FinVolution Group

Hello, ladies and gentlemen. Thank you for participating in the fourth quarter and full year 2023 earnings conference call for Finvolution Group. At this time, all participants are in 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 4th quarter and full year 2023 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.finvigroup.com. Mr. Tianjin Li, 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 U.S. GAAP. For information about these non-GAAP measures and reconciliation of 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. Privacy and Artistic Reformation 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's filings with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements acquired 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. Tianjin Li. Please go ahead, sir.

Thanks, Jamie. Hello, everyone. and thank you for joining our running call. This is Tiezheng Li, CEO of Finvolution Group. We are happy to speak with you today. When I became CEO one year ago, Finvolution set a clear objective, become a leader in FinTech industry, providing inclusive financial solutions for unserved borrowers and small business owners. In 2023, we advanced towards that goal with continued strong execution of our local focus, global outlook strategy, adapting to the unique situations in different markets. I'm thrilled to report that we delivered exceptional progress on all fronts. Throughout the year, we maintained our robust momentum with progressive expansion in China while pursuing much faster growth internationally, where economic conditions were more favorable. We have achieved leadership positions in both Indonesia and Philippines. We are also fighting our success and high-quality growth in China as we proactively adjust our strategies to suit China's dynamic economy. Performance-wise, we continue to grow our business across the board despite evolving microeconomic challenges. The cumulative number of borrowers we served in China Indonesia, and the Philippines has reached 13 million, growing at an accelerated pace with a net increase of around 3 million new borrowers year over year. For full year 2023, our total transaction volume reached RMB 194 billion, and our outstanding loan balance reached RMB 67 billion. representing year-over-year increases of 11% and 4% respectively. Net revenue for the full year 2023 reached RMB 12.5 billion, up 13% year-over-year. Our international business grew exceptionally well in 2023, propelled by our effective global outlook strategy of pursuing rapid growth in overseas markets. International transaction volume for 2023 soared to RMB 7.9 billion and outstanding loan balance rose to RMB 1.3 billion, up 85% and 58% respectively compared to the prior year. International market revenue increased to RMB 2.1 billion, up 86% from full year 2022 over the past year. International revenue contributions to total revenue increased significantly, rising to 17% in 2023 from 10% in 2022. Meanwhile, with our local focus strategy of pursuing high quality growth in China, we continue to achieve progressive growth domestically. Transaction volume increased to RMB 186 billion while outstanding loan balance reached RMB 6.6 billion, up 9% and 4% respectively, compared to the prior year. Revenue from the China market in 2023 further expanded to RMB 10.4 billion, up 4% compared to the prior year. Another notable improvement was funding cost, which improved by 30 bps on a quarterly basis, and by around 100 bps year-over-year. Our stable borrowing rates coupled with better than industry delinquency rates and enhanced operational efficiency enabled us to sustainability deliver higher ROA compared to the industry. We also strengthened our commitment to small business owners supported by a prudent approach during this fragile and sometimes volatile recovery period. In 2023, we served over 811,000 small business owners and facilitated RMB 47 billion of loans for them, up 80.5% compared with last year and representing 25% of the total transaction volume in China. Finvolution is a FinTech frontrunner with profound expertise across an extensive industry footprint. Part of our commitment to shareholders is to continue propelling the company's sustainable development and industry-wide digital transformation through technology innovation. I'd like to share just a few of the pivotal technological advancements we made throughout the year. We amplified our investment in technological R&D, driving high-quality growth, leveraging cutting-edge technology. We significantly improved and optimized our operational process across all markets in which we operate. This includes increased R&D investment of over RMB 500 million in 2023 to strengthen different aspects of our technologies, such as the automatic speech recognition capabilities, greatly improving its grasp of Chinese dialects while boosting our chatbot's efficiency and accuracy. R&D is critical to our ongoing success, and we continue to invite in our tech and our people. As of December 31, 2023, we proudly employed a dedicated R&D team of around 700 skilled professionals and have built a comprehensive IP portfolio that comprises 239 registered software copyrights and a successful filing of 179 patent applications, including 53 invention patents already granted. Each of our R&D accomplishments enhance our offering to consumers and set new benchmarks for the financial services industry, supporting Finvolution's growth and industry-wide progress. In recognition of these efforts, the Shanghai Municipal Commission of Economy and Information recently honored Finvolution on its Shanghai 2023 Double 100 Leads for Software and IT Service Excellence. We earned prestigious rankings on both lists, securing the 18th and 26th position respectively. These accommodations recognized our contributions to technology innovation and the advancement of the industry. Last but not least, ESG remains a top priority at Finvolution. We diligently enhanced our integrated ESG program throughout 2023 with a focus on inclusion and giving back to society. For example, we have cumulatively offered RMB 120 million of interest-free loans for eligible small business owners to help turn their dreams into reality. Our commitment and efforts have also been recognized by several renowned independent rating agencies with above average industry ratings. We celebrate Femolution's 16th anniversary in 2023, a milestone that affords us a glimpse of our future prospects as an enterprise grounded in sustained long-term growth. Over the past 16 years, our business model and strategy have been validated by success in the face of multiple challenges, such as the P2P transition, shift towards better quality borrowers, and international expansion amid the pandemic. As an independent platform with limited resources, we are proud to have expanded and flourished in all markets in which we operate. Going forward, we will remain committed to serving borrowers in our existing markets while increasing the pace of our international expansion by acquiring more licenses and expanding into additional countries and regions to deliver innovative financial services to more borrowers. Our local focus, global outlook strategy will continue to guide us and drive our healthy and sustainable development as we embark on 2024. By leveraging our peerless technologies, and operational advantages. We are confident to replicate our domestic and international success in new markets, unlocking value and making the company a world-class fintech enterprise, while consistently returning value to our shareholders. With that, I will now turn the call over to our CFO, Jia Yuanxu, who will discuss our operational and financial results.

