FinVolution Group

Hello, ladies and gentlemen. Thank you for participating in the third quarter 2022 earnings conference call for Finvolution Group. At this time, all participants are in listen-only mode. After management's prepared remarks, there'll be a question and answer session. Today's conference call is being recorded. I'll now turn the call over to your host, Jimmy Tan, head of investor relations for the company. Jimmy, please go ahead.

Thank you, Anthony. Hello everyone and welcome to our third quarter 2022 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.fimbigroup.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 these calls, 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 is 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 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 for joining our earnings call. With China's microenvironment rebounding gradually from the low points of the second quarter, Our domestic operation is also demonstrating progressive improvements. Powered by our proven strong track record in strategic execution, our industry-leading technological capabilities, and our diversified borrowers across China, our business remained resilient. We continue to deliver solid financial and operational performance despite rolling lockdowns affecting multiple cities in China. Although we are experiencing pockets of improvement in terms of both pandemic restrictions and the macro environment, our operations in the third quarter remain challenging. We continue to adapt to navigate these challenges by leveraging our advanced technological capabilities as well as our experienced management team of seasoned leaders who have successfully traversed multiple credit cycles during our 16 years of operations. Our total transaction volume in the third quarter reached RMB 45.5 billion, representing sequential growth of 10% and year-over-year growth of 19%. Concurrently, our total outstanding loan balance reached RMB 60 billion, representing an increase of 7% sequentially and 34% year-over-year. With the completion of our business transition, our proportion of category A and B borrowers in the domestic market who meet our highest credit standards, further expanded to 75% of our total borrowers in the third quarter, compared to 58% in the same period last year. We are also pleased to share that we have completed our pricing transition and the current average borrowing rate for our loan is around 23%, reflecting our commitment to promoting financial inclusion as well as our increased compliance level and alignment with the regulatory directives. Technological innovation remains the cornerstone of our operation, empowering us to achieve consistent performance during challenging periods. Ongoing adjustments have been made to our credit risk assessment models, adapting to the COVID lockdown environment, which enabled a steady and progressive growth while our risk performance has very fluctuated, even during the Shanghai lockdown. These solid operational results are mainly due to our sophisticated cutting-edge technologies, such as MatchCube, our all-in-one fund management platform, which supports a wide variety of protocols and effectively matches institutional funds with borrowers in real time. It can operate up to 55 fund management projects simultaneously with a daily processing capability of over 50,000 cases. Boasted by a prudent and effective risk management framework, coupled with reliable credit risk assessment models and a fraud detection system, we have improved our risk metrics on multiple fronts. Our day one delinquency metric was 5.5% in early November, while delinquency rates below 90 days as of September showed further improvement to 1.34% from 1.44% in the previous quarter. As the impact of rolling lockdowns become more manageable, we expect our vintage delinquency rate for third quarter to remain stable at around 2.3%. Encouragingly, our loan collection recovery rate also remained stable and strong at above 90%. Separately, we continue to take a prudent approach towards supporting small business owners. In the third quarter, we served a total of 504,000 small business owners and facilitate IMB 11.3 billion of loans for this segment, representing 25% of total transaction volume, an increase of 43% from the same period last year. Our small business owners are spread across various Chinese cities in different industries, such as retail, wholesale, and light manufacturing, among others, which further reduces our related risk through geographic and sector diversification. We would also like to highlight that around 60% of our small business owners have been in operation for more than three years, illustrating their overall stability. We will continue to monitor the economic recovery and gradually adjust our strategy to keep up with the pace of small business recovery. Moving on to our international expansion, we are very excited to report that with improvements across multiple operational fronts, revenue contribution from this segment reached 12% of total revenue in the third quarter, marking the first time our overseas revenue contribution exceeded double digits. We also refined our international branding strategy, producing stellar results across numerous operational metrics, such as the number of such as number of downloads, number of new registrations, and the conversion rates. These achievements earn our Adakami application a spot on Apple's Search Ads success story page, a notable commendation of our strategy's effectiveness in reaching new audiences. With stronger branding in the local market, our transition to better quality borrowers in Indonesia has outpaced our expectations. with the proportion of better quality borrowers in the third quarter expanding to 68% from 62% in the previous quarter. Coupled with Indonesia's improving macro environment and an easing COVID-19 policy, this brought transaction volume in international markets to RMB 1.1 billion, representing a sequential increase of 22% and a year-over-year increase of 6%. The ongoing transition to better quality borrowers also helped us deepen our relationship with local funding partners. Evidenced by an expansion in the proportion of loans, they facilitated to 48% in the third quarter, compared to 39% in the previous quarter, and in sharp contrast to zero local funding in the same period last year. Looking ahead, we are confident in our ability to further increase the proportion of loans funded by local financial institutions as we secure more local funding partners with a large number of better quality borrowers. Even more excitingly, our international outstanding loan balance reached IMD's 640 million, representing a sequential increase of 33% and a year-over-year increase of 88%. Our outstanding performance in the Indonesian market clearly demonstrates that we can leverage our technologies and business models in the overseas markets. Going forward, we are confident that the revenue contribution from international markets will continue to increase and that we can replicate these achievements in the Philippines and other suitable countries. Last but not least, I'd like to provide an update on our ESG performance. We continue to make strides in advancing our ESG initiatives and doing our part for the environment this quarter. Notably, we obtained the ISO 14064 verification from SGS, a well-known international standard certification organization. ISO 14064 provides industry and the government with a set of tools to develop programs aimed at reducing greenhouse gas emissions This verification is a powerful global acknowledgement of our environmentally sustainable efforts in pursuing carbon footprint reduction and will ensure that our reporting is reflected internationally. In summary, our STERIL results in the third quarter of 2022 speak to our resilient business model, state-of-the-art technologies, and extensive operating experience and resources. Looking ahead, we will continue to focus on acquiring better quality customers, refining our credit risk profile and management framework, while pursuing premium quality growth opportunity in China and abroad. Taken together, we believe that these efforts will position us to smoothly navigate the rapidly evolving market while delivering sustainable growth and creating great value for our customers, shareholders, and all stakeholders. With that, I will now turn the call over to our CFO, Jia-Yuan Xu, who will discuss our financial results for the quarter.