Earnings Call Transcript - FINV Q4 2025

Operator, Operator

Hello, ladies and gentlemen. Thank you for participating in the Fourth Quarter and Full Year 2025 Earnings Conference Call for FinVolution Group. Today's conference call is being recorded. I will now turn the call over to your host, Yam Cheng, Head of Capital Markets for the company. Yam, please go ahead.

Yam Cheng, Head of Capital Markets

Thank you, Wilco. Welcome to our fourth quarter and full year 2025 earnings conference call. The company's results were issued via newswire services earlier today and are posted online. You can download the earnings release and sign up for the company's email alerts by visiting the IR section of our website at http ir.finvgroup.com. Mr. Tiezheng Li, our CEO; and Mr. Jiayuan Xu, our CFO, will start the call with their prepared remarks and conclude with a Q&A section. 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 non-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. SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Finally, we have 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. Tiezheng, please go ahead.

Tiezheng Li, CEO

Thanks, Yam. Welcome to our fourth quarter and full year 2025 earnings call. 2025 was a significant year for us. It was FinVolution's 18th anniversary, much like a person stepping into adulthood, our company has grown from a passionate credit pioneer in China into a regional platform bridging the credit gap across Asia and beyond. This journey has been more than just about scaling. We've learned, adapted and built something valuable and lasting. 2025's challenging macro environment tested our resilience, but it also reaffirmed our strategic direction to advance our international expansion. To conclude the year, we delivered full year group revenue of RMB 13.6 billion, up 3.8% year-over-year. Net profit also rose to RMB 2.5 billion, a 6.6% increase from last year. The resilient financial performance was achieved despite the regulatory uncertainty in China in the second half of the year, which tempered the full year transaction volume to RMB 200 billion, down 2.9% year-over-year. Our local excellence global outlook strategy has unlocked diversification value and brought much needed resilience to our platform. In 2025, our international business grew significantly. Our volume increased by 38.6% and revenue rose by 32.0% year-over-year. Most notably, international business contributed 31% of revenue for the quarter, significantly higher than 21% just a year ago. As set out before, we target to grow this number to 50% in 2030, and we are confidently on track to achieve this goal. Today, we operate across both developing markets and most recently developed markets with our recent entry into Australia. Underpinning this momentum is the quite evolution of our international strategy itself. In our early expansion, we focused on disciplined execution in each individual market. But as we scaled across the region, we learned that strength also lies in connection. We deepened our capabilities at the platform level instead of each country operating as a stand-alone effort. We systematically captured the expertise, relationships and capabilities we developed in one market and recycled them to accelerate the dereisk entry into the next. This means leveraging proven regulatory experience, product development, advanced risk analytics, centralized funding and regional ecosystem partnerships across borders. This LEGO+ strategy transformed our international portfolio from a collection of local wins into an integrated platform with compounded platform level advantages. Today, we manage our business through two distinct lenses. The first is our mature market, China, which serves as our foundation for consistent profitability and cash generation. The second is our international markets, which include Indonesia, the Philippines and now Australia. These markets are characterized by high growth, scalable opportunities and increasing contributions to our overall portfolio. Now I would like to walk you through the key achievements and updates across both segments. First, our mature market, China. New regulations reshaped the operating landscape in the fourth quarter, as discussed in our Q3 earnings session. We prioritized risk over loan origination in Q4. That means tightened underwriting and enhanced risk controls. The result is a near-term moderation of loan origination volume to RMB 38.7 billion and loan balance to RMB 68.3 billion in the fourth quarter. These deliberate efforts began to pay off with risk containment. Vintage loss for new loan originations stabilized at 3.0%. Outstanding loan portfolio saw risk trending up in line with expectation with CM2 increased from 