FinVolution Group

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. I will now turn the call over to your host, Jimmy Tan, head of investor relations for the company. Jimmy, please go ahead.

Hello everyone and welcome to our second quarter 2021 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.pinpigroup.com. Mr Feng Zhang, our Chief Executive Officer and Mr Jia Yuan Xu, our Chief Financial Officer will start the call with their prepared remarks and conclude with a Q&A session. During this call, we will be referring to several non-GAAP financial measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with US GAAP. For information about these non-GAAP measures and reconciliation to GAAP measures, please refer to our earnings press release. Before we continue, Please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties are included in the company 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 post a slide presentation on our IR website providing details of our results for the quarter. I will now turn the call over to our CEO, Mr. Feng Zhang. Please go ahead, sir.

Thanks, Jimmy. Hello, everyone, and thank you so much for joining us today. We continue to provide value for both users and institutional partners in different aspects. Leveraging our cutting edge technology, we have been providing value for users across multiple segments, such as consumer finance, small business owners, and different types of financial institutions. Through our platform, users are able to enjoy the convenience of finance at their fingertips, accessing credit lines in a timely and efficient manner. On the other hand, our institutional partners are able to access and evaluate quality borrowers with efficiency. Along with the value created, we are thrilled to be reporting another set of record-breaking operational and financial results in the second quarter. As we harness our technological capabilities effectively to acquire new and better quality borrowers and constantly increase our acquisition channels, our total number of new borrowers acquired globally once again crossed the 1 million mark to a new record high of 1.18 million, an increase of over 500% year-over-year and 18% quarter-over-quarter. More specifically, the number of new borrowers acquired in China reached 812,000, representing an increase of over 380% year-over-year and 31% sequentially. The number of new borrowers acquired in the international market reached 371,000, approximately a 13-fold increase compared to the same quarter last year. Another clear indication that we are resuming high-quality growth is that our total transaction volume for the quarter reached a new record high to 33.4 billion RMB, a 153% jump year-over-year, and a sequential increase of 25%. Specifically, transaction volume in China climbed 148% year-over-year and 25% quarter-over-quarter to 32.5 billion RMB, while transaction volume for international markets grew exponentially by 1,780% year-over-year and 23% sequentially to 940 million RMB. Simultaneously, our outstanding loan balance further expanded to 39.4 billion RMBs, representing year-over-year growth of 87% and 21% sequentially increase. In order to better support the healthy growth of our facilitation operation, we have been making consistent investments in acquiring new, better quality borrowers through an array of online and offline channels We have diversified our online channels and have also established an offline team of over 600 employees, covering around 80% of China's provinces. In the second quarter, our offline channels contributed around 10% of total new transaction volume. Offline acquisition is not only an alternative channel, but also validate our technologies can be seamlessly integrated in different scenarios to enhance efficiency. Going forward, we intend to expand the offline team to beyond 1,000 employees in a year or so. Since 2020, we made our services available to small business owners in China, aiming to capitalize on the significant opportunity presented by these groups' underserved needs for operational firms. In the second quarter, growth momentum for our small business owner segment remained robust, with transaction volume increasing 41% sequentially to 6.2 billion RMB. Notably, the total number of small business owners served in the quarter exceeded 408,000 compared to just 220,000 in total for the full year 2020. We believe serving the needs of small business owners is in line with national policies and play a part in meeting the needs of this segment of the society. Going forward, we will maintain our strategic focus on serving this segment and expect this portion of our business to account for around 20% of total transaction volume in the second half of 2021. In line with regulatory directions, we amply continue to lower borrowing rates in the second quarter to 26.2% for our borrowers. And more recently, in August, the rate was further reduced to 25.4%. We're also pleased to share that the recent percentage of transaction volume with borrowing rates at or below 24% has risen to around 60%. We plan to continue acquiring better quality borrowers, expanding new funding sources across regions, and enhancing operation efficiency to provide more attractive rates and terms for our borrowers while maintaining a healthy take rate and operating margin. On the international front, with our state-of-the-art technologies and swift execution, we have continued delivering strong performance In particular, we successfully launched a pilot testing operation in Vietnam, which demonstrated encouraging growth prospects. More excitingly, this marks the fourth country in our global roadmap, in addition to our international presence in Indonesia, Philippines, and Singapore. We are very pleased with the accelerating pace in broadening our global footprint and thrilled that our recent entry in Vietnam is already demonstrating great potential with positive user feedbacks. We attribute our success in building out our first mover advantages in emerging markets to our fundamental capabilities, talented and efficient team with global perspective, proprietary technologies, operational expertise, and deep-rooted corporate value. Our technology supports us in successfully navigating our business transition in China and also plays a crucial role in our expansion across different international markets. We're confident in our global roadmap and remain firmly committed in our mission to make financial services more accessible and inclusive for borrowers around the world. Going forward, we will continue to advance our technological capabilities and solidify our operations in these countries while working with our local partners to explore new opportunities that will enable us to diversify our business models. Leveraging our technologies, operational expertise, and in-depth understanding of our institutional partners, we are able to provide diversified products and solutions for them in multiple scenarios. In particular, through cooperation with eight different institutional partners, we increased the portion of capital life model on our platform from 2.3% in the previous quarter to 13% in this quarter. All these achievements are further testament to the solid trust and the confidence that our funding partners have in Finvolution as we remain committed to building credibility and a strong corporate reputation amid ever-evolving market dynamics. Supported by our enhanced credit management model built on targeting higher quality borrowers, our delinquencies have shown further improvement across the multiple risk metrics. For example, our day one delinquency rate remains stable at 5.4% in August, compared with 7.5% in the same period last year. We expect vintage delinquency rates to continue improving to a level below 2.3% in the second quarter, while our 90-day bus delinquency ratio reached a historical low of 1.01% from 7.13% in the same period last year. Our loan collection recovery rate also stabilized at around 91%. As we look ahead, our primary objectives for 2021 and beyond are to continue pursuing high-quality growth in China, leverage technologies to strengthen our first-move advantage in the international markets, and diversify our business models, continue empowering financial institutions through business-as-a-service solutions, and empower a variety of businesses globally through our digitalization capabilities to create long-term value for our stakeholders. During the past several years, we have encountered and overcome many difficult challenges, such as exiting the P2P business, shifting our funding sources, moving towards better quality borrowers, and many more. We have the technological know-how, capabilities, and resources to deliver better results and achievements in this rapidly evolving environment. Our dynamic business model and operating strengths, coupled with our strategic investments in multiple sectors, will drive our success with a sustainable growth, sustainable return for all our stakeholders in the long term. Last but not least, I would also like to report our progress on corporate social responsibilities. During the past several years, we have consistently fulfilled our duties as a responsible corporate citizen. For example, during the recent flood in Henan, We have donated RMB 10 million as post-disaster aid and activated our local employees to distribute food supplies for those in need. Together with our institutional partners, a low-interest loan program for small business owners has also been introduced. Our third annual ESG report was also published recently, and for those who are interested in having more information, do visit our website for a copy. In summary, leveraging our technologies and the digitalization capabilities creates long-term value for our stakeholders. We are confident in our ability to maintain our position as the leading fintech platform in China while capturing tremendous growth opportunities globally. With that, I will now turn the call over to Jiayuan Xu, who will discuss our financial results for the quarter.