Thank you, Li, and hello, everyone. Welcome to our fourth quarter and the full year 2023 earnings call. Let's go through our key results for the fourth quarter. To the metaphor of the length of our earnings call today, I encourage listeners to refer to our fourth quarter earnings press release for further details. Despite GDP growth of over 5% in 2023, China's overall economic environment continues to evolve. We leveraged our various strengths to navigate the turbulence and conclude 2023 on a solid note. Our domestic transaction volume reached RMB 50 billion for the first quarter, up 6% year-over-year and 2% sequentially. While our standing loan balance grew to RMB 66 billion, up 4% year-over-year and 2% sequentially. Achieving growth in both metrics amid such a soft consumer environment is a testament to our business resilience, as well as our outstanding technology, innovation, and operational excellence. We have observed several notable improvements as we move through the first quarter of 2024. During the recent Rural New Year, consumption activities picked up rapidly with 474 million tourist trips nationwide, up 19% from the comparable period in 2019. Total tourism spending also climbed 8% to $633 billion from the comparable period in 2019. with air and train travel surpassing 2019 levels by 15% and 36%, respectively, reaching new record highs. Box office tickets sales also rebounded and reached more than $8 billion, setting a new record for the holiday period. Furthermore, several micrometrics exhibited varying degrees of improvement. For example, total social financing in January increased to $6,500 billion, up 9.5% year-over-year. Total retail consumption in December was increased to $4,355 billion, up 7.4% year-over-year. Fabry's manufacturing and service PMI index also improved slightly to 14 9.1 points and 15 1 points. We believe these signs reflect the dawn of a new era. Various consumer spending trends are shifting away from large ticket items, such as automobiles and popularity, to small ticket items like travel-related expenditures and other consumption activities. Amid these complex dynamics, we drove a modest yet encouraging recovery in our consumer credit demand through our ongoing refinement of borrower demographics and quality, with the number of new borrower applications increasing by between 3% to 5%. Cumulatively, we have served over 25 million borrowers in China. and the number of unique borrowers for the first quarter was 2.1 million. In addition, we further enhanced our credit risk assessment and fraud detection technologies during the quarter, which empowered us to navigate the macro headwinds and stabilize our asset quality. Our day-one delinquency rate improved to 5.3% in December, and further improved to 5.2% in February. We expect our vintage delinquency for the most recent three months to be 2.5%, demonstrating our business resilience. Boasted by the deployment of our advanced speech recognition technologies, as well as the AI-powered chatbot we mentioned earlier, our loan collection recovery rate for the recent three months remained healthy at 87%. In terms of our funding partners, as our reputation in the industry continued to rise, we have further diversified our funding resources. The cumulative number of our funding partners has expanded to 94 financial institutions as of the end of the fourth quarter. with funding costs improving by around 100 basis points year-over-year. Moving on to our second growth driver, our international expansion, which continues to outperform our targets and expectations. We embarked on our global expansion January in 2018 and have been deeply investing in advocating for evolution's visibility worldwide ever since. Indonesia, our first overseas market, continued to record macroeconomic growth, as consumer confidence index remained high at 100 and 25 points in January. Full year sales of the motorcycle, the most popular model of transportation in Indonesia, switched by 19.4% to 6.2 million units year-over-year. Our second overseas market, the Philippines, also ended 2023 with positive microdata. The Philippines were among the farthest-growing economies in Asia with fourth-quarter GDP growth of 5.6%. Manufacturing PMI was 51 points in February and has remained above 15 points since September. We have served over 4.8 million borrowers in international markets as we continue to explore diversified consumer acquisition channels to attract new borrowers. The number of new borrowers for international markets increased by 20% year over year to 1.37 million, and the number of unique borrowers rose by 18% year over year to around 1.9 million in 2023. International transaction volume for the full year 2023 sold by 85% year-over-year, reaching RMB 7.9 billion. Transaction volume for the fourth quarter reached RMB 2.25 billion, up 64% year-over-year. At the same time, our outstanding loan balance as of December 31, 2023, grew to RMB 1.3 billion, up 58% year-over-year. As we deepened our roots in Indonesia and fortified our reputation, the population of loans facilitated from local financial institutions in