FINV - Earnings call transcript Q2 2021

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Operator

Hello, ladies and gentlemen. Thank you for participating in the Second Quarter 2021 Earnings Conference Call for FinVolution Group. At this time, all participants are in a 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, were our call. to posted online. earlier everyone. XXXX are And conference earnings today second and The via issued quarter results newswire services company welcome

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

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

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

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

inherent involve and statements Forward-looking uncertainties. risks

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

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

Feng Zhang

much for you Thanks, Jimmy. us joining so Hello, today. everyone. thank And

of timely of lines providing institutional types efficient our fingertips, manner. able enjoy are to have at different value different platform, for in cutting Leveraging for and finance consumer and credit segments in across the Through We financial continue a multiple convenience been users institutions. users owners edge finance, aspects. their business as small partners such technology, accessing provide users our both and we value to

to access we other technological value On the effectively reporting as quality hand, borrowers with borrowers quality results created, our and quarter channels. Along our and another to the acquisition to acquire set operational evaluate efficiency. and second the thrilled harness in be we're capabilities new and are able partners of increase record-breaking financial institutional constantly with our better

representing million, borrowers total acquired crossed globally and XXX% sequentially. again new last acquired an in markets X number of year-over-year over borrowers of new specifically, a the of increase reached quarter-over-quarter. to new XX% and X.XX reached borrowers of million number the year. an to XXX% once XXX,XXX, Our record approximately high same in quarter mark over increase of More compared of fold XX% international new year-over-year XX China acquired XXX,XXX, increase The the number

high are year-over-year Another XX%. a clear reached to is growth quarter jump quality a the of transaction XXX% that RMB resuming we new high billion, indication a our for XX.X increase total that sequential and volume record

for to acquiring international to and online have been RMB Specifically, expanded XX% better XX.X and and new we XXX% by consistent growth million. operation, grew while an further In RMB and volume Simultaneously, of of billion, array loan representing offline markets year-over-year outstanding healthy to billion, channels. in through sequential XX% borrowers of better increase. year-over-year growth facilitation volume to quality XX% order the our making quarter-over-quarter transaction support sequentially XX.X climbed investments transaction exponentially XXX China our year-over-year X,XXX% balance XX% in RMB

validates only offline to the new an of enhance quarter, of acquisition China's is volume. also provinces. channels second transaction can XXX to scenarios diversified our have around be around our different our contributed channels Offline have efficiency. total seamlessly but integrated We team online technologies in also established employees, covering an not over and offline of In alternative XX% channel, XX%

Going intend just volume business Notably, part a billion. offline the group's owners the robust, total year XXXX. for presented in RMB small meeting and the in the policies aiming remained transaction employees quarter to opportunity team line in the XXX,XXX second serving needs served number China, with we in compared owners or In underserved X.X small on increasing small our owners needs momentum segment to in to so. services the X,XXX business operational the of capitalize full-year for be believe to small made of segments expand of our on to funds. a play society. with the XX% forward, owner is We by available quarter, significant growth national we Since to this for XXXX, the total XXX,XXX exceeded sequentially of business the in business needs

total We also serving will expect We're around we transaction to take transaction half to percentage of our regions provide to terms the forward, in share our of Going pleased this a this business that for and volume segment this recent with maintain sources IRR of account for expanding focus continue strategic volume or on our second more XX% portion across in has line enhancing borrowing In second continue IRR And directions, with operational was operating maintaining regulatory in the lower and borrowers, acquiring to to new while actively more borrowing rate around to at quality of attractive efficiency risen margin. the reduced XX.X%. borrowers. further borrowers, XXXX. rates IRR XX% plan rate our August, healthy recently, to rates better quarter for and XX.X% and below funding XX%. rates to we