0.61% to 0.77% for the quarter. As we run down our existing loan book upon repayment and originated new loans at higher credit standards, we saw the overall portfolio risk start stabilizing in December. As we gradually exit the regulatory side with a heavily rich loan portfolio, compliance infrastructure and risk models, long-term profitability would eventually normalize. We anticipate a phase of industry consolidation once the full effect of the regulation is reflected, and we are well positioned to seize the opportunities. Within our portfolio, China will continue to provide the scale and cash flow foundation that allows us to invest confidently in our growth overseas. Second, our international markets, including Indonesia, the Philippines and now Australia, we have reached encouraging milestones for Southeast Asia. Both Indonesia and the Philippines achieved full year profitability and contributed over USD 15 million in combined operating profit. Behind this financial outcome is a validation of a respectful locally attuned approach of our international playbook. Our highly localized approach drove strong user growth. We doubled our unique user base to 5.9 million across Indonesia and the Philippines for the full year. We also penetrated deeper into the consumer base with diverse products customized around local consumption preferences. For example, our Buy Now, Pay Later solutions have been well received by consumers and ecosystem partners across online and offline channels. In the fourth quarter, we entered the Australian market with the acquisition of a respected lending platform, Fundo. This new foray is a well-considered move that draws on our experience in maturing regulatory regimes in China and operational excellence in overseas markets. First, our evolving experience in China has prepared us for a mature regulatory environment. Over the years, we navigated China's transition from high-growth emerging regulation towards a more rigorous consumer-focused framework. Our operating model has similarly matured towards a lower risk, more sustainable approach. This experience has equipped us with the regulatory maturity, compliance discipline and consumer-first mindset that align closely with the expectations of developed economies like Australia. Second, we have a proven track record of building profitable businesses from the ground up overseas. We have successfully executed the 0 to 1 journey, not just once, but in multiple international markets, scaling operations to profitability. This capability in launching, localizing and scaling businesses abroad gives us strong conviction in our ability to replicate success in Australia. Moving on to respect tech innovation, a core part of how we build... It's embedded directly into the application flow, breaking the journey into clear logical steps and offering real-time guidance at each stage. The impact has been tangible. We are seeing fewer viewer drop-offs, higher completion rates, and better overall conversions. It's a refinement that may sound small, but it meaningfully improves how users experience our platform. Localization and support of local communities also play a key role in our success overseas. In Q4, we launched an emergency humanitarian response following the severe flooding that struck Indonesia in late November 2025. We established emergency kitchens and fully equipped sanitation facilities to benefit approximately 1,800 affected residents across six locations in Sumatra. Our ESG efforts like this have driven an increase in our S&P CSA score for seven consecutive years, reflecting our belief that how we grow is as important as how much we grow. Our commitment to responsible stewardship extends to our shareholders. We accelerated our buyback program this year with USD 107 million repurchased in 2025. It's a historical record since our IPO. This commitment is personal as well. In December, our Chairman and the management team recently invested an additional USD 1.9 million of their own capital in share buyback, a gesture of deep confidence in this journey we are on together. In addition to buyback, we are also announcing approximately USD 74.5 million in dividends for 2025. That translates to a total shareholder return of approximately $182 million, equivalent to a 50% payout. As we entered 2026, we do so with clarity, not certainty. We will manage our China business with patience, nurture our international segments with focus, and continue investing in the technologies and partnerships that make sustainable growth possible. Our long-term vision remains to build a truly global FinVolution. Thank you for being part of this journey with us. I will now turn the call over to our CFO, Jiayuan Xu, for a deeper look at the numbers.

