FINV - Earnings call transcript Q4 2020

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Operator

Hello ladies and gentlemen. Thank you for participating in the Fourth Quarter and Full Year 2020 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. the Investor to Relations turn Tan, host now of Head for will call your over Jimmy I the company. ahead. go please Jimmy,

Jimmy Tan

Hello The our XXXX to today and via everyone and online. earlier and year posted full newswire fourth services earnings results company quarter call. are were issued conference welcome

Executive earnings Jiayuan and Mr. up the our a our at ir.finvgroup.com. for section can Officer the IR company's e-mail You will of Mr. release session. Q&A prepared call download the Zhang, Officer; our Chief Financial with Chief Feng the with Xu, remarks visiting sign and alerts by start conclude and website their

are During or prepared to this assess U.S. These and for our a referring to we measures be GAAP. with be performance. substitute information review intended in considered certain not non-GAAP as the to isolation and presented will financial financial operating accordance measures financial in call, non-GAAP

non-GAAP press information measures earnings our and these GAAP refer to to reconciliation release. For about measures, please

Before note that of will the Securities made discussion we XXXX. continue, statements Litigation Safe provisions Private U.S. the please Act contain under of Harbor forward-looking Reform today's

Forward-looking involve inherent uncertainties. risks statements and

as any other included to today. the As results the and expressed materially under these obligation forward-looking and may Exchange law. Further required Securities except U.S. in applicable does are risks and assume information update company different such views uncertainties not the company's regarding with from be company the filings statements The Commission. any

Please our CEO, for IR call to turn quarter. Feng now providing Finally, Zhang. I the a we details of on post the go our results presentation website slide sir. our over ahead Mr. will

Feng Zhang

for and today. everyone us Hello Jimmy. joining you, so thank much Thank

past my to XXXX challenges. FinVolution was all extremely the to like year shareholders stakeholders of unusual an over their sincere on behalf and I enormous would First all for with of year. appreciation support our of express

say a financial we created shifting quality which uncertainties by well operate have pandemic the to strategically economic we over and past in done environment to by we solid fast delivered I'm performance evolving the year. regulatory proud remarkably the despite better However, the borrowers

of in us XXXX clearance on upward PXP quarter quarter recovery resuming will After strong the the note. fourth With trend and focus in strong XXXX continued on high third year us our quality be a our helping we close the for balances growth. on a behind the

these IRR strong For exceeding was RMBXX billion from our of capabilities origination quarter strategic XX.X% to our increased loan of attributed sophisticated range end average the our volume the prudent our to by previous our industry-leading execution, with risk fourth guidance quarter gains to top the approach management. technological XX% We billion. RMBXX and and

prudent our risk assessment to key our borrowers as in by our completed improvement transition the maintain on to continue we management risk is into able as momentum funding our our our funding towards our continue see saw It risk management to by framework the and with for successfully strategic have number enhanced delinquency costs were of evidenced we us significant our decreasing better increasing funding Equipped simultaneously partners levels. allowing We quality while institutional management stable industry metrics. encouraging multiple to risk and on enter XXXX. approach Both sources diversified strong capability further platform. leading we ample improvement and growth [side]

the our high transition XX.X% COVID-XX to was capabilities. borrowers example our and December risk management towards primarily XXXX rate during For one compared to day February in quality due X.X% delinquency effective outbreak before XXXX

X% compared Our to in the is vintage around fourth expected quarter period below rate fall in XXXX. same the to in X% delinquency

[roll]. is Notably stabilize forward loans also all recovery rate XX-day our XX%. historical our levels rate on for maintain expect vintage outstanding similar Going to collection to continued new delinquency Portfolio we our at delinquency over platform XXXX. at rates vertical at loan a in

rates example same to to period are days year. last X.XX% in X.X% For XX the due XX compared past delinquency to improved that

and increased numbers on continue remains attract funding XX platform on to ample with board. our as our growing funding partners steadily On partners of to funding The over new institutional side, we the stable number funding of partners.

