FinVolution Group

Hello, ladies and gentlemen. Thank you for participating in the fourth quarter and full year 2025 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, Yam Cheng, head of capital markets for the company. Yam, please go ahead.

Thank you, Walker. 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. Tietzen Lee, our CEO, and Mr. Jia Yuanxu, 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 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 filing 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 IOL website, providing details of results for the quarter. I will now turn the call over to our CEO, Mr. Thien, and the team. Please go ahead.

Thanks, Yann. Welcome to our fourth quarter and the four-year 2025 earnings call.

And pardon me, everyone. It looks like we have lost the audio. Please stand by. Please proceed. We have you back.

Thanks, Ian. Welcome to our fourth quarter and full year 2025 earnings call. 2025 was a significant year for us. It was Fintvolution's 18th anniversary Much like a person stepping into elsehood, our company has grown from a passionate credit tech 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 micro-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 13.6 billion RMB up 3.8% year-over-year. Net profit also rose to 2.5 billion RMB, a 6.6% increase from last year. The resilience 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 200 billion RMB, 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 contributes 31% of revenue for the quarter, significantly higher than 21% just a year ago. As set out before, we target to grew 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 market with our recent entry into Australia. Underpinning this momentum is quite evolution of our international strategy itself. In our early expansion, We focus on disciplined execution in each individual market, but as we scale across the region, we have learned that strength also lies in connection. We have deepened our capabilities at the platform level, instead of each country operating as a stand-alone effort. We systematically capture the expertise, relationships, and capabilities we developed in one market, and recycle them to accelerate the de-risk entry into the next. This means leveraging proven regulatory experience, product development, advanced risk analytics, centralized funding, and the regional ecosystem partnership across folders. This LEGO Plus strategy transforms our international portfolio from a collection of local VINs 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 meant tightened underwriting and enhanced risk controls. The result is a near-term moderation of loan origination volume to 38.7 billion RMB and loan balance to 68.3 billion RMB in the fourth quarter. These deliberate efforts began to pay off with risk accompaniment. Vintage loss for new loan origination stabilized at 3.0%. Outstanding loan portfolios saw risk trending up in line with expectation, with CM2 increased from 0.61% to 0.77% for the quarter. As we ran down our existing loan book upon repayment and originating new loans at higher credit centers, we saw the overall portfolio risk start stabilizing in December. As we gradually exist the regulatory recite with a capital-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, they have reached an encouraging milestone for Southeast Asia. Both Indonesia and the Philippines achieved full-year profitability and contributed over $15 million in combined operating profit. Behind this financial outcome is the validation of a respectful, locally attuned approach of our international playbook. Our highly localized approach draws 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 the local consumption preference. 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, Fondo. This new foray is a well-considered move that draws on our experience in maturing regulatory regime in China and operational excellence in overseas market. First, our evolving experience in China has prepared for a mature regulatory environment. Over the years, we have 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 regulatory maturity, compliance discipline, and the consumer first mindset that align closely with the expectation of developed economies like Australia. Second, we have proven track record of building profitable businesses from the ground up overseas. We have successfully executed the zero to one journey, not just once, but in multi-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

Pardon me, everyone. We have lost the speaker connection. Please stand by while we get the backup line connected. Thank you.

Your line is open. Please proceed. It's invited directly into the application flow, breaking the journey into a clear logical steps and offering real-time guidance at each stage. The impact has been tangible. We are seeing fewer user drops off, higher competition rates, and a better overall conversation. 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 to our buyback program this year with $107 million repurchase 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 $1.9 billion of their own capital in shared buyback. A gesture of deep confidence in this journey, we are bound together. In addition of buyback, we are also announcing a promising 70th 4.5 million US dollar in dividend for 2025. That translates to total shareholder return of approximately 182 million, equivalent to 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 the partnerships that makes sustainable growth possible. Our long-term vision remains to build a truly global solution. Thank you for being part of this journey with us. I will now turn the call over to our CFO, Xiao-Yuan Xu, for a deeper look at the numbers.