Jiayuan Xu, CFO

Thank you, Tiezheng, and hello, everyone. Let me go through our key results for the fourth quarter and full year. Please refer to our earnings press release for further details. On a group level, our fourth quarter results reflect the near-term impact of our disciplined China strategy and continued investment in international expansion. Group net revenue was RMB 3 billion. In 2025, China's economy remained largely stable with GDP growth of 5%, maintained within a reasonable range while in pursuit of high-quality development. On the industry front, the regulatory authorities released multiple new guidelines for banks, consumer finance and macro lending companies during the quarter, which aimed at lowering the overall financing cost. As the industry reconfigured its assets and funding in line with the new regulatory framework, we saw contraction in loan volume and a pickup in risk in the second half of 2025. We are refining our underwriting parameters to focus on high-quality borrowers and have gradually phased out our marginal assets that used to be credible before the new regulation. This provided protection to unit economics. Our IRR remained stable. As Tiezheng mentioned, the vintage loss of the newly originated cohort began to stabilize around 3% in Q4. More importantly, early risk indicators began to show signs of peaking in the middle of December with day 1 and 30 collection rates coming down afterwards. We continued to deepen our engagement with funding partners as the funding supply dynamics started to normalize. In Q4, we added new funding partners and further reduced funding costs by 20 basis points quarter-on-quarter to 3.4%. Overall, our take rate held steady at around 3%. Closing the quarter, we booked RMB 2.1 billion revenue for China. In our international markets, we maintained a strong growth momentum in Q4 with the consolidation of our new Australian business, complemented by broad-based performance across our established markets in Indonesia and the Philippines. From a regional macro perspective, we navigated a period of moderate economic growth with accelerated GDP growth in Indonesia, offset by slower growth in the Philippines due to seasonal flows. Overall, we delivered robust results. Our international transaction volume reached RMB 4.1 billion or USD 0.6 billion for the quarter, up 41% year-over-year. And the unique borrowers grew to 3.8 million, a 133.8% increase year-over-year. Across the region, we are benefiting from a clearly regulatory environment. In Indonesia, the regulatory clarity provided by July's announcement to maintain the interest rate cap provided a stable framework. We proactively increased our customer acquisition investment, which drove transaction volume to a historical high of USD 0.3 billion, equivalent to a 10% growth quarter-over-quarter. In the Philippines, a new interest rate cap is scheduled to take effect in April 2026. We believe this upcoming change will favor players with strong technology and operational capabilities, areas we excel in. We are already preparing in advance to accommodate the new pricing structure, relying on our relevant experience navigating similar regulatory transactions in multiple markets. We are confident in managing a smooth adaptation even as we anticipate some near-term moderation during the transition period. We continued to upgrade customer quality and expand our diversified product offerings to credible consumers. During the quarter, we added 1.6 million new borrowers, up 26% quarter-over-quarter. In Indonesia, our offline consumption finance initiatives boosted customer quality and engagement. Buy Now Pay Later solutions in mobile phone stores and other small ticket items drove an influx of new users, growing our new borrower base by more than 3x year-over-year. In the Philippines, embedded e-commerce partnerships now contribute 43% of the country's volume compared to 30% a year ago. Total transaction volume in the Philippines reached USD 0.2 billion, a 64% growth year-over-year. On new markets, our recent entry into Australia marks a significant strategic expansion into a developed market. Australia represents a high-value English-speaking market with a mature regulatory framework that provides long-term operating stability. The combination of near-prime customers' unmet demand for digital lending, stable pricing structure, and an under-digitalized market creates a significant opportunity for superior risk-adjusted returns. The Fundo acquisition allows us to leverage our core strength in data-driven risk pricing, operational efficiency, and low-cost capital to grow in Australia efficiently while building a durable and diversified revenue stream for FinVolution Group. Moving on to shareholder return. We maintained our commitment to meaningful shareholder returns in 2025. We executed USD 40.7 million of buybacks in the fourth quarter alone, which is our largest quarterly buyback ever if we exclude the buyback concurrent with convertible issue in Q2. We also increased our dividend per share by 10.5% to USD 0.306 for the year. The progressive dividend and buyback for 2025 highlight our commitment to our shareholders during a year of volatility. In short, we navigated a complex environment and delivered resilient results in 2025. In light of the recent regulatory changes in China, we expect full year 2026 group revenue to decline between 5% and 15% year-over-year. Our long-term goal remains to have 50% of revenue coming from international markets by 2030. We are stepping into the new year, not with grand promises, but with steady confidence in the resilience of our model, the dedication of our teams, and the solid partnerships we have built along the way. Thank you. I will now hand the call back to the moderator for Q&A.

Operator, Operator

Our first question today comes from Alex Ye at UBS.

Xiaoxiong Ye, Analyst

I have two questions. The first one is about the company's shareholder return policy. It's encouraging to see the increased pace of buybacks since the fourth quarter. Can we anticipate this momentum to continue in the near term despite the ongoing regulatory uncertainties? My second question concerns the Chinese market. In light of the various regulatory tightening measures since last year, could you provide an update on some of your operational targets for this year within the domestic market, including loan volume growth, average loan pricing, and the sales and marketing budget?