with delivering footprint with We talented our with feedbacks. roadmap excitingly, success that international and in performances. technologies, efficient prospects. advantage successfully mover a pilot continued attribute a to international swift addition launched markets very have and first and rooted and state-of-the-art thrilled expertise, demonstrating with in is Vietnam, global perspective, our testing our fourth positive recent great the user Singapore. to In Vietnam broadening our out technologies in country strong our value. presence, and encouraging in we Indonesia, our demonstrates team the We're operation we this global growth particular, in in our execution, marks our front, which Philippines operational On More corporate pace capabilities, proprietary accelerating emerging fundamental deep entry the potential global in building already pleased

roadmap international a technologies the our inclusive borrowers in our and financial transition remain plays business Our for us successfully world. We're in support our also committed expansion make role navigating in mission confident across markets. accessible in our global in firmly and China around to and crucial more services different

of our while working with these capabilities new explore our partners Going countries, forward, depth our models. operations in our particular, we capital through will local cooperation opportunities with are in continue us that different partners, technological reputation and improvements institutional credit across solidify Leveraging and model committed enable to advance technologies, amid to to our our diversify the in diversified building enhanced the we our expertise, as business partners able evolving further on risk our partners, portion products institutional we management provide ever solutions of model for to to eight and we in to built will higher operational scenarios. In understanding increased multiple Supported quarter All on remain platform by shown and testament these our have multiple metrics. a achievements previous that targeting corporate solid borrowers, delinquencies our in and strong from further the trust founding market in are the X.X% confidence FinVolution light dynamics. quality XX% credibility to quarter. have them this

X.X% compared in with remained day delinquency stable in For at the rate example, last period August X.X% X our year. same

in X.X% period reached We X.XX% to level year. second our a expect while delinquency continue the same of vintage delinquency to below XX-day rates low X.XX% the from a quarter, historical last improving ratio in

rate also XX%. around stabilized recovery at collection loan Our

advantage ahead, and objectives diversify continue for in leveraging financial continue strengthen quality empower are institutions beyond our for create value through our to digitization growth look as first we empowering capabilities business in primary the our solutions As markets international a stakeholders. a to businesses through long-term and service and technologies our of models, XXXX high our globally variety business China, pursuing to mover

the quality encountered and more. many executing years, challenges, as business, funding shifting we difficult our and have borrowers During the PXP many sources, better towards several past overcome such moving

deliver resources the evolving results have environment. know-how and We this and rapidly in better achievements to capabilities technological

coupled Our to responsibilities. investments model our for stress, sustainable growth, in sustainable our in with and progress success least, corporate our dynamic like their social not operating on strategic return Last, stakeholders with would drive but multiple business report our also town. sectors, all will own I

consistently the corporate past have as citizen. several responsible a years, fulfilled our we During duties

low interest activated in owners food with flood donated aid we program Hunan, example, has small supplies Together for in local disaster as been the For those million introduced. partners, our RMB post our institutional a XX during also need. and to distribute employees recent for business loan have

to discuss report maintain information, With do while ahead ESG also was technologies more now are Jiayuan will annual ability our over globally. for those visit for who our In growth to website in platform our published And turn our a the copy. as create capturing quarter call Xu, capabilities to having tremendous position and our confident results who the fintech long-term third China, our leading for the summary, interested leveraging digitalization for value financial in will stakeholders, that, recently. opportunities we I in Our are

Jiayuan Xu

an our increase non-GAAP business quarter, operating metrics of increase XX% year-over-year operations multiple model. our second and of X%, across million, income viability improvement of validating the continued With further XXX delivered sequential a in of RMB the we

RMB short to and coupled with well strong RMB sheet balance robust markets. Our X.X our opportunities and both with cash term positions unrestricted in investments, technology domestic us capabilities, international explore in billion