Our strong capabilities on do institutional quality new CBIRC's partners institutions model the joint partners of with XXX% business. well the to platform the regards X.X% to loans the rely assets facilitation strengthened same we our on operate fourth credit fell empowering through further platform. With We better last a are lowered XX% in to quarter lending loans compared our funding the borrowers in online as focusing the business are financial to landing lending demand loan our on period funding have a funds of Instead, provide our which from restrictions of not risk on cost borrowers. model further spurred notice our model. banks The we regulating commercial to year. facilitate With management through as funds in profiles costs. joint for

on funding our consumers a and CBIRC highly partner lending is private banks, of with regulations internet online companies domestic is new operation As the our impact mix banks, finance companies trust diversified minimal.

with loan to portion enterprise about for X% and business loan China. loan in propel extend loans XXXX business In our credit growth the to our Now company. we In our volume specifically by plan assessment to to strong little segment. such strategic framework of expect growth XXXX. more of total risk loan a micro our for support will the XXX,XXX our MSE which micro about on XXXX RMBX.X new financial small this year volume facilitation loan accounted how the technological we line technological for for leverage around of of originated and services account guidance we to regulatory over our our economy and into XX% offering of industry This have is also know-how to the initiatives the overall capabilities fuel share in help I'd volume to capabilities enterprises. cater diversified further our Powered prosperity to we micro businesses. enterprise billion the believe operating the origination needs our plan a and also we in in We further like

Our international leading market expansion growth. the is rapidly with Indonesia progressing

the Our which origination than today traction volume RMBXXX Indonesia represent the Southeast our quarter. growth. the majority Asia to by to gain further of loan for expected compared in Loan better fourth with overseas the operations XXX% previous business million increased volume quarter

fast-growing services past the the These that license and we market financial developments Over monetary of two Southeast for a are from as a Indonesia believe will Asia authority capital license of the obtained us services significant years lending peer-to-peer we have from a authority market. Singapore. be

us execution to lays our be plan was to performance a billion in to as a well deep for now the RMBXXX users of our effective year-over-year. solid we by XXXX. successful in financial volume recovery range in [digits]. summary, XXXX further expect our loan make growth. our remains drive state-of-the-art quality The In XX% with strong more loan of supported technology technological capabilities started as With of XX% quarter the our experience and of RMBXXX resilient higher XXXX and increase to an and strategy. industry our in foundation the transition services to expertise continue evolving of borrowers light to representing billion growth We that solid dynamics business harness will market performance third to for accessible In in

dedicated capabilities our remain on Looking track controlling taken prudent XXXX with innovation, our given to to technology and record in we credit technological and risk responsive ahead navigate challenging cycles. risk management economic proven measures in credit

our financial markets With as shareholders. micro I the enterprise to Xu will our immense will quarter. in who China's potential call well-positioned for well to deliver capture the Asia's and Southeast consumer are now We value discuss to the Fintech over for turn markets results long-term as Jiayuan that

Jiayuan Xu

and an In further fourth quarter, everyone. delivered Mainland Feng you a operating RMBXXX of increase in million core year-over-year recovering profit the demonstrating resilience hello the business XX% environment model. made our non-GAAP representing community China. of the Thank and of We I

in and Our with capabilities Mainland in to business strong both cash our technology Asia billion new finance liquidity. markets expand we and strong China continue from balance opportunities Leveraging and with look relationships arising our we sheet partners. capture as to short-term deepen consumer Southeast remains unrestricted RMBX.X