Indonesia increased to over 90% from 63% in the same period of 2022, reflecting our credit assessment model's effectiveness as well as deepening trust from local financial institutions. The Philippines has also demonstrated excellent growth. During 2023, the number of new borrowers in the Philippines grew by over 188%. This led to exponential growth in its transaction volume and outstanding loan balance, which surged by over 200% on a year-over-year basis. contributing around 20% of international transaction volume in the first quarter. Thanks to our proven record as a trusted lending partner, we have also secured institutional fundings in the Philippines and also have a strong pipeline of future institutional partners in place. These accomplishments have boosted our confidence as well as our visibility as we emerged as one of the top players in the Philippines. In 2024, we expect our Philippines operation to maintain its robust, high double-digit growth momentum. International business revenue in the fourth quarter progressively increased to over $602 million, up 53% year-over-year. and represented around 19% of the company's total revenue. From a full-year 2023 perspective, international revenue reached RMB 2.1 billion of 86% year-over-year, representing 17% of the company's total revenue, marking a significant achievement in our international development. This success has led us to amplify our international expansion efforts with strategic initiatives such as refining borrowed demographics, acquiring licenses, and venturing into new countries. The outstanding progress we have made in our overseas markets across multiple operational and financial metrics serves as a springboard for our ongoing expansion and development. On a related note, we continue to build our international business presence and brand awareness on leading social media platforms through AIGC-driven upgrades to our creative advertising campaigns. As of the end of the fourth quarter, we had more than 1 million followers on Facebook, and our followers on TikTok grew at an accelerated pace to reach over 816,000. up more than 15% quarter over quarter. Social media will be a key means of reaching our target audience with our overseas marketing efforts as we enter new countries and debut innovative products. Now, turning to our financial metrics. Driven by strong execution of our local focus, global outlook strategy, net revenues for full year 2023 increased to RMB 12.5 billion, up 13% year-over-year, while net income increased to RMB 2.38 billion, up 5% year-over-year. As of the fourth quarter, our leverage ratio, which is defined as the risk-bearing loss divided by shareholders' equity, remained stable at 4.1 times, reflecting opportunities for growth when the microeconomy normalized. Our strong balance sheet and the liquidity position continue to enhance shareholders' confidence while providing us with optimal flexibility to execute our strategy. In particular, our cash position remains robust with over 7.9 billion of cash and short-term liquidity as of the end of December 2023, representing an increase of 12% year-over-year. We believe our current cash position is sufficient to support our business expansion while increasing our return of value to our shareholders. Now, let me briefly update you on our capital return program. Since 2018, we have continuously returned value to our shareholders in the form of share repurchase and dividends. Recently, our Board of Directors approved our sixth annual dividend in the amount of USD 0.237 per ADS, and an increase of 10.2% year-over-year. For full year 2023, we returned a total of around US$160 million to our shareholders, consisting of US$62 million in dividends and US$98 million through share repurchase, representing a capital return rate around 49% of 2023 net income. As of December 31, 2023, the company has cumulatively returned US $605 million to our shareholders. These actions underscore our consistent commitment to enhancing shareholder value. Before I conclude my remarks, I would like to provide some additional color on our business outlook for 2024. Despite the involving microenvironment, our business continues to thrive and progress. We are gaining substantial momentum as we focus on advancing our international initiatives, preparing technological innovation, expanding our healthy consumer base, and optimizing our product profile. As a result, We expect our transaction volume in the China market in 2024 to be in the range of RMB 195.7 billion to RMB 205 billion, representing an increase of around 5% to 10% year-over-year. In addition, we expect international transaction volume in 2024 to be in the range of RMB 9.4 billion to RMB 11 billion, representing year-over-year growth of around 20% to 40%. That concludes my prepared remarks. We will now open the call to the questions. Operator, please continue.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, we ask that you please kindly repeat your question in English. At this time, we will pause momentarily to assemble our roster. The first question comes from Yada Li with CICC. Please go ahead.

