Hello, everyone. Thank you for joining the third quarter 2024 earnings conference call for FinVolution Group. This call is being recorded. I will now hand it over to your host, Jimmy Tan, Head of Capital Markets for the company. Jimmy, the floor is yours.

Hello, everyone and welcome to our third quarter 2024 earnings conference call. The company results were issued via Newswire services earlier today and are posted online. You can download the earnings release and sign up for the company email alerts by visiting the IR section of our website at ir.finvgroup.com. Mr. Tiezheng Li, our Chief Executive Officer; and Mr. Jiayuan Xu, our Chief Financial Officer, will start the call with their prepared remarks and conclude with a Q&A session. During this call, we will be referring to several non-GAAP financial measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation, or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures and reconciliation to GAAP measures, please refer to our earnings press release. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties are included in the company's filings with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Finally, we posted a slide presentation on our IR website providing details of our results for the quarter. I will now turn the call over to our CEO, Mr. Tiezheng Li. Please go ahead, sir.

Thanks, Jimmy. Hello, everyone, and thank you for joining our earnings call. This is Tiezheng Li, CEO of FinVolution Group. We are happy to speak with you today. FinVolution made great progress despite the challenging circumstances through strong execution of our local excellence, global outlook, our LE-GO strategy. Although China's overall economic growth remained constrained in the third quarter, we anticipate more sustainable improvements in the fourth quarter given the bolder than anticipated stimulus measures announced in late September. Additionally, we have made significant progress towards the objective of achieving 50% of our revenue coming from the international market by 2030. By continuously leveraging our experience in China and ongoing technological improvements, we have propelled rapid growth in international transaction volume. This has translated into higher revenue and net income contribution, with international revenue contribution increasing significantly from 3.7% in 2020 to 10.3% in 2022, and expected to be around 20% in 2024. Over the years, we have also consolidated our capabilities into individual models, which we can flexibly deploy while adapting to the evolving requirements of different countries. In line with our objective of increasing our international revenues, we recently strengthened our international team and invited Dr. Sun Xiaodong to join us as our Senior Vice President for International Business. Dr. Sun has held key positions at renowned firms such as Ant Financial International, MYbank, American Express, and Citibank. Bolstered by Mr. Sun's leadership and expertise, we are confident in accelerating our international business expansion and achieving new milestones. As of September 30, 2024, we have cumulatively served 32.6 million borrowers across China, Indonesia, and the Philippines. For our international markets, we are proud to share that the number of unique borrowers grew from 0.7 million in 2020 to 1.6 million in 2022 and to 2.1 million for the first 9 months of 2024. Additionally, it's worth noting that the number of new borrowers were 0.63 million in 2020, 1.1 million in 2022, and 1.5 million in the first 9 months of 2024. Validating the high percentage of new borrowers in our international business, the acquisition of high-quality borrowers across all our markets remains an important element of our strategy. As a result, the total number of new borrowers across our platform once again exceeded the 1 million mark. We are very pleased to share that as we enhanced our global operations during the third quarter, the number of new borrowers in international markets reached 671,000, up 60% year-over-year and 43% quarter-over-quarter. Notably, the number of new international borrowers continued to show strong growth. Such growth underscores our execution excellence and our strategic effectiveness in driving the rapid expansion of our international business. For the third quarter, total transaction volume reached RMB 52.2 billion, while total outstanding loan balance reached RMB 68.1 billion, up 1.8% and 3.3% respectively year-over-year. This continued growth across other markets in which we operate validates our strategy's efficiency and sustainability. Given the low penetration rate for financial services in our international markets, we continue to enhance our holistic approach to customer acquisition with innovative marketing campaigns that capitalize on our strategic partners' resources and our local teams' deep understanding of market trends. For instance, our comprehensive social media strategy continues to attract new site visitors and enhance our brand exposure. This facilitates positive word-of-mouth publicity and projects a trustworthy image that encourages follower conversions. As of the end of the third quarter, our total followers on major social media platforms reached 2.5 million, up 21% year-over-year. As a tech pioneer, we are leveraging technological innovation to strengthen our operations and promote the fintech industry's integrity and security. During the third quarter, FinVolution presented its detection solutions for combating deepfake voice command scams during the 33rd International Joint Conference on Artificial Intelligence in South Korea. Advancements in voice synthesis technology are making it increasingly difficult to distinguish between genuine and cloned voices, posing significant risks in terms of data security and asset protection affecting different industries. We believe that our sophisticated large language model-based solutions have the potential to effectively combat voice command fraud, safeguarding our users' interests and fostering a healthy industry ecosystem. We have also integrated large language models into our loan collection recovery process, which has improved our loan collection recovery rate and saved us millions of dollars. The development of such innovative technologies is a result of our strong commitment to R&D and the annual FinVolution Technology Cup competition, which has incubated many cutting-edge solutions over its 9-year history. Looking ahead, we will continue to invest heavily in R&D to enhance service quality and operating efficiency empowered by leading technologies across our operations. Before I wrap up, a brief update on our ESG efforts. In line with our core commitment to financial inclusion, we continue to support the backbone of the economy by facilitating loans for small business owners during the third quarter. As agile, community-oriented providers of local employment opportunities, serving small businesses ultimately contributes to a more rapid economic recovery. During the quarter, we empowered 447,000 small business owners with loans totaling RMB 15.4 billion, up 25% year-over-year. In summary, we successfully navigated the third quarter's challenges by capitalizing on our strengths in technology, customer acquisition, and retention. We also continue to attract quality talent across multiple countries, which has further strengthened our R&D capabilities and will eventually enable business process outsourcing from Indonesia and the Philippines. Facilitating our expansion as we enter into more new markets, firm execution of our local excellence, global outlook strategy, continuous technological innovation, and our unwavering commitment to our vision of financial inclusion continue to drive our steady progress and long-term sustainable growth. Going forward, we are confident of becoming the leading fintech player across the Pan-Asian region. With that, I will now turn the call over to our CFO, Jiayuan Xu, who will discuss the operational and financial results.