and consolidated of same to million quarter quarter profit RMBXXX fees. due for by rate XX% primarily to increased fourth for income Now million on impact walk the volume call. reduction the the XXXX from Net XX% XX% was XXX. of of profit RMBXXX partially the XXXX in serviced primarily the due same same the balance XXXX period or facilitation increased to fourth RMBXXX of ASC our in RMBXXX quarter and for line fees in of loan beginning transaction representing loans due the line same in by fourth interest decrease the XX% the in this period million increased service of in million decreased of same fees. million excludes by period Non-GAAP average in third-party billion XXXX to XXXX earning the the through from RMBXXX XX% in from RMBXXX for the growing to volume. of period charge. of In of operating item compensation in Net increase company each an increase any adoption XXXX. outstanding million quarter for which the of Post RMBXXX turning to same Guarantee by Loan from increase mainly the an due to million increase the expenses of fees by of for of which the before RMBXXX of quarter for will transaction XXXX due of the mainly to quarter about the for at release Other the tax revenue customer in of I by the service billion period by XXXX loan primarily decreased of to of million to adjusted time RMBX.XX XXXX facilitation million was XXXX fourth refer XXXX. service deferred to to the million fourth RMBXXX period the million by in revenue loan fourth of for year of the RMBXXX the not the of period representing was of of due providers. offset XXXX the origination XXXX fourth XX% the compared XX% the for to Please fourth fees million financial adoption XXXX was declining million RMBXXX ASC referral of share-based quarter RMBXXX to quarter. interest XXX increased RMBXXX Net income for fourth RMBX.XX results to XXXX details. same more the the quarter

the of funds model funding loan loans to and partners on business is is our core well credit. service to provide funding based borrowers the for institutional role value-added access Our to as provide the provide whereby to on as XXX% our the model partners platform borrowers facilitation

sheet our We have well-capitalized leverage balance is conservative. a and

of outstanding the you and cash the only by liquidity our loans If and on X.X leverage business the of at unrestricted remains divide our equity, RMBX.X with total the end ratio position billion times investments across shareholders of RMBXX of December our was platform billion about short-term strong XXXX.

to enables well-positioned Our significant environment and us the be strong flexibility. current us gives balance in sheet

share shares. have return first back shareholders through and $XX our to buy quarter continued million buybacks. deployed to we We have our In to the value dividends

cumulatively As on million of have December U.S. XXXX buybacks. $XXX deployed we

third our dividend our also shareholders. ADS for Our in a business dividend of per declaration consecutive $X.XX board U.S. which our reaffirms our confidence XXXX model. announced fiscal for This is has year

that potential. $XXX capabilities U.S. Operator continue. deployed buyback core the long-term conclude and the million XXXX will in initiatives will call Since and questions. my Our to now With please prepared have I we share this our we remarks in we and began regard. cumulatively market dividend open

Operator

question Wang question answer Hanyang Instructions] now XXResearch. ahead. go with first will [Operator We Please begin session. and The the from comes

Hanyang Wang

Let to release my questions. Hong me question the Language] regarding [Foreign My team. is try Kong take on first

So any is will be take plan or timetable on rate. question helpful. second My for that

reduce rate take XXXX last and question the continue overseas So about will to is business. in we

measure Southeast in volume participation the of the the Asia risk the what in how assuming primary in what terms proportion will and model we be overseas our business different. business So area you. Thank several years and profiles timing the we measure of how is and next in

Feng Zhang

Okay.

exploring -- stock stages. Hong this requirements is the is secondary Exchange due made the have too and as very on company We Kong the the possibility early for

have further side. we We will only market update when from our updates

Hanyang Wang

[Foreign Language]

Jiayuan Xu

Okay.

Let do me first. the translation

adjust perspective -- from some pricing. flexibility our this not and the let Okay, pricing. – we applicable times product And model. four The us us for loan facilitation -- the it's LPR to have using lending

However, the and decision on level several the customer on satisfaction, rates of such factors the level economic is dependent my etc. adjustments of the as development,

before changes. to these will making factors all consider need We any

Hanyang Wang

Language] [Foreign

Feng Zhang

REIT Apart pricing, funding cost. Okay. our from other such to consider also the factors need and as we

our the as take improve view For cost is we expected example be and we we rate expected funding the is have to below be really below to funding and -- have from X.X to market our to reducing rate X% confident cost are and capability X% at further of maintain point rate. the REIT delinquency guaranteed

Jiayuan Xu

X% I will just the of between pricing on XX% if is number add basically it XX% the math you and and if to risk, based exploration, do cost. our the cost it X% quickly is which do content you funding is X.X%

X%. about based So with They on out of rate it these numbers. is come take

clarified has pricing model. four mentioned the Zhang to that has doesn't as Now gap the our apply Court clarified business the LPI Supreme times has regulation

have So to rate is adjust on do upward upward side we further we which color. room have and our that in or that the do pricing flexibility downward, at case take

Hanyang Wang

[Foreign Language]

Feng Zhang

Okay.