same and XXXX time, RMB was billion this results quality. XXXX, release to services to for in due fee. our the low quarter the million of mainly share-based referral XXXX before Non-GAAP the in XXX turning compensation, XXXX, of to of in of XXXX, quarter XXXX increase primarily for the the partially increase was by the Please quarter of refer of in XXXX, quarter of same customer period Loan in of to increase item in more the of XXX RMB higher million guarantee in second RMB the balance Guarantee In Net XXX% in platforms. due in RMB XXX RMB same tax, outstanding our the decrease our by of impact deferred to increased of the by in period was RMB the of RMB in Other which for by compared XXXX million of average for million offset XX% an XXX period the in same representing volume, the the fees second transaction by XXXX increase for loan second will million of same to due facilitation to million in by of as the details. XXX markets. period income, RMB for RMB of result million trusts, XXX our to XX% third-party period revenue to quarter. asset result million second mainly a to primarily fees quarter Net income increased second Net same profit for quarter not the by decrease XXXX, period representing line the second the of primarily same serviced quarter volume X.X transaction XXX the RMB period XXX fees. RMB of XXX line and which to quality. of by to of RMB volume quarter for XX% each reduction financial decreased earnings RMB transaction international operating walk of the XX% company outstanding the I million to from offset to second by RMB Post-facilitation the on income to XXXX, X.X RMB consolidated million Now, improved the an revenue was XXX million asset period XXX increased million for to to compared transaction increased our due expenses the XXXX. loans partially million billion the XXXX the through XX% improved million XXXX transaction the in to excludes XXX for due XXX of the XXXX. XX RMB fees income adjusted rate call. in by service X% other as of same a second offset interest increased interest increase second partially to to of our XXXX

our our us ratio business remains of liquidity the We short-term and strong evolving well well in end capitalized times. X.X the have our billion June cash balance of Leverage as significant and at was across X.X XXXX, flexibility. investments us a positions leverage environment and And the only RMB position, sheet, gives ratio low. consisting

in around situation China monitor of other With company the closely the resurgence the to the remain regions business and operations. and continue its pandemic COVID-XX recent the will vigilant world, in

company is the to in a the and of RMB expected operations anticipates holds billion. in such, which cautious of XX RMB As third range view XX volume for prepared its steady will I that, its XXXX, transaction of my be billion quarter the to remarks. With conclude growth

please open the continue. now will Operator, We to call questions.

Operator

[Operator from Thomas Chong comes And our first Jeffries. Instructions]. question with

Thomas Chong

strong the on Congratulations results.

I here. First, have two questions

And about about trend forward? already volume second and regulatory an some what you updates in second XXXX? APR outlook the could have loan my how of we the how And think about the share on first, please our XX%? APR is, And in our So environment? half going below loans question much should origination

Jiayuan Xu

cap [Foreign country institutions. our companies. consumer Language] a understanding, there the guidance for are finance for as timelines implemented XX% on is the different evenly CBIRC From window from But across not the different is IRR it

for outstanding to next new and actually no end we June. our XX% zero determine be that XX% interest whereas, the loan of by the borrowers. our end be the all some, follow guidelines rate some reducing the that preemptively Language] next for loans example, been will is originations of above For of will reduced This institutions there something have by balance will June, above within expectation [Foreign

and Language] the rate the quarter, of CEO, proportion XX.X Mr. in borrowing mean, to in borrowing Zhang, second was been given guidance our the rate call the believe to Language] reduced And we at have Feng the it loans XX.X. out first in to very the on in quarter, that We XX.X. that, these the And earlier, our And quarter, XXX August was we there full-year is in rates, mentioned example, our We level year. And we further further forward. going believe reached we out, grace and our on current going reduced implemented. facilitated beating here. to the And the are in X.X% involved to period the when the from based our make first do we XX.X. in X%. funding is has in confident And it quarter confident second of was beginning loans static X.X% assumptions, in is [Foreign X.X% cap has be are I the billion. our all based August. believe note For that are has also this XX% RMB XX%. that given the achieving of static fully over will under this operating And around below end [Foreign stress to improvement the XX% improve has shifting been been reduced we we take delinquency or forwards are efficiency based to in assumption we the of at [Foreign to these close assumption. rate rate help costs, will and have confident Language] upper making take test, have and around impact a which guidance preparations the will And be actually on our an