Thank you, Li, and hello everyone. Welcome to our third quarter 2024 earnings call. Let's go through our key results for the third quarter. To be mindful of the length of earnings call today, I encourage listeners to refer to our third quarter earnings press release for further details. As Li mentioned, the recent announcement of a series of bold expected stimulus measures during China's national holidays has resulted in positive growth in travel and consumption data. During the national day holiday period, 765 million domestic trips were made, a year-over-year increase of 5.9%. Domestic tourists collectively spent around RMB 701 billion, representing year-over-year growth of 6.3%. Alongside the trend of consumption recovery, consumer willingness to purchase houses in the first-tier cities such as Beijing, Shanghai, Guangzhou, and Shenzhen has rebounded significantly due to favorable real estate policies. Furthermore, the manufacturing PMI rose by 17 basis points in September, reaching 49.8 points, the highest level since May. During the third quarter, we observed ongoing improvement across multiple operational metrics in our China market. For the first 9 months of 2024, the transaction volume in China reached RMB 142 billion, up by over 4% year-over-year. Other operational metrics also exhibited varying degrees of continuous improvement. Furthermore, our average borrowing rate in China remained stable in the third quarter, a strong validation of our commitment to financial inclusion. Leveraging ample market liquidity and a continuous shortage of quality loan assets, we further improved our funding costs by an additional 50 basis points in the third quarter. Since the beginning of the year, we have improved funding costs by 190 basis points, reflecting financial institutions' strong recognition of our asset quality and credit risk assessment capabilities. Regarding risk, we achieved significant improvement in our recent day 1 delinquency rate, driving a 20 basis point improvement to 4.9% through effective use of our end-to-end credit risk assessment models. Meanwhile, our loan collection recovery rate rebounded to 88.5%, up 50 basis points quarter-over-quarter. Given our growing confidence in the acceleration of the macroeconomic recovery, we anticipate sustaining the improvement for the remainder of the year. We also maintain our expectation that the vintage delinquency rate for the quarter will improve to around 2.4%. Turning now to our international expansion, our validated second growth driver. For the first 9 months of the year, international transaction volume reached RMB 7.2 billion, up 29% year-over-year. Revenue contribution from the international markets grew further to RMB 636 million, up 9% year-over-year and representing 19% of total revenues. Capitalizing on a robust global macro environment through effective execution of our LE-GO strategy, we are confident in our international operations' sustainability and the diversification of our business models across various countries. Let me begin with our first and largest overseas market, Indonesia. This market continues to exhibit strong growth momentum, with the consumer confidence index remaining above 120 points for 21 consecutive months. We expect further stimulation in local consumption following a 25 basis point reduction in the benchmark 7-day reserve report rate to 6%. In September 2024, motorbike sales in Indonesia increased by 3.7% year-over-year, reaching 529,000 units. After several months of business adjustments aimed at attracting high-quality borrowers under the new pricing cap, we are pleased to announce that our transaction volume in Indonesia has resumed growth, reaching RMB 1.8 billion, a sequential increase of 11%. This quarter also marks one of our best-performing quarters ever in terms of transaction volume. Following the completion of our recent business adjustments, we forged a new strategic partnership agreement with Superbank, a leading digital bank in Indonesia, highlighting the trust and recognition we have earned from local financial institutions. To date, we have entered into strategic partnerships with multiple renowned digital and traditional local financial institutions, including Superbank, Bank Jago, Citibank, OCBC Bank, and Permata Bank, among others. I also want to highlight that after several quarters of preparation, we have successfully acquired a large majority stake