FinVolution Group

Hello, ladies and gentlemen. Thank you for participating in the first quarter 2026 earnings conference call for Finvolution Group. At this time, all participants are in listen-only mode. After management prepare remarks, there will be a question and answer session. Today's conference call is being recorded. I'll now turn the call over to your host, Yim Ching, Head of Capital Markets for the company. Yim, please go ahead.

Thank you, Desmond. Hello, everyone. Welcome to our first quarter, 2026 Earnings Conference Call. The companies themselves 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. Mr. Tie Zhen Li, Tim, our CEO, and Mr. Jia Yun Xu, Alexis, our CFO, We start the call with the 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 the cancellation 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 provision 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. The 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 posted a slide presentation on our IR website, providing further details of our results for this quarter. I will now hand over to our CEO, Tim. Tim, please go ahead. Thank you, Jan.

Hello, everyone. Early closeout 2025. Besides, we were stepping into this year with clarity, not certainty. One quarter in, the clarity is beginning to show in the trajectory of our business and in the early results of disciplining choices we made last year. The micro-back job has its challenges. Yet, we delivered a firm first quarter. Risk is recovering in China. Overseas business continues to scale with its own strength. And across the platform, years of technology investment are compounding into operating efficiencies. Despite the typical seasonal stopness in the first quarter, transaction volume held broadly steady at 42.6 billion RMB. Roughly in line with last quarter, our group net revenue reached 3.2 billion RMB, up 6% sequentially. Operating profit was up 13% sequentially. Net profit came in at 421 million RMB, up 1%, reflecting the impact of foreign exchange fluctuation. Overseas markets again delivered 30% of group revenue this quarter. This is no longer only a diversification story. It has matured into a second profitable engine. To give investors a clear view of this business, for the first time, we are disclosing our overseas business as a separate reportable segment. In the first quarter, overseas revenue reached 949 million RMB. up 35% year-over-year. Operating profit reached 46 million RMB, up 88% year-on-year. This is a reflection of both the scale we have built and the earnings power that now stands on its own. Now let me walk you through our two segments. Let's start with our mature market, Chinese mainland. The first quarter in China was, in a word, patient. We are seeing early signs of recovery in progress. The Chinese New Year holiday always makes the first quarter a seasonally softer period. Its transaction volume held up at $38.5 billion, roughly flat sequentially. On risk, we are seeing gradual improvements. The actions we took in the second half of last year are working. And credit risk is sending its way back to a higher baseline. Vintage delinquency is by 30 basis points. Day one delinquency ratio also improved, while 30-day collection rates picked up. This improving environment has given us the operating headrooms to re-engage with growth, cautiously, not aggressively. As the industry consolidated, some players pulled back. We selectively acquired more high-quality customers at compelling cost. Conversion improved. Acquisition costs came down, and we added roughly 0.6 million new borrowers in China this quarter, up 7% sequentially. In the near term, we will continue to closely observe the evolving regulatory landscape. There is still uncertainty ahead. Our approach is to stay aligned with the rules, manage risk carefully, and capture opportunities as they emerge. Now it rolls through our overseas business. Our overseas market segment is a regional platform that learns, compounds, and transfers. Under our LEGO Plus framework, The capability with building one market are deliberately designed to flow into the next. That means risk infrastructure, product architecture, customer strategy, funding relationships. A lot of these can be leveraged and replicated. This quarter is a demonstration of that idea in practice. The first quarter is traditionally a low season for our overseas markets as well, Across the region, transaction volume was 4.1 billion RMB, broadly flight sequentially. Indonesia moved through Ramadan. In the Philippines, we deliberately moderated origination ahead of new interest rate regime, taking effect in the second quarter. A mirrored decision, consistent with our playbook. Year over year, the direction is clear. Loan volume up 35%, loan balance up 38%, unique borrowers more than doubled to 4.5 million. As the trader is unfolding on the roadmap we set, we are firmly executing the initiative we laid out from day one, expanding new customer acquisition channels, migrating the platform onto our propriety risk infrastructure, deploying credit models, and the decisioning rules tailored for the Australian consumers. Early results are there, sharper risk detection, better borrower segmentation, stronger portfolio economics. What will make Australia work is the same combination that has served us before. Cross-market experience layered onto deep local knowledge. Technology. AI is no longer a supporting capability for us. It's how we run the business. From AI agents to workflow automation. We are proactively deploying nearly 120 active initiatives across the business. and more than 50% are embedded directly in frontline operations. For example, our engineering teams are building proprietary AI-native infrastructure to support new product launches across our current and future markets. In some of our overseas businesses, the results are already tangible. AI collection agents are not only the default touchpoint for pre-dued reminders, They are also handling 50% of early stage collections at a recovery efficiency level in line with our historical benchmarks. We believe this is a durable, compounding competitive mode, and we are just getting started. Community. Our longstanding community engagement programs continue to make an impact this quarter. Our major business support program further expanded its reach this quarter, opening eligibility to retired athletes who run their own business in China. Since the launch, over 140 small business owners have benefited from this initiative and upgraded their business with our help on operational and funding support. In the Philippines, Our local platform partnered with multi-local institutions to combat fintech-related cybercrime, reinforcing our commitment to building a safer digital financial ecosystem. Together, these initiatives reflect the depth of our local roots and the consistency of our commitment to responsible girls. To close, the first quarter gave us the early shape of the year. a recovery in China amid regulatory fog. Our overseas business standing on its own with growth and profit, a technology advantage that is compounding. Against an uncertain micro, we move with the same posture we spoke of last quarter, clarity, not certainty, patience, not hate. We remain focused on growth that lasts and on creating durable value for consumers and our stakeholders. I will now turn the call over to Alexis.