Let recap the Southeast Asia. situation us on in

growth Philippines Singapore. and Our also is entry Indonesia and leading market have such into we countries other as the

to and continue the will requirements. the limit the of keep operations keep within local our regulatory regulation We -- developments of

license we a example, in to one and For is PXP really between every months. two our loan tenure have Indonesia

Hanyang Wang

[Foreign Language]

Feng Zhang

share to just few We in a our expand a China in market ago. there like from Indonesia. It as we continue years think lot will potential of Indonesia is is

Hanyang Wang

in business are Thank of in Asia you. the [Foreign the model? market terms facilitation Language] So loan competitors the what main Southeast

Jiayuan Xu

Okay. Language] [Foreign

Hanyang Wang

Language] [Foreign

Feng Zhang

The Indonesia to that Indonesia we in are want capabilities over we too confidence three to just market in repeat among do the constantly and our and by Asia Southeast China early very and way, stage fintech have apps I add the success market. is -- market top the

Hanyang Wang

[Foreign Language]

Operator

from Alex go question UBS. next ahead. is from Our Please Ye

Alex Ye

have questions. Language] will I [Foreign I question. translate three my

strong so how one the growth. is First long -- growth of guidance loan -- XXX billion

I growth am I like and to growth. like contribution our new a how yet. our returned that strong wondering wondering, we haven't customers do am looks to is from activate to achieve the growth higher momentum increase to So because plan level it customers still high

MSE target. is The on loan second question your

three to MSE and credit going adjusted your and XX% are could of appreciation You cost, rate a cost by the compare to constraints on kind kind rising addition the to customer share for was higher your risk has contribution return am quarters XXXX, MSE strategy. of [Indiscernible] six does in past this probably -- in the loan quality of that loan driven month with is a been you consumer how that future. the I there Thanks. customers finally high really wondering whether

Feng Zhang

customers. billion the RMBXXX In order Language] new between billion achieve we of to both need to target [Foreign and old RMBXXX the

XXXX. period fast new actually to already And example the quarter fourth increase to customer we For and actually the XX% very quarter three is in our and was and this of level the continue growing XXXX. similar in expect XXX,XXX fourth is same compared around trend December levels to at this the the the compared in

Alex Ye

[Foreign Language]

Feng Zhang

The are Okay. actions as more acceptable to our are brands new more we customers. actually they new registrations realize from these customers that

Alex Ye

[Foreign Language]

Feng Zhang

seen have customers with as increase. have noticed similar We trends old also repeat we borrowings our actually

Alex Ye

[Foreign Language]

Feng Zhang

have we growth two during to enjoyed past has have growth two the PXP the last slow XXXX entrance. with rapid been years been Our we the years very at prior in but the occupied

exist have and quality PXP borrowers. We better to the transition

of achieved loan high in to targets volume. these and resume We terms has have quality targets growth of been both origination complete we the have successfully of both these ability

Alex Ye

[Foreign Language]

Feng Zhang

our online/offline acquiring customers of channels. We through been have new diversified

acquiring them are we channels through online the information. For

Alex Ye

Language] [Foreign

Jiayuan Xu

is fourth similar quarter that level XXX the acquisition plus fourth cost customer remember also on impacted but do in the was the QX the to quarter in CPS basis Our the by event.