in a local multi-finance company, which will enable us to diversify our products into non-cash loans. This, in turn, will empower us to expand our presence to more borrowers. The completion of this acquisition underscores regulators' trust and confidence in our local operations. In the Philippines, our second international market, robust macroeconomic conditions are boosting consumption. In September, the Purchase Manager's Index (PMI) reached 53.7 points, reflecting year-over-year growth of 6% and a sequential increase of 5%. This micro-trend also drove a reduction in the Philippines' unemployment rate to 3.7% in September 2024, down from 4.5% during the same period last year. Notably, private consumption in the Philippines has accounted for over 70% of its nominal GDP for over a decade, serving as the country's primary growth engine, boosted by steady remittance inflows and a strong labor market. Our Philippines operations continue to outperform expectations, with transaction volume growing 137% year-over-year and 24% sequentially to RMB 838 million. It's also worth noting that its contribution to international transaction volume grew to about 32% for the quarter. We have established robust financial and operational partnerships in the region and remain highly confident in our ability to sustain rapid growth here. For example, we are strengthening our Buy Now Pay Later (BNPL) partnership with TikTok. We have also initiated a pilot project with another leading e-commerce platform to diversify our customer acquisition channel. Furthermore, we have ample funding from leading local financial institutions such as Maya Bank, SeABank, and Union Bank to support our growth. These solid partnerships have enabled us to capitalize on the vast opportunities in the Philippines market. Given the accomplishments we have achieved in our international markets, we are confident we can replicate this success in additional countries and regions by leveraging our in-depth experience and technological advantages. Now, turning to our financial metrics, this quarter's operational excellence resulted in solid financial performance. Net revenue for the quarter reached RMB 3.3 billion, marking a 3% increase year-over-year and a 3% increase sequentially. Net income was RMB 624 million, representing a 9% increase year-over-year and a 13% increase sequentially. Meanwhile, sales and marketing expenses rose by 6% year-over-year to RMB 516 million as we continued to strengthen efforts to acquire new borrowers of high quality in both China and international markets. Furthermore, our leverage ratio defined as risk-bearing loans divided by shareholders' equity remained low at 3.2x, reflecting potential growth opportunities as the macroeconomic environment stabilized. Our total liquidity position, consisting of cash and cash equivalents plus short-term investments, reached RMB 9 billion, up 13% from December 2023. This showcases our robust balance sheet that's well able to support our business growth and exploration of new opportunities while consistently increasing shareholders' returns. Before I conclude, let me briefly update you on our share repurchase program. During the third quarter, we deployed around USD 24.3 million to repurchase around 4.6 million ADS on our secondary market. For the first 9 months of 2024, we deployed USD 81.1 million to repurchase our shares in the market, up 23% year-over-year. As of September 30, 2024, we had cumulatively returned USD 361.1 million and USD 325 million to our shareholders in the form of share repurchase and dividend distribution, respectively, for a total return of USD 686.1 million to our shareholders, underscoring our strong commitment to enhancing shareholder value. In summary, our robust results for the third quarter demonstrated the effectiveness of our local excellence, global outlook strategy, empowered by our nimble business model and technological advantages. Given consumers' growing confidence in an accelerating economic recovery, we believe our operations will continue to build positive momentum throughout the remainder of the year. We will remain committed to seizing the global market's vast opportunities and sharing our achievements with all shareholders through sustainable business growth and a strengthening capital return program. That concludes my prepared remarks. We will now open the call to the questions. Operator, please continue.