Hello, Mr. Guan. Thank you for giving me the opportunity to ask this question. I have two questions today. The first question is to ask about the uncertainty of the current public relations environment. What positive adjustments have we made in terms of payment strategies, customers, and control? Based on the above adjustments, how do you look at the company's Then I'll do the translation. First day considering the current macro environment, I was wondering what adjustment have we done in the lending strategy, customer acquisition, and the risk management? And with the help of these measures, how to view the asset quality going forward? And secondly, for the international branches, what are the growth and the profit outlooks for Indonesia and the Philippine markets, respectively? That's all. Thank you.

Okay, thank you, Adam. Let me answer your first question, which is the current situation of Hong Kong. From our current domestic red-line indicators and some related research results, we think that the domestic economy is still in a relatively weak state, but it is expected to continue to slow down. Since around the third quarter of last year, we have actually seen that the entire industry has also been affected by the environment, and there have been some fluctuations in asset quality. We also made some quick responses and adjustments. For example, in terms of goods, we have reduced the delivery of relatively low-quality channels. In terms of higher-quality information flow channels, we have quickly folded the related models. In terms of the population, we have adjusted the amount and pass rate of those high-priced customers. In terms of some core indicators, we also pay close attention to the rate of return the return rate, the expected rate of 90 plus, and these core indicators. In terms of this, we have carried out a lot of big data analysis for the evaluation of each period and each period. In detail, we carry out a case study on each strategy to ensure that under this strategy of overall risk tightening and controllability, it also ensures that we have a relatively better Those middle and low debt level people's financial services And one more thing about the貸貨 aspect, as you all know, in the second half of last year, the tightening of the telecommunications limit of the entire telecommunications system actually had some impact on the power supply. That's because we had a relatively progressive resource reserve before, which made it possible for us to deal with these impacts more efficiently. Then the supply of our entire resource of our limit can still meet the needs of our entire power supply Although our return rate has also been affected, from 89 to 87, but this data is still very top-notch in the entire industry. After these measures have been done, we will soon see some positive and positive effects in December. In the past three months, we have seen that Day One's figure has dropped from 5.7 to 5.3, and in February it fell to about 5.25. The return rate has stabilized at about 87%, and the final loss rate has also returned to about 2.55%. It should be said that our data is relatively fast in the industry. From today's perspective, although the entire environment is still very uncertain, Okay, Yada, let me do the translation.