Thank you, Jason, and hello, everyone. Let me go through our key results for the first quarter and four years. Please refer to our earnings press release for further details. On a group level, our first 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 reasonable range while in pursuit of high-quality development. On the industry front, the regulator authorities released multiple new guidance for banks, consumer finance, and micro-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 long volume and a pickup in risk in the second half of 2025. We are referring our underwriting parameters to focus on the high-quality borrowers and have gradually placed our marginal assets that used to be credible before the new regulation. This provided protection to the unit economics. Our IIR remained stable. As Tianzhen 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 one and the 30 collection rate coming down afterwards. We continue to deepen our engagement with funding partners as the funding supply of Dynamics start to normalize. In Q4, we added new funding partners and further reduced the funding cost by 20 basis points quarter on quarter to 3.4%. Overall, our take rate held steady at around 3%. Closing the quarter, we bought MB 2.1 billion revenue for China. In our international markets, we maintained a strong growth momentum in Q4 with the consolidation of our new Australia 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 floods. Overall, we delivered robust results. Our international transaction volume reached 4.1 billion, or US $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 regulated environment. In Indonesia, The regulatory priority 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 US $0.3 billion, equivalent to 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 argue. We are already preparing in advance to accommodate the new pricing structure, drawing 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 have added 1.6 million new borrowers, up 26% quarter-over-quarter. In Indonesia, of offline consumption finance initiatives boost customer quality and engagement. Buy-now-pay-later solutions in mobile phone stores and other small ticket items join the influx of new users, growing new borrower base by more than three times year over year. In the Philippines, embedded in commerce partnerships now contribute 43% of the country's volume compared to 30% a year ago. Total transaction volume in the Philippines reached the US $0.2 billion, a 64% of gross year-over-year. Our new market, 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 phone door acquisition allows us to leverage our core strengths in data-driven risk pricing, operational efficiency, and the low-cost capital to grow in Australia efficiency by building a durable and diversified revenue stream for Five Evolution Group. Moving on to shareholder return, we maintained our commitment to meaningful shareholder returns in 2025. We executed US $40.7 million of buybacks in the fourth quarter alone, which is our largest quarterly buyback However, if we exclude the buyback concurrent with convertible issue in Q2, we also increase our dividend per share by 10.5% to 0.306 for the year. The progressive dividend and the buyback for 2025 highlights our commitment to our shareholders during a year of volatility. In short, we navigate. We navigated a complex environment and delivered the resilient results in 2025. In light of the recent regulatory change in China, we expect full-year 2026 group revenue to decline between 5% and 15% year-over-year. Our long-term goal remains to be 50% of revenue coming from international markets by 2030. We are stepping into the new year not with grand promises, but with a quiet, 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.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If your question has been addressed and you'd like to remove yourself from queue, please press star then 2. 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. Our first question today comes from Alex Yee at UBS. Please go ahead.

Good morning, Mr. Guan. I'm happy to have this opportunity to ask a question. I have two questions. First of all, I am very happy to see that the company has also accelerated the recovery process. How should we look at the company's recovery strategy in the future? Especially in the current regulatory environment, there are still some uncertainties. Is it possible to maintain such a rhythm in the short term? The second question is about the Chinese market. Recently, including at the end of last year, a series of regulatory policies were introduced. Can you give us more details about some of the goals for China in this year, 2026, including the rate of loans, the average price, and how much investment we want to make in the South American market? I will translate for my question. I have two questions here. The first one is about the company's shareholder's return policy. So it's good to see a accelerated buyback pace since Q4. Can we expect this momentum to sustain in the near term, given there's still a lot of buyback and uncertainty on the regulatory front? The second question is regarding the Chinese market. So based on the various regulatory measures since last year, Can you give us an update on some of the operational targets for this year for the domestic market, such as the long-volume growth, average of pricing, and sales and marketing budget? Thank you.