Jiayuan Xu, CFO

Okay. Thanks. I will take your questions. Your first question is about our share buybacks. Yes, as we have mentioned, we stepped up significantly in the fourth quarter, reaching about $40.7 million, and this is a quarterly record for us. For the full year 2025, total repurchase came in at $107 million. Despite the domestic regulatory headwinds, our China business has remained resilient and our international business continued to deliver very strong growth with improving profitability. So at the current valuation level, we still see very attractive opportunities for us. Therefore, we are maintaining that purchase momentum. Just to give you some sense, in the first quarter so far, we have already executed another $38 million in buybacks. As of year-end '25, we had about $74 million remaining under our current $150 million buyback authorization. We will continue to review the program regularly to ensure our buyback policy remains consistent and sustainable. Beyond corporate-level activity, I also want to highlight the personal commitment from our Chairman and the senior management team. They have repurchased about $1.9 million worth of ADS, around 370,000 shares using their own personal funds. This is a very clear signal of long-term confidence in the company's core value. Your second question is about our forecast for our domestic business. In 2026, our China business will focus on what we call high-quality operations. That means greater focus on sustainability, compliance and serving better quality customers. We are also extensively embracing the use of AI to drive efficiencies across customer acquisition, risk management, and various key functions within our organization. Here are some of our key priorities for information. As for the transaction volume in the first quarter, we typically would expect lower transaction volume due to Chinese New Year, and this year should follow the same pattern. For the full year, it will really depend on the risk, the macro, and the regulation, which we are closely tracking. At this point, we are focusing on strengthening our business operations and we will adapt as the conditions become clear. For pricing, our pricing is shared by funding partners and the regulator guidance. We are continuously refining our models to balance risk and return within a compliance framework. We are also offering better pricing to high-quality borrowers. This aligns with the regulator's expectations and is good for building a stronger customer base in the long term. Regarding customer acquisition, last year, the reset in the China market led to relatively moderate competition in marketing activities. Customer acquisition costs came down as a result. In Q4, our cost per new borrower declined by 15% quarter-over-quarter, while our acquisition expense ratio declined by 22%. Now we consider the current acquisition cost to be quite attractive, especially when you compare it to the lifetime value a new customer can potentially bring. So we maintain a relatively proactive customer acquisition strategy in the first quarter of 2026, and we will keep a close eye on our strategy dynamically.

Operator, Operator

Our next question comes from Cindy Wang at China Renaissance.

Yun-Yin Wang, Analyst

I have two questions. First, could you provide the trend in the delinquency rate for day 1 and the 30-day loan collection rate from Q4 to January through March? Given the changes in early indicators, how do you assess the current credit cycle? Is it nearing its end or still ongoing? Second, I noticed a significant increase in revenue from overseas markets in Q4. What is your outlook for overseas revenue contribution this year? Additionally, what customer acquisition strategies are being implemented in Indonesia and the Philippines?

Jiayuan Xu, CFO

Okay. Thank you, Cindy. I will take your questions. Your first question is about the risk metrics for our domestic business. Yes, actually, we have seen an increase in risk overall, but it appears to be contained, especially from the current vantage point. During the quarter, we saw risk picking up from the end of September, accelerating in October, moderating, but still trending up in November and finally peaking in the middle of December. Average early risk indicators in Q4 increased slightly from Q3. They were up from 5% to 5.5%, and the 30-day loan collection rate fell from 88% to 86%. As a result, the CM2 flow rate increased from 0.61% in Q3 to 0.77% in Q4. In the first quarter of 2026, following the gradual runoff of our legacy loans from high-risk customers, the quality of the existing loan portfolio continued to improve. Meanwhile, the new loans originated have high credit standards with better credit quality. As a result, our day 1 delinquency has trended down in January and February for two consecutive months. For example, the early risk indicators show initial signs of recovery, returning to levels somewhat closer to the end of September last year. Currently, the day 1 delinquency has lowered to around 5%. Having said that, we continue to be diligent about risk until the sign of recovery is clear. Your second question is about our overseas market. Yes, regarding the 2026 international revenue contribution, we expect our international business to maintain its rapid growth momentum this year. For this year, we are guiding international revenue to account for roughly 30% of our full year total. The profitability should scale nicely as well, moving notably from the USD 15 million operating profit we delivered in 2025. Let me share some updates for customer acquisition in Indonesia and the Philippines. We have built a systematic approach to customer acquisition. It really comes down to three things: precision traffic acquisition, embedding ourselves into high-frequency spending scenarios, and then fostering user loyalty through brand and experience. Those combinations help us move beyond just acquiring users; it's about capturing deeper lifetime value. In terms of the online acquisition channels, across our international markets, we use mainstream channels like Google, Facebook, Instagram, and TikTok. Backed by our data models and years of execution experience, we can reach our target audience efficiently. Those channels are not easy to master; they have high operating barriers. But once you crack the code, they can help build strong brand recognition and capture full user lifetime value. And once our model is validated, it becomes a sustainable growth engine for local businesses. Secondly, moving beyond traditional online advertising, we focus on deeper integration with local ecosystems. For example, in Indonesia, our MF license was an important channel for our ecosystem expansion. It allowed us to expand from pure online cash loans into offline installment lending, covering items like 3C products, home appliances, and furniture. We are now showing up where people actually spend money. The results speak for themselves. We crossed 3 million new customers in '25, three times the number from last year. This year, we will keep expanding that offline footprint and build out a true multichannel acquisition network. In the Philippines, our approach is partnership-driven. We have integrated with lending e-commerce platforms to offer Buy Now Pay Later products at online checkout, which now accounts for 36% of our volume in 2025. We have also teamed up with Smart, a major telecom operator, for Buy Now Pay Later products on mobile top-ups. Additionally, we are collaborating with Carousell, the regional secondhand marketplace, to embed financial services into their platform. These strategies focus on meeting users in their daily routines, making financial services a part of their experience, facilitating steady customer acquisition.