From observation and study, China macroeconomy is still facing uncertainties, but expect to have a gradual recovery. Around the third quarter last year, we have observed some negative impact on the industry, which results in asset fluctuations. We have been quick with our responses. For example, we have reduced customer acquisitions from lower quality channels and stepped up our model updates from higher quality channels, updating the models, tightening the approval rates and credit limit for borrowers who are more prone to economic uncertainty such as those with a higher level of debt. We have also closely monitored changes in our core metrics such as day one delinquency and loan collection recovery rates for the disbursed loans. And through the analysis of different borrower segments and title approval rates, we have ensured financial services for higher quality borrowers, example those with lower debt levels, remain intact. For post-loans, I believe you are aware of the impact on loan collections due to the reductions of telephone lines. The impact on us is minimal due to our sufficient advanced preparations of telephone lines, which are able to satisfy the needs of our post-loan collection team. Although our loan collection recovery rate slightly declined from 89% to 87%, we are still leading ahead of the industry. With the implementation of these efforts, we have seen positive results in December. For the recent three months, Our day one delinquency rate improved to 5.3% from 5.7% in the third quarter and further improved to 5.25% in February, while loan collection recovery rate remains stable at 87% with vintage delinquency returning to 2.5%. Our recovery should be ahead of the industry, and we are confident to maintain industry-leading asset quality with continuous improvement going into 2024.

The second question is about our entire overseas business situation. I would like to talk about it in several countries. The first is our largest overseas business in Indonesia. In the last four seasons, Indonesia's business has been affected by some regulatory requirements. In terms of pricing, it needs to make appropriate adjustments in 2024. We have completed this work on January 1, 2024. It is completely in line with the regulatory requirements. The adjustment in terms of pricing actually means that in our own business, people, models, data, and strategy need to do a series of related adjustments and adjustments. According to our past experience, it takes about six months to complete all these jobs. From the current progress, these jobs are still very smooth and have seen some positive effects. For example, In terms of risk, we adjusted it through the population structure. We saw that the whole risk data and the comparison before it dropped by 20%. In terms of goods, because of the price adjustment, we saw that many small and medium-sized platforms have also withdrawn from the market. So there is a very obvious decline in the whole investment and goods competition. So we dropped by 8% in the price of goods. So the rise in quality and the weakening of competition effectively reduce the impact of custom adjustments. In terms of the business flow in Indonesia this year, in the first half of the year, we still focus on product adjustment and result adjustment. We don't particularly pursue fast increases. In the second half of the year, we will combine the results of these adjustments and some changes in the external situation to determine the specific strategy for the second half of the year. In terms of profitability, we are very confident that we will maintain a healthy level. In 2024, we expect that our business in Indonesia will achieve full profitability. Here, I would like to remind you that because of the accounting standard, the business community we see is actually better than the ones on the screen. The Philippines has also revealed some relevant data this time. Because in the past few years, the Philippines has also developed very fast and very healthy. The whole environment of the Philippines is relatively stable, so we look forward to continuing to maintain a relatively rapid growth this year. We are now in the second place locally, and our goal this year is to become the first in the market. Then in terms of profitability, Philippine business performance is also very good. We will expect to achieve a single month profit within this year and a half. So this is a Philippine situation. In general, we have achieved a certain scale of profit capacity in Indonesia and the Philippines in our business. In the future, we will continue to consider, for example, we will add investment in photos. Because richer photos can help us to to open up more business varieties and the depth of our products. At the same time, it can also improve our brand image and further promote our local partnership. In addition to these two countries, we will also actively open up new countries, and we are not limited to Southeast Asia. On the business level, we will also consider more ways of cooperation to accelerate our second wave of overseas strategy.