Okay. Thanks, Dave. I will take your questions. Well, your first question is about our share buybacks. As we have mentioned, we stepped up significantly in the first quarter. reached about $40.7 million. This is our quarterly record for us, and for the full year 2025, total repurchase coming at $107 million. Despite the domestic relator headwinds, our China B&As have remained resilient, and our international B&As continue to deliver the very strong goals with improving probability So at the current valuation level, we see still the very attractive opportunities for us. So we are maintaining that pro-trade 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 of 2025, we had about $74 million remaining in our current $115 million buyback authorization. We will continue to review the program regularly to ensure our buyback policy remains consistent and sustainable. And beyond the corporate level activity, I also want to highlight the personal commitment for 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 their long-term confidence in the company's core value. And then your second question is about our forecast for our domestic business. In 2026, our China business will focus on what we call the high-quality operations. That means greater focus on sustainability, compliance, and serving better quality customers. We're also extensively embracing the use of AI to drive efficiencies across customer acquisition, risk, and the various key functions within our organizations. 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. And for the full year, it will really depend on the risk, the macro, the regulation, which we are closely tracking. At this point, we are focusing on stressing our B&S operation and we will adapt as the conditions become clear. And for price, our price is shafted by funding partners and the regulator guidance. We are continuously referring our models to balance risk and return with a compliant framework. We are also offering the better pricing to high-quality borrowers. This aligns with the regulator expectation. and is good for building a stronger customer base in the long term. As for the customer acquisition, actually, last year, the growth reset in China market led to relatively moderate competition in marketing activities. Customer acquisition cost 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 is quite attractive, especially when you compare the lifetime value a new customer can potentially bring. So we maintain a relatively proactive customer acquisition in the first quarter, 2026, and we will keep close eye on our customer acquisition strategy dynamically. Okay, thank you, X. Thank you.

Our next question comes from Cindy Wong at China Renaissance. Please go ahead.

Thank you for giving me this opportunity to ask a question. I have two questions here. The first question is, the day-to-day interest rate and 30-day loan return rate that we see now is a change in Q4 and 1 to 3 months. How do we look at the credit risk cycle in the recent changes? Do you think it is close to the end or is it still in the middle of the cycle? Secondly, I would like to ask, in the fourth quarter, we saw an increase in the supply and demand of the overseas market. How do you look at the supply and demand of the overseas market this year? Especially Indonesia and the Philippines, do you have any catch-up on the goods? Thanks for taking my questions. I have two questions. First, could you give us a trend in Q4 and January to March for D1 delinquency rate and 30-day loan collection rate? Based on the changes in early indicators, how do you see this round of the credit cycle? Has it approached to the end or still in the middle of the cycle? The revenue contribution from overseas markets increased significantly in Q4. How do you view the revenue contribution from overseas markets this year? And what customer acquisition strategies are employed in Indonesia and Philippines? Thank you.