Thank you, Kim. This quarter marks a meaningful evolution in how we report. For the first time, we are presenting our overseas operations as a separate segment. The reason is simple. Our overseas operation has grown into awareness with its own scale probability, and trajectory. Reported alongside our China operations, the two tell a cleaner story. China is the foundation of cash flow and stability. Overseas is the engine of growth. Two engines, distinct but aligned. The overseas segment consists of Indonesia, the Philippines, and Australia. Together, these three markets have reached the scale, goals, and the probability where segment reporting gives investors a much clearer view of how they will drive upside going forward. We are also introducing adjusted EBITDA for each segment. This metric aligns with how global peers report their financial services, business, and helps investors see the underlying probability of each engine. Transparency builds trust by separating the two engines. We make it easier for investors to value each segment on its own metrics and unlock the true value of the platform we have built. Now let me discuss each of the segments. China, the macro backdrop with bodily stable, GDP growth of 5%, consumption sentiment holding its ground. Our China business continues to walk through the reset and begin in the second half of 2025. Lower generation volume was largely flat quarter on quarter. Given Q1 sustainability, this is a resilient outcome. Net revenue can be at 2.2 billion, up 7% sequentially. Take a ratio from 3% to 3.2%, supported by better risk performance. On risk, the picture is consistent across indicators. In the first quarter, vintage delinquency is from 3% to 2.7%. Delinquency improved from 5.5% to 5.2%. The 30-day collection rate picked up from 85.9% to 86.8%. As a result, M2 flow rate declined from 0.77% to 0.68%. On the funding side, we continue to maintain stable partnerships with a broad base of financial institutions, which kept funding core stable during the quarter. This healthy risk environment allows us to selectively broaden our credit appetite. Targeting has sharpened. Conversion has improved. New borrowers rose 7% sequentially, even when we actually reduced sales and marketing spend in China. Overseas segment. Overseas revenue was up 35% year-over-year. At expanding margin, adjusted EBITDA was on the 47.5 million of 87% year-over-year. More encouragingly, All three markets contribute to this probability. The deeper picture is in how we deepen our integration into local ecosystems. We are embedding our financial services into the daily life and the commerce of each market. This plays out across three consistent themes. First, customer upgrading through targeted product development. Across all markets, we are systematically shifting our portfolio toward better quality borrowers. This is not a collection of one-off products. It's a consistent push toward higher quality portfolio composing. In Indonesia, offline buy-not-pay later remains the primary growth engine, despite Ramadan, a seasonally slow period. Both transaction volume and the loan balance go 5% sequentially. Customer quality improved and the tick rate held steady, even as headline PMI eased modestly to 15.1. Unique borrowers reached 3.2 million, nearly five times the level of the same period last year. Second, Regulator prependence as a core capability. Our regulator playbook is being applied again in the Philippines. We tightened the law generation ahead of the new pricing regulation, and the early read-on risk indicator suggests the caution is playing off. We have navigated a pricing transition in Indonesia and China before, and we are approaching one with the same posture and the same pride confidence. Third, our proprietary risk infrastructure, refined over years in China and the Southeast Asia, is being gradually deployed in Australia. Credit trends there have moved lower for last quarter's seasonal peak, a validation of the portability of our infrastructure. With a renewed credit model, we still achieved secretion growth in transaction volume despite seasonal softness in the first quarter. Finally, our funding ecosystem continues to expand. We have recently added a prominent international bank to our funding partnerships in the Philippines. We are encouraged by the shared mission of our partners to support the exciting goals of the digital credit industry in the country. Our goal basis, net revenue for the quarter reached 3.2 billion, marking a 6% increase sequentially driven by an improved take rate. Operating profit improved by 30% quarter-on-quarter to RMB 547 million, offset by impact of FX fluctuation. That income reached RMB 421 million, up 1% sequentially. Our shareholder return since 2018 we have continuously returned value to our shareholders through share purchases and dividends. Recently, our board of directors approved our eighth annual dividend in the amount of US $0.306 per ADS, reflecting a DPS increase of 10.5% year-over-year. This dividend was distributed to May 7, 2026, bringing our total dividend distributions to shareholders for fiscal year 2025 to U.S. $74.5 million. As of the end of April, we have deployed U.S. $54 million towards share purchase, reflecting our conviction in our business and the commitment to our shareholders. Outlook. Hopefully in 2096, We reiterate our revenue guidance in the range of MB 11.5 billion to MB 12.9 billion. We are on track toward our 2013 ambition, 15% of group revenue for overseas markets. To conclude, China continues to provide a resilient foundation and is steadily founding its footing. Overseas is scaling probability alongside it. The combination gives us the stability we need today and growth we are building for tomorrow. We step a quarter deeper into the year with a confidence that is quieter but firmer in the resilience of our model, in the discipline of our execution, and in the partnerships that carry us forward. Thank you. Now back to the operator for questions.