Operator, Operator

And our next question comes from Jing Yujie with CICC.

Yujie Jing, Analyst

Let me translate my questions. Which is about the overseas market expansion. You mentioned in the meeting that we plan to enter developed markets such as Australia. Could you share the strategic thinking behind this decision? And what's the current competitive and regulatory environment in developed markets? Also, could you briefly talk about the company's development plans?

Tiezheng Li, CEO

Thanks, Yujie. I will take your question. I will answer your question in three parts. First is why developed markets. Let's think of it this way. We are taking the mature experience we've built in China. It's actually aligned very closely with developed market regulations, combining it with a scalable growth engine we’ve proven in Southeast Asia. So we are exporting our capabilities to a new frontier. We believe developed markets offer something really valuable: large personal loan markets that are ready for digital transformation. By entering this market, we are not just chasing growth; we are building resilience. A more balanced geographical portfolio helps us hedge against volatility in any single market. Being one of the new fintech platforms that can credibly operate across both emerging and developed markets elevates our global brand and influence. Second, why Australia? Australia presents clear structural opportunities. The unsecured personal loan market there is around AUD 33 billion, and we have watched non-bank players steadily gain shares from traditional banks over the past few years. As one of the first Chinese players to enter, we have a first-mover advantage. When looking at the general operating landscape, we see somewhat moderate competition. The digitalization level remains moderate, and there's no major dominant player in the space. For a technology-driven platform like ours, it's an ideal entry point. Additionally, the regulatory environment is both robust and transparent, providing clarity and stability we need for long-term sustainable operation. Thus, Australia became our natural first choice for our push into high-income, highly regulated markets. Third, why Fundo? Fundo has an ACL license, which typically requires a long, expensive process for compliance. By acquiring Fundo, we effectively bought ourselves a fast path into the Australian market. It lets us enter faster at a lower cost while being able to immediately upgrade an existing operation rather than starting from scratch. The Fundo business is already self-sustaining and profitable with strong risk controls in place. More importantly, Fundo's level of digitalization and automation puts it ahead of most local competitors, making it an ideal candidate to integrate into our LEGO+ global platform. Looking ahead to 2026, our focus is straightforward: sharpen our risk models, refine operations, and optimize funding costs to keep improving unit economics. We are confident we can help Fundo to accelerate its growth in both origination volume and revenue.

Operator, Operator

Thank you. That concludes our question-and-answer session. I'd like to turn the conference back over to the company for any closing remarks.

Yam Cheng, Head of Capital Markets

Okay. Thank you. Thank you once again for joining us today. If you have any further questions, please feel free to contact FinVolution Group's IR team. This concludes the conference call. You may now disconnect your line. Thank you so much.

Operator, Operator

Thank you. Once again, that does conclude the conference call. You may disconnect your line at this time, and have a wonderful day.