Feng Zhang

of going forward think cost at CPS, that controlled have events. a the as Therefore will because better very of as going year borrower is healthy the e-commerce and of a base it QX little business quality lower and our forward. lower be the rate level and confident Such marketing advertisements be Yes higher we level And they funding model. we for because will given are cost bit our CPS loss the cost. similar our well lot the end

So the to question. add I will try answer Yes. second

lower SME of business XX% are slightly owners our XX% our and borrower. RMBXX,XXX mostly thousand customers [Indiscernible] XX,XXX, -- there average our Chinese than the like are and line ticket from shop like size So a range average in few those mostly in with an range is to to around

than We lower have We better to loans. like these standard rate seen be the risk loss customers like X% our average. for on quality probably estimate

we profitability bit also the lower expect given their delinquency little price and rate. lower is lower So slightly price the

same expect margins adjustment risk same We return. the and the

think asking you. yes all terms in right. things are you So that's of I Thank probably the

Alex Ye

clear. Thank very That's Thanks. you.

Feng Zhang

Alex. you Thank

Operator

Jacky Please The Zuo next question with is Renaissance. China from go ahead.

Jacky Zuo

thanks about two have So one Language] management [Foreign questions. I the demand. for taking borrowing questions. my Number is

that peers credit Just We users. to the quarter is sharing side. partner. from some -- cutting seen the some funding line given model the borrowing with first is have the on profit is users you the second and side latest the for funding news end the in additional these check trend want do from question from see borrower we the our exploring of see And what we see demand

model? want what to our check just So Thank progress on you. the whether is profit sharing

Jiayuan Xu

and very this of our the are customers and [Foreign loan our QX exceeded in guidance XXXX and old also based customers. end our QX to Language] volume guidance due Okay from origination volume on is demand the our top new support strong loan the in guidance our

Jacky Zuo

Language] [Foreign

Feng Zhang

impact. these internet if are data confirmed drive from do We have users not XXX% the

in demand with reflecting we has We estimate satisfied. fully with market the overlaps have of not are results for to the that some been example players indirectly other able conducted,

Jacky Zuo

Language] [Foreign

Feng Zhang

There is guidance model. specific regarding sharing regulators the from no risk the

Jacky Zuo

Language] [Foreign

Feng Zhang

several unique the etc. cash perspective the and to such From leverage capital company's regarding economics, need we model ratio, issues consider position as

Jacky Zuo

Language] [Foreign

Feng Zhang

the facilitation At for us. bearing loan most risk this -- moment model is

Jacky Zuo

Language] [Foreign

Feng Zhang

With said, capital-light us. does mean that for is being this important model not not that

the and capital-light priority. business our of is the capital-light powers XXXX model partners with growing numbers one working remains fact in top the In in institutional our us of

Jacky Zuo

[Foreign Language]

Jiayuan Xu

working try XX partners and have are already with these that to institutional the most model This we over we under the operating were free model risk we know with partners our why also we the partners. in you if venture fundamentals capital-light of institutional institutional them. As believe have is and support us

Jacky Zuo

Language] [Foreign

Operator

[Operator The go ahead. Dragon. Instructions] Liang from line your is me is with next Please open. Liang, question Henry Henry Golden Pardon

Henry Liang

just well. [Foreign so and muted. Sorry, it's all Language] basically volume, the profitability So congrats, going like metrics,

Just explain you decline what and competitors. share fantastic our you like what's is Can metrics. the wonder Thanks. the really all core transaction can guys of like that

Jiayuan Xu

Okay. Language] [Foreign

business of XX over First actually very is to operating past look history quality but you better years our upgrade a ago two years we with of we at if going the the borrowers. have years and all exit take been PXP have during the rapidly two and occupied

Henry Liang

[Foreign Language]

Feng Zhang

because the to and are ability We most has to peers. capability core execute compared with sides, capabilities we and all able swiftly the transform our four technological manage the these team transform of to the the to in management the

Henry Liang

Language] [Foreign

Feng Zhang

do the sub and have of PXP that we from is era capabilities operated example only not lease our for in managements. borrowers because One the data This better today. borrowers quality in used to the we our to

Henry Liang

Language] [Foreign

Jiayuan Xu

Language] [Foreign Henry. Hey

Henry Liang

[Foreign Language]