Operator

Alex Instructions]. from Ye, next comes [Operator The UBS. question

Alex Ye

questions. have few I a

outlook, margins the also one the the First on [indiscernible]. on impact on

is in affected you second August, rate your so So, then, the lower and far? And how how year? implemented after sales And the marketing so price take next for have outlook that on a is your trends. recently question has

quite see more quite of loan on of currently the expect percentage outpace color a has is can third terms It's when sort your of And loan And that marketing strategy. overseas in marketing overall encouraging trend your of volume. it then loan behind it always accounts sort volume? total what's could trend? around market to as driver growth. and to on your that sales front your go and to for share some wondering question saw and and sales I you progress the substantially about X% further I'm we of your up continued So, stabilized start

you I'm from us two contribution years? you loan have wondering if share targeted overseas to could three with volume if next market in So, your the any

Jiayuan Xu

to earlier This question XX%. at Language] capped of being [Foreign rates is the question related interest

funding the it the China, around Language] diversify we will believe versus was acquisition market, in is as reduction. XXX rate for XXX. first of cost also of in pace quarter determine to for RMB X.X%. the CPS stress the the that And in our still for this XXX application. current the expect quarter, the And was for in we In our partners take China stable. range in have X.X%. will would be around trend on around RMB Our in second future, order XXX. progress And take And [Foreign our there the with reduction, will CPS future, pace based in static RMB to customer we international The the about our the And challenges was the our to rate reduced quarter. RMB test, to our the ABS to in will rate in In are costs our to believe believe be we [Foreign that to discuss RMB X.X% acquisition the second around need customer the [Foreign update XXX we X% in significant Although this achieved Language] right future, like we sources. Language] ABS I be quarter. in XXX RMB second by

would range on of acquisition the my RMB channels. customer like it For the international Language] around XXX-plus. I update different market, to be also will [Foreign

new information XX%. consist acquisition. our about XX% of feeds channels example, to customer For

recently. we able offline of Language] XX% RMB has year, and our is Southeast Asia team it penetrated about Southeast been have growth, There the in it about times consists believe four second has markets in increased also and to for we confident and add our quarter, acquisition quarter-on-quarter and of in about origination about about On fourth acquisition [Foreign the operations billion stores customer XXX of still COVID-XX making was we loan our resurge progress we're Language] Asia million. very our customer of app achieve by [Foreign RMB has new X about Our been fast market. the a In some began XX% to today. last international our Vietnam. are country, compared loan volume growth which And XX%

Feng Zhang

This of is an half total I GDP at add would growth terms size market, just Southeast early of Mainland in in population financial Feng. that Asia market, But China. stage. roughly it's is terms of and

our we to are business earlier is much China. compared in at also Mainland So, stage where a

rates So, be in if we our expect horizon, Asian a faster at five we Southeast to growth domestic than years market. markets look the three definitely to

much market, to uncertainties, that, in volume. given range certainly that to does get depends the the five So, have it's account would which can also environment, hope in for we hard it of within the predict our years, we three but transaction total international because on domestic regulatory maybe growth XX-percent-ish business how for our

Operator

Renaissance. is with from And Instructions]. Eric next the China [Operator question Lu

Eric Lu

a quarter. the on performance Congrats great second in

is overseas about first The explanation. question

So, expanded we company in in the know countries Southeast four has Asia.

model about please in more [indiscernible] each you country. color provide can the So,

loan asset quality second and And nature. for the source, the facilitation funding example, is product the capitalized model. the the For question

please about capital-light you the business some color provide future of plan can So, model? adopting