Our first question today comes from Alex Ye with UBS.

So my first question is on China business. So we have seen your loan volume was up by 7% Q-on-Q, so the growth has rebounded from 1% Q-on-Q last quarter. So I'm wondering what drove the loan volume pick up during the quarter. Is that an industry-wide trend? And then also going to Q4, have you seen any sort of pick up in credit demand and loan allocation in October and November? And secondly, it's on your international business. So after the price ceiling adjustment this year, do you expect a further decline into next year? And then also, we also see there's continued investment in sales and marketing and other expenses. So I'm wondering when do we expect to see the Indonesia business to start generating more meaningful profits?

Have you noticed any industry-wide trends? Additionally, as we approach Q4, have you observed an increase in credit demand and loan allocation during October and November? Regarding your international business, after the price ceiling adjustment this year, do you anticipate another decline next year? Furthermore, with ongoing investments in sales, marketing, and other expenses, when do you expect the business in Indonesia to begin producing more significant profits?

Alex, let me do the translation for Alexis. Since the second half of 2023, the industry has experienced some significant fluctuations and the industry is facing the challenges of a size reduction. However, FinVolution with its steady risk performance has still managed to achieve a growth rate of above 4% in transaction volume for the first 9 months of the year with transaction volume in the third quarter reaching RMB 49.5 billion, up 6.7% sequentially. During the third quarter, from two different perspectives, we have observed that customer applications have increased compared to the second quarter, reversing the trend of continued weak applications during the first half. Customer applications in the third quarter increased by 12% sequentially. Another view is that the continued investment in new customer acquisitions enables us to maintain a leading status in the industry. Historically, our percentage of new customers has constantly been above 10%, and during the third quarter, this percentage further grew to 14%, reaching 400,000 new borrowers. Investment in high-quality borrowers is critical for us to achieve continued growth. I believe you have also noticed the stimulus package announced in late September. We have observed that the daily transaction volume has shown some improvement along with an increase of around 10% in application rates. As we entered late October, customer applications have gradually slowed down and returned to the September levels, but still, it has shown significant improvement compared to the first half of the year. We believe the trend exhibited in the third quarter is able to continue into the fourth quarter. The stimulus package, announced at the end of September, greatly motivated us. It provides us with greater confidence regarding the development of our China market. As you know, we have been maintaining high-quality growth in our China market and through continuous investment in areas such as customer acquisition and user experience, we believe the impact of such investment will be multiplied as the stimulus package gradually materializes. During this period, we all should have some patience.

The stimulus package announced at the end of September has significantly motivated us. It gives us greater confidence about the growth of our market in China. We have been achieving high-quality growth in this market and by continually investing in customer acquisition and user experience, we believe that the effects of these investments will be amplified as the stimulus package comes into effect. During this time, we should all exercise some patience.

Okay. Alex, let me do the translation for this question as well. In 2024, we have been through a price reduction process from 0.4% to 0.3% on a daily basis, and we have completed the transition to better quality borrowers and upgraded our credit risk assessment models in nearly 5 months. Transaction volume has since resumed growth and is up by 10% sequentially. Throughout these several adjustments in pricing, we have accumulated sufficient experience in handling interest rate reductions. Currently, we did not receive any notifications for further price decline. We are still operating at the current level of 0.3%, although there might be further information in the fourth quarter. Under the stable pricing environment, we believe we are able to provide more meaningful profits for this Indonesia business in the cash loan sector.

And our next question today comes from Cindy Wang with China Renaissance.

I have two questions. The first is regarding the funding cost, which has decreased by 190 basis points this year. Do you believe there's potential for further improvement in the fourth quarter? My second question is about the number of new borrowers in international markets, which has outpaced China for the second consecutive quarter. Can you elaborate on your customer acquisition strategy and costs in Indonesia and the Philippines, and how that might affect your sales and marketing expenses?

I have two questions here. First, the funding cost has been lower by 190 basis points this year. Do you think there is any room to improve in the fourth quarter? The second question is that the number of new borrowers in the international market has surpassed China for the second consecutive quarter. Can you discuss your customer acquisition strategy and customer acquisition cost in Indonesia and the Philippines? Additionally, how would that impact your sales and marketing expenses?