Let me do the translation. Your question is on the whole international expansion and we will break down the explanation into different countries. For example, Indonesia has a new price cap in 2024. Our Indonesia operations in the fourth quarter has been impacted by local regulation change and since January 1, 2024, all our new loans have met regulator requirements and fully compliance. The pricing adjustments means that our borrowers' cohort model data and rules have to undergo a series of adjustments. Based on our past experience, we will need around six months to complete all these changes. And from the current outcome, these changes have been positive. Example, through adjusting our borrowers' cohort, the risk metrics have improved by 20%, reducing the impact of rates reduction. And also, from a customer acquisition perspective, We have seen many small and medium platforms reducing their customer acquisition efforts, which led to an 8% decrease in our customer acquisition costs. This further helps to reduce the impact of price reduction in Indonesia. In the first half of 2024, Indonesia's operation focus will be on product adjustment and improving the quality instead of a rapid growth. And during the second half of 2024, we will re-evaluate our strategies based on macro situation. And in 2024, we expect Indonesia to achieve profitability. The profitability from the business view will be better compared to the financial view due to the growth of the accounting policies. In addition, we have also disclosed some additional data points for our Philippines operations. Over the past few years, Philippines operations has been developing very rapidly. And from current observation, Philippines country's economic and regulatory environment has been relatively stable. We will expect the rapid growth to continue into 2024 and we are currently number two in the segment of the market. We believe we can achieve our target of number one by the end of the year. Additionally, we expect that our Philippines operations can achieve profitability in the second half of the year under the relevant accounting rules. We have managed to achieve profitability in both Indonesia and Philippines and going forward, we will consider to strengthen our investment in different types of licenses, diversify our operations and enhance our brand image to further increase our competitive advantage. We are also actively exploring new countries and these countries are not limited to Southeast Asia and we also consider other methods of expansion to speed up our international footprint. Okay, thank you, Yada. Thank you, Yada.

The next question comes from Cindy Wong with China Renaissance. Please go ahead.

Thank you for the opportunity to ask this question. I have two questions to ask. First, because this year we will be setting up overseas more quickly, 所以可不可以告诉我们一下 今年在货客成本端的话 我们这边是怎么评估的 然后第二个的话呢 想请教一下菲律宾市场 那菲律宾市场这边的话 2023年其实整体的一个增长是非常的快速 那现在目前公司在菲律宾也是第二名了嘛 可不可以再帮我们展开一下 就是说目前菲律宾的一个竞争环境 然后我们要怎么样能够在今年达成 第一名的一个leading position Thank you for taking my call, and I have a question here. So the first question is related to the customer acquisition code. Since you are aggressively on the international market expansion, so what is your CA market this year? And the second is related to the Philippine market. The Philippine market grows very strong in 2023. Can you talk about the competitive landscape and how do you achieve to be a first number one market share position this year? And how would that contribute to the international market revenue in 2024? Thank you.

Thank you, Cindy. Let me answer the question about overseas customers. I would like to talk about two issues. One is the Indonesian market. We have been working in the Indonesian market for many years. It has been six years. We have reached a certain level of understanding and expansion of the local market. From our past strategy, We still get a relatively high-quality customer base through this kind of method. As I mentioned before, from the end of last year, there are still relevant adjustment requirements in terms of the regulatory level and pricing. Therefore, we quickly made appropriate overlays in terms of the model of the entire customer base. From the results of this year's adjustment, the whole effect is still good. On the one hand, we also observed that with such an increase in customers, we can give customers a higher ratio and a longer deadline. On the other hand, the competition in the entire market will be better than last year. So it has a comprehensive impact on our cost ratio in Indonesia. Compared to the past, there is a more obvious improvement and improvement. From this year's overall forecast, I think the entire trend may still be able to maintain such a trend. Of course, we still focus on the adjustment and optimization of the entire model. In the future, based on our entire adjustment result, let's look at in terms of goods and services, or a faster development. The Philippines is a little earlier than Indonesia, and the whole environment is very good. In terms of the entire market, our entire investment has been ranked very high in the relevant news. In terms of the cost of goods and services, I think it's still relatively stable overall. Cindy, let me do the translation. We have been operating in the Indonesian market for quite a period of time, in fact six years, and we have a deep understanding of the market.