Jiayuan Xu

of a Language] and turning work moment, mentioned profit, the the our model. Language] this the different for rest as relatively significant partners is heavy us from If for model give more the faster And pipelines, is worked the different made The for of point X.X contribute priority quarter, will in our have to partners of take progress institutional [Foreign progress have achieved cost But previous actually but of Language] cooperation to work We for model. you in to X% [Foreign of capital institutions the involved. our capital [Foreign quality quarter in performance. the about China light from we is And the pricing, focus for to X.X% more eight we terms business. in breakeven light the capital the with on [Foreign Language] the on has we our we terms times. risk model with that we unit our model, market, know, capital Our potential on rate quarter to low a Language] business is six ratio growth. the very economics capital have actually focus international meaning at the business willing And on international compare international the light have And around customers RMB additional Language] XX% [Foreign on there's XX%. our in capital have – XX% model another our our model. actually is in under with can light actually instead billion. to light not the capital year, at in this our in light CEO acquiring And a the more is X.X that leverage only also continue model, you [Foreign

Operator

from The Fan CLSA. next question with is Hans

Hans Fan

other on asset two and is have regulation quality. is I One one the on questions.

think I breaking the wise, facilitation in APR. between asked the to other up fintech want callers I about terms [indiscernible]. the loan regulation about about link bank So, platform and some the of ask

That's model? business, companies very was noticed We especially is on So, good. one. the on of quality quality. impacts can who how do a So, the to sort turn the on ask in take the we potential scoring there the asset in that data based credit this our what regulation on through change And plan two data number be And first, are asset was Number pass what rates? our to the licensed platforms pass are to trends in compliant? fintech banks? regulation,

expecting delinquency recent ratios? most are continuous two trends there? improvements months, So, at Do just looking we the what wondering, in the

Jiayuan Xu

on [Foreign on data based collection direction. our believe the along required been fulfilled have in has we we on standard. this And view And is company regulator's Language] The past actually working based the minimum reviews, Language] [Foreign requirements.

activities And and of exploring actually amount the a of been on as financial means guarantee need has like and credit-related with our our micro In also throughout the security received stress we the of is capability asset regulatory of process outcome also data material. the security our Language] we protocol one to licensed with bodies. better agency. go Language] is [Foreign quarter, data to Virus the to possibilities improving since progressively. And [Foreign XXXX. one Emergency be Computer will Language] supervised activities quality not Response under app [Foreign National institutions believe cost would [Foreign to data. licenses, information been Our the we app core to that to the from certification Language] And is activities based Center. will developing transparent, the actively certification to the cost, and efficiency. this in needs [Foreign participating I and China also we And actually app the bodies. based our sources under and expect licensed delinquency utilization it X.X%. credit minimum conclusion, around such the collected our of their Language] In link, data we improve us and future, together regulation's data has And possibilities mentioned on be our add agencies. Language] explore teams. the As think in the based delinquencies on we're indirect needs bureau products be quality bureau and affect competence on [Foreign supervised Baihang And have going passed. The And credit required working regulatory to of have results. a not Language] vintage the all not been the earlier, our lending Language] with business up standardized all have direction becomes actually it have breaking the Language] license lot. of will level. stake going This to of a credit-related management the [Foreign year, operation And our bureau standard to that process changed current in strengthen actually cooperation the channels. such only and And doesn't agency forward, the but using licensed higher opportunity license data we and the some be maintain we impact credit more the we at the our the we risk further transfer As secure second to [Foreign assessment understanding [Foreign

know, lowering from have like level help will risk improve to also the the PXP you we As pricing experienced what our transition.

Operator

[Operator Instructions].

Next from question comes with [ph]. Henry Lin Dragon Gold [ph]

Unidentified Participant

on Congrats results. strong very the

very to questions follow-up. two Just quick

some under I that or we will like you Language] guidance on under business, profitability much have rough And everything your The for breakdown just like, first your the one earnings when cap Do have we estimate, international next more know is, can downside/upside for facilitations, like you about is talked provide how is concrete XX%. loan volume the earnings color thing XX%? [Foreign different countries? of year the second

Feng Zhang

Feng. is This

our for account market of early country, the our volume, in total accounts quarters Indonesia the Just And Vietnam market stage. is a breakdown, And country just profit. very quickly, three about Philippine at for international in Vietnam starting, terms rest. of so and

can terms profit price the the think we do change just regulatory shift, a impact in math. quick Now, I for of