Cindy, let me do the translation for Alexis. I believe you guys have seen that our funding cost in China has improved significantly since the beginning of the year, reflecting the market recognition in our technologies and asset quality. We believe there's still room for improvement in the fourth quarter; however, the improvement rates might be smaller compared to the remaining of the year.

I believe you guys have seen that our funding cost in China has improved significantly since the beginning of the year, reflecting the market recognition in our technologies and asset quality. We believe there's still room for improvement in the fourth quarter; however, the improvement rates might be smaller compared to the rest of the year.

Cindy, let me do the translation. As mentioned by Alexis, we have spent the first 5 months transitioning to better quality borrowers in Indonesia and have since resumed growth in the third quarter. Along this process, we have been expanding our base of local funding institutions and now we have been working with 7 different partners such as SeABank, OCBC Bank Jago, among others, and all our loans facilitated in Indonesia are done through these local players. We have also acquired a multi-finance license validating the recognition and trust from local regulators. We have also established cooperation with renowned local partners such as OPPO and others. You may have noticed that our customer growth has been very robust in both year-over-year and quarter-over-quarter comparisons. The take rate is also stable, and as Alexis mentioned, there will be much more meaningful profit in 2025.

Our operations in Indonesia involve collaboration with local players. We have obtained a multi-finance license, which demonstrates our credibility with local regulators. Additionally, we have partnered with well-known local brands like OPPO. We've seen strong customer growth when comparing year-over-year and quarter-over-quarter metrics. The take rate remains stable, and as Alexis pointed out, we anticipate significant profitability in 2025.

Cindy, let me do the translation. The Philippines' macro environment is robust and we have achieved great operational results. For example, we have established strong partnerships with local financial institutions such as SeABank and Maya Bank, and today about 60% of our loans are being facilitated through local financial institutions. Additionally, we have established strong cooperation with local partners such as TikTok Shop, and today around 20% of our transaction volume comes from them, and we expect this to grow further in 2025. The business operations' performance in the Philippines is above our expectations, with strong growth both year-over-year and quarter-over-quarter. We also expect Philippines operations to contribute profits in 2025.

About 60% of our loans are being facilitated through local financial institutions. Additionally, we have established strong cooperation with local partners such as TikTok Shop, and today around 20% of our transaction volume comes from them, and we expect this to grow further in 2025. The business operations' performance in the Philippines is above our expectations, with strong growth both year-over-year and quarter-over-quarter. We also expect Philippines operations to contribute profits in 2025.

Cindy, let me do the translation for this one as well. Since entering the international market in 2018, we have been operating internationally for 6 years. As you can see, over these years, our operational metrics such as risk and customer acquisition have been improving. Currently, the revenue contributions from international operations have reached around 20%. We have also been proactively planning and deploying resources into more new countries and we’ll share more when there is more concrete news. Some of our strategies include entering a new country by initially focusing on cash loans, then adapting to local regulations, and eventually upgrading to better borrowers. Additionally, we have a target of achieving 50% of our revenue from international business by 2030 and providing more borrowers with better services.

And our next question today comes from Yada Li with CICC.

The question is about shareholder returns. Do you expect to provide more value to shareholders in 2025? How will the company balance long-term growth with total shareholder returns? That’s all.

Then I'll do the translation. The question regards the shareholder return. Do you expect to deliver more value to shareholders in 2025? And how will the company balance long-term growth and total shareholder return? That's all.

Yada, let me do the translation. The company has prioritized the long-term return of shareholder value. On one hand, we are creating value through rapid sustainable growth of our business. On the other hand, we have established a leading capital return program consisting of share repurchases and dividends. Since 2018, we have launched our dividend and repurchase program for 6 consecutive years, the earliest in the industry. During this period, we have cumulatively returned RMB 618 million to our shareholders, which is around 43% of our market cap. During the third quarter, we deployed USD 24.3 million for share repurchases, up 24% year-over-year. For the first 9 months of the year, we have cumulatively deployed USD 81 million, up 23% from the same period last year. We have already utilized 75% of our third share repurchase program by the end of October. We are also committed to returning value to shareholders through high-quality growth in both international and China markets. Our principle is that we will maintain high-quality growth, and we are confident of distributing dividends at a stable growth rate for our shareholders.

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

Hello. Thank you all for joining our earnings conference call today. If you have any further questions, please feel free to contact our Investor Relations team. Thank you all. Have a nice day.

Thank you. This concludes this conference call. You may now disconnect your line and have a wonderful day.