Information feeds continue to be the main matter to acquire better quality borrowers for us. Although the pricing cap has some impact on our operations, we have made adjustments to our models and the result has been very positive. For example, when we have higher quality borrowers, we are able to increase our ticket size with longer loan tenure and the fee rates further improve with weaker competition. And we believe this trend will continue in 2024 and we will re-evaluate our customer acquisition strategies in the second half when the macro environment stabilizes. For the Philippines, it is in a much earlier stage compared to the Indonesian market. And over the past two years, our marketing efforts are much more proactive and it has been pretty stable among the top. And we believe this trend will continue into 2024.

And then our target audience is about 40 million of them, about 30% of them. And now we have nearly 5 million registered users. And then there are also users who have borrowed funds, which is about 740,000, almost 800,000. And we think the entire market should be relatively early compared to the domestic market. And then every year, uh uh uh I think in the Philippine market, we still have a very obvious advantage in terms of technology and understanding. So we will continue to rely on our experience in the department and in Indonesia to develop faster in the Philippine market to gain a stronger competitive position. Cindy, let me do the translation. We entered the Philippine market in 2020 and this is our fourth year of operations.

Philippines has a population of around 130 million and our target customer base is around 40 million. To date, we have registered users of around 5 million and our borrowers is around 740,000. There are currently over 100 players and the largest players are from the US and local Philippines companies. We believe as a FinTech company from China, our advantages is obvious. and we will continue to leverage on our advantages and duplicate our success in China and Indonesia in the Philippines market. Around 20% of our transaction volume for the international market is coming from the Philippines in the fourth quarter, and we believe this proportion will continue to increase in 2024. Okay, thank you Cindy.

The next question comes from Alex with UBS. Please go ahead.

Thank you, Mr. Guan, for the opportunity. First, regarding overseas business, can you continue to talk about the Indian market? If the price is adjusted this year, how will it affect our income and profits compared to before and after the adjustment? And then, will there be an improved time table in terms of supervision? And how are we going to deal with it? The second is about the shareholder feedback. We saw that in 2023, Thank you. First, on the Indonesian market, after the pricing adjustment starting this year, how do you expect the impact on revenue and earnings? And do you expect any further move from the regulators with regard to the timetable to further adjust the pricing cap? And how will we tackle the change? And second, in terms of the total shareholder's return, we know the company has also speeded up the pace of a serial repurchase this year, bringing the total payout ratio to 48.5%. So how should we expect a more sustainable payout ratio going forward?

Thank you. Okay, thank you, Axel. Let me first talk about the situation in Indonesia. Actually, I just introduced a lot of data about Indonesia. Now, based on the current situation, we After the adjustment, the take-away will be around $10. Before that, it was around $13. So, there will be some impact, but overall, it is still a relatively healthy level. After deducting the customer and operating fees, the ROI before tax is around $2.4. It should be said that it is still a very healthy level in this business. uh uh Hello Alex, let me do the translation. We have actually shared some Indonesia data earlier. And take rate, we expect the take rate after our pricing adjustment to be around 10%. And parallel to the pricing adjustment, it was around 13%.

From an ROA perspective, we expect it to be around 2.4% after the deduction of CAC and some other costs. Based on the current regulators' advice, there might be a further change in price reduction. We need to re-evaluate this in the second half of the year. However, based on the current UE, we believe our business will remain at a healthy level even if further price reduction kicks in.

