到客户的平均也会更高一些，期限也会更长一些。那另外一方面呢，整个市场的竞争，相比去年也会更好一些，所以综合影响到我们在印尼的费比，相比过去是有一个比较明显的改善和提升。那从今年整体的预期来看呢，我觉得整个趋势可能还是能够保持在这样的趋势之上吧。当然我们首先还是以整个模型的调整调优为主，那未来根据我们整个调整的结果，再来看，对获客方面的进一步的放开，或者是更快速的发展。菲律宾相对于印尼而言呢更早期一些，然后整个环境也非常不错，在整个这个市场上，我们的整个投放一直也是在相关信息里面是排名非常前列的。在获客的成本上面，觉得总体还是比较稳定，比较稳定。所以基本上2024年我们判断也大概是这样的趋势。所以这个大概是我们 在印尼和菲律宾的整个获客的大概的预期的 情况。

Jimmy Tan (Head of Investor Relations)

Cindy, let me do the translation. We have been operating in the Indonesia market for quite a period of time, in fact 6 years, and we have a deep understanding of the market. Information feeds continue to be the main method to acquire better quality borrowers for us.

Although the pricing cap has some impact on our operations, we have made adjustments to our models and the results has been very positive. For example, when we have higher quality borrowers, we are able to increase our loan, our ticket size with longer loan tenure, and the fee rates further improve with weaker competition. And we believe this trend will continue in 2024, and we will reevaluate our customer acquisition strategies in the second half when the macro environment stabilize. For the Philippines, it is in a much earlier stage compared to the Indonesia market, and over the past two years, our marketing efforts are much more proactive and it has been pretty stable among the top, and we believe this trend will continue into 2024.

Jiayuan Xu (CFO)

然后第二个关于我们在，整个菲律宾的一个业务和竞争的一个环境。我们在菲律宾是2020年进入的，现在是第四年。那菲律宾的总的一个市场情况呢，人口大概是一个多亿，1.3亿不到，然后我们的目标人群大概是其中的，40 million左右，大概占比是30%。然后目前呢，我们已经有接近500万的这个累计注册用户，然后这个已经有借款行为的用户也是，这个，这个74万，接近，接近，接近80万。那我们觉得整个市场应该是还是相比国内而言是相对比较早期，然后每年的，增长率是比较快，比较快，所以整个市场空间还是非常大。然后现在市场上玩家大概100多家吧，然后，这个比较大的这个，这个公司，有这，有美国的背景的公司，有菲律宾当地的公司，那我们作为来自于，国内的，这个参与者，我觉得在菲律宾市场上，我们还是在技术和在理解上面是，拥有非常明显的一个竞争的一个，一个优势的。所以我们会继续就是复制我们在国内啊，以及在印尼的这个成功经验，来，在整个菲律宾市场上，更快速发展，是，争取更有利的一个竞争的一个，一个位置。整个业务的情况，我们现在菲律宾应该大概是在我们海外业务大概是占20%左右，所以我们会期待今年更快速的发展，能够把这个比例再往上提升一些。

Jimmy Tan (Head of Investor Relations)

...Cindy, let me do a translation. We enter the Philippine market in 2020, and this is our fourth year of operations.

Philippines has a population of around 130 million, and our target customer base is around 40 million. To date, we have registered users of around 5 million and our borrowers is around 740,000. There are currently over 100 players, and the largest players are from the US and local Philippine companies. We believe as a local Fintech company from China, our advantages is obvious, and we will continue to leverage on our advantages and duplicate our success in China and Indonesia in the Philippines market. Around 20% of our transaction volume for the international market is coming from the Philippines in the fourth quarter, and we believe this proportion will continue to increase in 2024.

Jiayuan Xu (CFO)

Okay, thank you, Cindy.

Operator (participant)

The next question comes from Alex Ye with UBS. Please go ahead.

Alex Ye (Greater China Financials Research Analyst)

谢谢管理层给我提问机会。第一个关于海外业务的话，能不能继续请教一下印尼市场这一块，今年如果调整完定价以后，对我们这个收入和利润上相比调整前后大概预期怎么量化这个影响，然后后续，是不是监管方面会有进一步下调的时间表，以及我们准备怎么样去应对？然后第二个是关于股东回报的这一块，我们看到2023年，公司也加快了这个回购的速度，那全年的一个加上股息的派息比例也达到了48.5%。再想请教一下，未来我们计划来讲，随着这个可能增速的逐步放缓，未来一个可持续的一个总体派发比例应该怎么预期？谢谢。

I'll do a translation. First on the Indonesian market, so after the pricing adjustment starting this year, how do management expect the impact on revenue and earnings? And do you expect any further move from the regulators regarding the timetable to further adjust down the pricing cap? And how will we tackle the change? And second, in terms of the total shareholders return, we know the company has also sped up the pace of share repurchase this year, bringing the total payout ratio to 48.5%. So how should we expect a more sustainable payout ratio going forward? Thank you.