Thank you very much. We will now begin the question and answer session. To ask a question, please press star 1 and 1 and wait for your name to be announced. For the benefit of all participants on today's call, if you wish to ask your questions through management in Chinese, we ask that you please kindly repeat your question in English. One moment for the first question. The first question comes from the line of Alex Yeh from UPS. Please go ahead.

President, good morning. Thank you for giving me the opportunity to ask a question. I have two questions here. The first one is about the repurchase. It is also very surprising to see that the company has maintained a relatively fast repurchase rhythm in the first quarter as well as in the fourth quarter last year. Can you give us an overview of the follow-up repurchase Then what kind of considerations or changes will be made in the specific rhythm? The second one is about some of the observations of this supervision. Since this year, I have also seen some of these continuous supervision. So I translate for my question, the first one is on buyback. We are glad to see the company has maintained its pace of buyback in Q1, similar to previous quarter. So can you give us some color in terms of the outlook and including the pace for your buyback in the coming quarters? The second question on the regulatory outlook, so we have seen several new documents, regulated documents coming up in the past several months, including the latest document, which is so-called the amendment rules on the online marketing of financial products. Could you share with us what impact would this regulation document bring to your day-to-day operations, and how would the company react to mitigate the impact?

Okay, thanks, Alex. Yeah, I will take your first question, and the team will take your second question. And your first question is about the buyback. On the buyback execution side, as you have seen, we have been really a very pretty active pace since the first quarter last year. We did around $14 million in the first quarter, and the momentum has carried to 2026. In the first quarter, we executed another $39 million, and by the end of April, we have added another $15 million. So the total amount this year is about $54 million. And the remaining capacity in our current program stands at about $20 million. With that as the backdrop, our board recently approved a new U.S. $150 million program, and also for two years. It's quite similar to the two programs we did in 2023 and 2025. And on the capital allocation, our goal is always to maximize the shareholder return. The return accretion could come from business expansion, especially from the overseas business. And it could also come from the share repurchase at the dislocated price. So we will make sure we have enough quiet power to support the business expansion and then deploy the buybacks in more flexible ways based on the liquidity and the price we trade. It would be dynamically balanced.