I would like to talk about the issue of buying back. First of all, I think we need to go back to our previous strategy. We are a global consumer finance technology company. In the past, we have been very successful in opening businesses in Indonesia and the Philippines, and we also have a leading position in the individual market. The Chinese market has become more mature in recent years, so the entire business has entered a relatively stable stage of development. So we are pursuing a higher quality development in China. The overseas market, according to our observation, is actually relatively early. Its space and potential is very large. So we are confident that in the future, the deep growth of Indonesia and Philippines, and the expansion of new countries in addition to these two countries, the company's overseas business can maintain a very rapid growth. Our stock return strategy is actually directly related to the company's strategy. We hope to be able to convey that our business is able to develop healthily and quickly. This is the most important way to continue to create value for shareholders. In the past three years, we have also fully proved this point. After we completed the domestic transformation and the expansion of the new overseas market, In fact, in the past three years, an average return on income has reached 44%, and the average income growth is 20%. This figure is leading in the industry. In addition to this, we are also actively using capital tools such as repurchase and inflation to constantly return our profits. We have been doing repurchase and inflation since 2018. This should be the earliest in the industry. In the past six years, we have accumulated these two methods. The shareholder has returned more than $600 million. If we look at this figure, it should be close to half. In 2023, our return will be close to $100 million, and the planned profit will be more than $60 million. So the total net profit is estimated to be close to 50%. If we calculate the yield, it can also exceed 10% and reach 11%. In 2023, our DPS per share profit is 0.237. This is the fourth consecutive rise in DPS. If you look at the past five years, the average rise should be more than 10%. I would like to emphasize that in Chinese foreign stocks, companies that can maintain a five-year prosperity and DPS growth can actually not exceed six. We are one of them. So in the past, we not only brought returns to shareholders through business growth, but we also continued to bring returns to shareholders using the capital tool of the return prosperity in the leading market. From the future, we will continue to uphold such an idea. First of all, we need to ensure that high-quality business growth as the core can bring sustainable returns to shareholders. At the same time, we continue to maintain our current leading capital return strategy. In terms of prosperity, we are confident and able to maintain the record of the past, and continue to bring stable and sustainable growth to shareholders.

Hi Alex, let me do the translation. First of all, I would like to reiterate Finvolution's position. We are a global consumer finance technology company. Our success has been validated in China, Indonesia and the Philippines with leadership position. In the recent years, as China market matures, our business entered into a stage known as high-quality progressive growth. On the other hand, based on our observation, The international markets are still in early stages of development where market opportunities for growth is enormous and we are very confident to cement our success in Indonesia and the Philippines while expanding to more countries, ensuring a rapid growth rate for our company. Our capital return program is closely in line with our company positioning. We hope rapid and healthy business growth can be the main way to create value for our shareholders. Over the last three years, we have proven this point. We have completed the business transition of our China business and expanded internationally with an average CAGR growth of over 44% and revenue growth of around 20%. And apart from this, we have also returned value to our shareholders through our capital return program. We began our dividend program and share repurchase program since 2018, the earliest in our industry. Over the last six years, we have cumulatively returned over US$600 million to our shareholders, equivalent to almost half of our market cap today. In 2023, we deployed close to US$100 million to repurchase our shares and US$62 million for dividend distribution, representing around 50% of net income for 2023 and a combined dividend of 11%. In 2023, our dividend per ADS was US dollar 0.237, the fourth years of consecutive increase. And on the five years average, this increase in dividend was above 10%. And I would like to emphasize on this. For China ADR, there are not more than six companies with five years of consecutive dividend and consistent increase in DPS. And we are one of these companies. And in summary, we are returning value to shareholders in terms of growth and a leading capital return program. Going forward, we will continue with this belief and let high quality growth remain as our core method to return value to our shareholders and concurrently maintain a leading capital return program. Regarding dividends, we are confident to maintain our track record and continue to deliver consistent increase in dividends for our shareholders.

Alex.

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

Thank you all once again for joining us today. If you have any further questions, please feel free to contact Finvolution's investor relations team.

This concludes the conference call. You may now disconnect your line. Thank you.