RMB As about And XX.X%. facilitated XX by average are us. is Outstanding we loans, billion. IRR mentioned, we have currently, they about is the – our

if XX let's – the billion a math, like, RMB we to say, XX%, do if times we that's drop reduce So, of X.X%. roughly

that's So, X RMB billion.

pre-tax profit million XXX RMB Sorry, impact.

of rate at a our some maintain may volumes below we reality, in Now, XX%.

that's again, bit than But that. impact a mentioned. we more as the So, may be little static the version,

now, happen – down Now, there's will more this in our will to the supply and operate players, reality, between is with limited a good have and much very XX% There we opportunity loss what for rate, with we we'll we think of asset market, continue think drive XX%. they lots sector. are

to able business but very impact to without to they a either very will close huge be be their XX% them not It's for do or going XX%. volume. very, fact, that do their with adjust will difficult that, to In a – to on

with a our supply be human partners, of to a think cost improve costs, our be a is our And lastly, smaller fixed limited. component, going then sector which it's And to to efficiency very research is with our fixed So, increase such – great be cost funding total volume, higher. The as really for with our we power lot I – better opportunity total company, asset our revenue. that, costs is of of spend the we to going are the further funding as a lot this our the institutional business, capital size negotiation with partners. going business for is of there's cost a us big is the going chunk heavy to percentage be we like a

ahead improvement to than these we all with can significantly profit smaller the So, a us, indicated. of just think actually impact opportunity limit we number impact I the

Unidentified Participant

year a year's if is material constant, from still material growth. we it under of earnings everything last level. But a Like, math, will have this we'll like still growth Basically, above very XXXX XX%. that holds still looks like have at

year, growth. last So, still next versus year it's material

Feng Zhang

But think I so. hope understanding a may of different people material. have certainly We

impact to and term, a term. fairly XX% the if believe the the look the aspects, good message these it's the is in think for profitability. is, terms for long going to I I But to company. be here think, medium term we the at impact from the have to industry do that of key So, think be we thing going for going our we And that short is cap all in some short manageable

Unidentified Participant

follow-up. quick very one Just

have been we both market? on area on answering we in some price to that Upstart considering how the has future their potential any On enter? US that doing strong like share Because been the given of business, under of business, plan and there? economics share the international as Are

Feng Zhang

market. plan paying have concrete enter as attention. been US now, we We have don't to But a of some the

I are think on focusing we developing worlds. mostly

Asian come. term, we we for and One something us play are medium Upstart, at very it's figure trying We pretty to particularly for still it's I big valuation. mainland market a long developing with out. happy world, enough them, has the of the think years we're when But Southeast the But market. think to the look high to to

Operator

[Operator Instructions]. Harry question comes Securities. next The with China from [ph] Wu

Unidentified Participant

user changes regulatory any kind do user further collection to privacy, data response of affected? that policies the there to Would and Language] what on the especially [Foreign is be company would not business ensure

Jiayuan Xu

is still and to Last an is countries. minimum of cross was collected introduction Certification there transfer, paper the focus protection the Emergency the On front, much evolving, the China developments data also received [Foreign relatively on in all remain And and standard. App on from always with we still Computer data their Virus also in Security App Center. The the information Language] required personal we the X regulations. China cross transfer. whereas data Level Response changes. the closely collected the National On and Security international the we rating This consultation personal there regulation information and have hasn't continue protection on border Friday, China Language] scope maintained [Foreign markets in been all Certification new [Foreign of the border paper on data have Language] to Information monitor remain in will [Foreign respective Language]

Operator

Instructions]. [Operator

over As company to the there remarks. the for further no would I closing any questions, to are like turn now conference back

Jimmy Tan

us once for Thank again you joining today.

questions, further Good please free to have you nice night. a team. contact our IR day. If feel Have

Operator

Thank has attending for now today's conference The concluded. you presentation.

You may now disconnect.

FinVolution (FINV) 23 Aug 212021 Q2 Earnings call transcript