Feng Zhang

resume focus Our on growth and we resuming our condition to the do to and rapidly. we on -- capability comes basically our We have has based track now records are past resume have to spot market. temporary

Henry Liang

Language] [Foreign

Jiayuan Xu

to proved also area. market the have We

to Our on but transferable means are in markets. this that international replicate in not China international technologies the market. And we to only our and experience are China also able capabilities the

Feng Zhang

more I Henry, color. won't Hey add

Officer really the there at our I And company growth. other players company. joined Chief culture. keeping One risk us are think share now risk was in apart President of thing our is on The CEO company like I can the couple our is strong our have our a emphasis current the sacrifice think company we is Chief of don't I a as before a we level company I the Risk the XXXX I of would market Risk the our the and put and set risk from joined things. in one Officer and that I because target of lot President, we am

of focus. So access that's management's given we that risk risk track very a a a gives very model. kind why color and how like record important in we smooth our institutional is of transition you And funding good have smooth PXP have to the of

We also on technology. emphasize a lot

key very in advantage in invest this we to for long fintech that strong technology we continue a is believe as and competitive term finally the team. success We have business

is grown than like set is it why no, goal like even I our grown think production see risk borrowers, ago. a believe work. institutional facilitation for of seeing we quality and see of many of the I And more you like it strategic years you we two growth good will years see result better So better We fruits work going for comes and today forward. is think model we really are

So think good combination of really execution. it and we planning strategic is

Henry Liang

very current how with top So be situation much total can thanks the the for just follow-up. our partners One we funding of and margin this Language] it's insightful new cost line what the into in the secondly, can and like earnings. transitioned volume that is funding in negotiate quick very growth of [Foreign the

Feng Zhang

is Henry already for further to funding we [Foreign funding XX the Language] pipeline Okay side. in room have there we facts, Okay the improvement and XX believe our in partners

Henry Liang

[Foreign Language]

Feng Zhang

cost is only funding However, factor.

most priority other partners to the growth. our quality need consider our the partner at ability, have moment current appropriate not funding to will and the the level find funding however, support customers cost the lowest just high of is to We but issues that

Henry Liang

[Foreign Language]

Feng Zhang

revenue to have have to of take will rate around guidance Okay our able we given loan a if guidance accomplish and our do so you have. X% we origination be how given are of much we also you going have sense

Henry Liang

Language] [Foreign

Jiayuan Xu

influencing these. several to line bottom However, from there factors line are top

this front. customer we one up And them. recognize need is example to For cost of

Henry Liang

Language] [Foreign

Feng Zhang

is customer for us. a New not purely acquisition cost

that is of view as customers acquisition know you understand you we us If customers is required for growth. why new investment. new This a form

Henry Liang

[Foreign Language]

Feng Zhang

the new try acquisition our customers of to maximize on side. We

Henry Liang

Language] [Foreign

Feng Zhang

Another factor is accounting. bottom influencing the the line

Henry Liang

[Foreign Language]

Feng Zhang

because when completion. line situations top from of doing And these bottom line two a and

Henry Liang

Language] [Foreign

Feng Zhang

maintain However in we are a bottom too competent steady to trend. the growth line

Jiayuan Xu

Language] [Foreign

Operator

question-and-answer like would the over now to conference company any back our to I concludes turn the closing for remarks. session. This

Jimmy Tan

Thank Okay. tonight. our you everyone joining for call

you questions If free reach IR night. to any team. further to out have feel the Good

Operator

concludes This the call. conference

your You now you. Thank may disconnect line.

Jimmy Tan	Head, Investor Relations
Feng Zhang	CEO
Jiayuan Xu	CFO
Daphne Poon	Citi
Hanyang Wang	86Research
Alex Ye	UBS
Jacky Zuo	China Renaissance
Yiran Zhong	Crédit Suisse
Terry Sun	CMBI
Steven Chan	Haitong
Liang Henry	Golden Dragon

FinVolution (FINV) 11 Mar 212020 Q4 Earnings call transcript