OK, thank you, Cindy. And I will check your questions. Well, your first question is about the risk matrix in foreign world 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 went up from 5% to 5.5%. And the 30-day loan collection rate went down from 88% to 86%. So the CM2 flow rate as a result increased from 0.61% in Q3 to 0.77% in Q4. And in the first quarter of 2026, following the gradual runoff of our legacy loans from the high-risk customers, the quality of the existing loan portfolio continued to improve. Meanwhile, the new loans are originated at a high credit standard and have better credit quality. So as a result, our delinquency has trended down in January and February for two consecutive months. For example, the early risk indicators show initial signs of recovery, returned to the level somewhat closer to the end of September last year. Now the current, the delinquency has lowered to around 5%. We continue to be vigilant on risk until the sign of recovery is clear. And the second question is about our overseas market. In terms of the 2026 international revenue contribution, we expect our international business to maintain its rapid growth momentum this year. And for this year, we are getting international revenue to account for roughly 30% of our full year total. And the possibility should scale nicely as well. We are looking at a meaningful step from the US $15 million operating profit we delivered in 2025. And then let me share some updates for the customer acquisition in Indonesia and the Philippines. Well, we have built a pretty systematic approach to customer acquisition. It really comes down to three things. The positioning traffic acquisition embedding ourselves into high frequency spending scenarios, and then looking in user loyalty through demand and experience. Those combination helps 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 pretty efficiently. Those channels are not easy to master. They have high operating barriers, but once you crack them cold, they can help you build a strong brand recognition and capture full user lifetime value. And once a model is validated, it becomes a sustainable growth engine for the local business. And the second, moving beyond the traditional online advertisement, we focus on deeper integration with local ecosystem. 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, cover things like 3D products, home appliances, and a family chair. We are now showing up where people actually spend the money. The results speak for themselves. It will cost 3 million new customers in 2025, three times of last year. This year, we will keep expanding that offline footprint and build out a two-multi-channel acquisition network. And in the Philippines, our approach is partnership-driven. We have integrated with lending e-commerce platforms to offer product at online checkout. That now accounts for 36% of our volume in . We have also teamed up with Matt, a major telecom operator, for better palliative product on mobile top-ups. And also, we are working with Carousel, the regional second-hand marketplace, to embed financial service into their platform. Those things are simple. Meet users in their daily routines, make the financial service part of experience, and the customer acquisition happens laterally. OK, thank you, Sinki.

Thank you. And our next question comes from Jing Yu Ji with CICC. Please go ahead.

感谢公司给我这个提问的机会。 有几个关于海外市场拓展的问题想请教一下管理层。 会上提到咱们准备进入澳大利亚这些发达国家市场, 这个是出于怎样的战略考量? 以及当前发达国家的监管和竞争的情况是如何的呢? 是否合法人中国家? Let me translate my questions, which is about the overseas market expansion. You mentioned in the meeting that we plan to enter development markets such as Australia. Could you share the strategic thinking behind this decision? And what's the current competitive and regulatory environment in development markets? Also, could you briefly talk about the company's follow-up development plans? Thank you.

Thanks, Yujie. I will take your question. I will answer your question in three parts. First is why divided markets? Let's think of it this way. We are taking the mature experience we built in China. It's actually aligned pretty closely with divided markets. developed market regulations, and combining it with the scalable growth engine we've proven in Southeast Asia. So we are exporting our capabilities to a new frontier. We think developed markets offer something really valuable, large, experienced personal loan markets that are ripe for digital transformation. By entering this market, we are not just chasing growth, we are building resilience. A more balanced geotric portfolio helps us hedge against volatility in any single market. And frankly, being one of the new fintech platforms that can credibility operate across both emerging and developed markets evaluates our global brand and influence. And second, why Australia? Australia presents clear structural opportunities. The unsecured personal loan market there is around 33 billion Australian dollars. It's sizable. And we watched non-bank players steadily gain shares from traditional banks over the past few years. So as one of the first Chinese players to enter, we have first mover advantage. And looking at the general operating landscape, we see a somewhat moderate competition. Digitalization level remains moderate. There's no major dominant player in the space. So for a technology-driven platform like Swinvolution, it's an ideal entry point. And added to that, regulatory environment that's both robust and transparent giving us the clarity and the stability we need for long-term sustainable operation. So Australia became our first choice for our push into high-income, highly regulated markets. Third, why Fondo? Fondo has an ACL license. It typically requires a long, expensive process to get it. and the ongoing compliance costs are significant. By acquiring Fondo, we effectively bought ourselves a fast path into the Australian market. It let us enter faster at lower cost and with the ability to immediately upgrade an existing operation rather than starting from scratch. And the Fondo business is already self-sustaining and profitable. with strong risk controls in place, and more importantly, Fondo's level of digitalization and automation already put it ahead of most local competitors. That made it an ideal candidate to plug into our LEGO Plus global platform. Looking ahead to 2026, our focus is straightforward, sharpen our risk models, and refine operations and optimize funding costs to keep improving the unit economies. We are confident that we can help Fondo to accelerate its growth, both in origination volume and revenue. Thanks, Yijie.

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.

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

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