Jiayuan Xu (CFO)

好，谢谢 Alex。我先回答一下我们印尼的，这个情况。其实刚才也介绍了挺多关于印尼的一些数据啊。那么现在就目前的情况来看，我们这个预计的调整完以后，这个 take 大概是会在 10 左右啊，那之前大概是在 13 左右啊，所以啊，会有一些影响，但整体还是保持一个比较健康的一个水平，对。然后如果这个扣去这个获客和运营费用以后啊，我们税前的这个 ROE 大概是在 2.4 左右啊，应该说在这个业务当中还是一个非常健康这样的一个水平。对，后续在这个定价方面，这个调整按照之前，那个当地监管的这个要求，确实后面还是有，有可能性，还是，继续会有一些，调整的要求，那这个呢，我们会到下半年再来评估和看啊。但从目前我们整个，这个，整个，这个业务的这个表现来看，我们觉得即使，再往下调整一些，我们整个这个业务依然还是能够保持一个比较健康，能够盈利的这样的一个，一个水平，啊。

Jimmy Tan (Head of Investor Relations)

Hello, Alex, let me do the translation. We have actually shared some Indonesia data earlier. And take rate, we expect the take rate after our pricing adjustment to be around 10%, and prior to the pricing adjustment, it was around 13%. And from a ROA perspective, we expect it to be around 2.4% after the deduction of CAC and some other, other costs. And based on the current regulator's advice, there might be a further change in price reduction. We need to re-evaluate this in the second half of the year. However, based on the current UE, we believe our business will remain at a sub-healthy level, even if further price reduction kicks in.

Jiayuan Xu (CFO)

然后，就我们在整个分红回购的这个问题，那我想从几方面说一下。那第一个呢，我觉得还是要，重新想我们的信也的一个战略，那我们是一个这个立足于全球化的这个消费金融科技公司，那过去我们在国内、印尼和菲律宾，其实都非常成功开展业务，而且在各自的市场也处于这个领先的一个位置。那中国市场，这几年其实越来越成熟，所以整个业务呢，进入一个相对，稳定的发展的这样的一个阶段。所以我们在国内我们是一个这个追求更高品质的发展。那海外市场呢，根据我们的这个观察，其实还是处于相对早期，那它的空间和潜力就非常大。所以我们有信心，未来在这个印尼和菲律宾的这个深耕，以及，除了这两个国家以外的新国家的拓展，那公司的海外业务，能够保持非常快速的一个增长。那我们的股东回报策略呢，其实跟公司的战略应该是直接相关的。我们希望是能够，首先是能够，能够传递一个，就是我们业务是能够一个健康快速的发展，这是一个持续给股东创造价值的一个最主要的一个方式。

过去三年其实我们也充分证明了这一点，我们在完成国内转型和海外这个新拓新市场的拓展以后呢，我们其实过去三年的一个复合增长是达到44%，收入年平均增长是20%。这个数字在行业里面我们是领先的。那在这个之外呢，我们其实也是积极通过像回购、分红这些资本工具来不断的回馈我们股东。我们从2018年就开始做回购和分红，这应该是行业里最早的。那在这六年当中，我们已经累计通过这两种方式向股东回报了超过$600 million。这个数字如果拿我们现在市值来看的话呢，应该差不多接近一半了。那2023年我们回购是接近$100 million，然后计划分红是六千多万，所以合计占到我们净利润大概是要接近50%。如果算业务的话，也能超过10%，达到11%。2023年我们的DPS每股分红是0.237，这是我们第四年连续的这个DPS的上升。如果拿过去五年来看的话，平均升幅应该是在10%以上。这个数字我觉得特别想强调一下，就是在中概股当中，能够连续保持五年分红且并且DPS能够持续增长的公司，其实不超过6家，我们是当中的一个。所以在过去我们不仅通过业务增长给股东能带来回报，然后我们也是持续的是以领先市场的这种回购分红的资本工具，是给股东带来回报。那从未来来看呢，我们继续会继续秉持这样的一个理念，首先先确保是高质量的业务增长作为核心啊，给股东能带来一个可持续的回报，同时呢继续保持我们现在领先的资本回报策略。那在分红方面呢，我们有信心也有能力保持过往的这样的一个记录，不断给股东带来稳定并且是持续增长的股利回报。

Jimmy Tan (Head of Investor Relations)

Hi, Alex, let me do the translation. First of all, I would like to reiterate FinVolution position. We are a global consumer finance technology companies. Our success has been validated in China, Indonesia, and the Philippines with leadership position. In the recent years, as China market matures, our business enter into a stage known as high quality progressive growth. On the other hand, based on our observation, the international markets are still in early stages of development, where market opportunities for growth is enormous, and we are very confident to cement our success in Indonesia and the Philippines, while expanding to more countries, ensuring a rapid growth rate for our company. Our capital return program is closely in line with our company positioning. We hope rapid and healthy business growth can be the main way to create value for our shareholders. Over the last three years, we have proven this point.

We have completed the business transition of our China business and expanded internationally with an average CAGR growth of over 44% and revenue growth of around 20%. And apart from this, we have also returned value to our shareholders through our capital return program. We began our dividend program and share repurchase program since 2018, the earliest in our industry.

Over the last six years, we have cumulatively returned over $600 million to our shareholders, equivalent to almost half of our market cap today. In 2023, we deployed close to $100 million to repurchase our shares and $62 million for dividend distribution, representing around 50% of net income for 2023, and a combined dividend yield of 11%. In 2023, our dividend per ADS was $0.237, the fourth years of consecutive increase, and on a five-year average, this increase in dividend was above 10%. And I would like to emphasize on this, for China ADR, there are not more than six companies with five years of consecutive dividend and consistent increase in DPS, and we are one of these companies.

In summary, we are returning value to shareholders in terms of growth and a leading capital, and a leading capital return program. Going forward, we will continue with this belief and let high quality growth remain as our core method to return value to our shareholders and concurrently maintain a leading capital return program. Regarding dividends, we are confident to maintain our track record and continue to deliver consistent increase in dividends for our shareholders. Alex.

Alex Ye (Greater China Financials Research Analyst)

好，非常谢谢，thank you.

Operator (participant)

As there are no further questions now, I'd like to turn the call back over to the company for closing remarks.

Jimmy Tan (Head of Investor Relations)

Thank you all and once again for joining us today. If you have any further questions, please feel free to contact FinVolution's investor relations team.

Operator (participant)

This concludes the conference call. You may now disconnect your line. Thank you!