Okay. Hi, Alex. As you mentioned, the online marketing of financial products, we think this regulation is a natural continuation of a long-running trend. The core ideas I think are protecting consumers, ensuring only licensed players offer financial products, and keeping a clean line between tech and finance. And all of these we are already, we agree with. Right now I think it's still early to determine the full impact. The industry is working through the details on execution. And generally, we see three board areas where the industry will adapt. First, marketing rules are getting tighter. Things like low barrier to entry and instant disbursement and the zero cost are out. The days of flashy borderline misleading advertisements are fading. For the industry, that means higher compliance cost, and some players we think may need to make some adjustment to their processes. Our approach has always focused on responsible lending and long-term brand buildings. So we see this as an opportunity to raise our standards even further. And second on user traffic flow from a platform to lenders. The rules add some fiction. It requires third-party platform to refer users directly to the financial institution's own platform. A lot of details still need to be hammered out on implementation. So it's too early to say for sure, but we are working with financial institutions and the Internet platforms. to restructure some of the workflow into this renewed framework. There will certainly be some adjustment to the process. We are in close communication. And the third, on business boundaries, the regulation reinforced that core financial decisions, such as credit approval and the risk assessment, must rest with licensed financial institutions. This has always been our model. We provide the technology and data tools. Our partners make the final calls. And overall, this regulation raised the bar for the entire industry. There will be adjustments near term. But as a company, Demolution as a company with strong compliance and technology infrastructure, we see it as a net positive over the medium to long term. And thanks, Alex.

Thank you for the questions.

One moment for the next question.

Our next question comes from the line of Cindy Wang of China Renaissance. Please go ahead.

谢谢管理层给我这个提问的机会 那我这里有两个问题想请教 第一个问题就是 可不可以给管理层给我们一下 就近期国内这边四五月的一个风险表现 那有机会持续在第一季度的一个基础下 持续向好吗? 那风险向好的情况下的话,第二季我们怎么看国内的一个新放贷盘量? 然后第二个问题的话是我们注意到就这次公司做了这个分布的一个披露, 那可否请您分享一下关于这个分布披露背后的一个考量? 然后海外的话,这边可不可以帮我们介绍一下目前的一些APR, 跟违约率的一些指标? Thanks for taking my call. I have two questions. First, could you let us know whether domestic risk performance in April and May continue to improve from first quarter? And then if credit risk improves, will transaction volume in China in the second quarter would increase? And second, we noticed that the company has met segment disclosure this time. Could you please share the consideration behind the segment disclosure? And also, could you please introduce some operating indicators for overseas markets, including like APR, funding cost, and default rate? And then what percentage of the group's EBITDA is expected to contribute from overseas markets by 2030? Thank you.

Okay, thanks, Cindy. I will take your questions. Your first question is about the back to business. Yeah, when we look at the risk of performance in the second quarter, the improving trend is continued. The ethicality has continued to get better. And by the end of April, our day one delinquency had already fallen below 5%. back to where we were in July and August of last year. The sustained improvement in the asset quality is really the reflection of the risk management we have been building across the full credit lifecycle. On the front end, customer acquisition and the pre-approval, we have been actively moving up the credit quality curve. offering higher limits and a better pricing to those high-quality customers. And on the technology side, we have been leveraging the large-language model to refine the risk analysis, fraud detection, and intelligent post-loan collections, which has meaningfully lift both the VNS efficiencies and asset quality. As the asset quality stabilized, we have selectively raised our risk appetite in the second quarter. We are now running a diversified approach backed by the AI models. For those high-quality existing borrowers, we are now offering more credit limit at a controlled pace. And we also selectively offering a wider group of customers of reasonable credit quality to expand our potential customer pool. So we are making progress on sustaining the first quarter growth momentum into the second quarter, and we will keep our close eye on the macro environment and our early risk indicators. Stay focused on the high-quality growth and continue to keep the balance between volume, risk, and probability, okay? And your next question is about the overseas business. I think it's the multi-part question. So I will break it into three pieces. First is about the overseas operating metrics. We will not break our API funding course or release it by market because each is very different from interest rate to volume profile. but I will give you some high-level guidance for reference. For HR, compliance is always our first priority. We strictly follow the local pricing rules. At the same time, moving toward high-quality customers will give us the flexibility to offer different price. Take the buy-not-pay-later product as an example. It helps us reach more prime customers. And for the funding cost, more institutions recognize our asset quality. And our funding partners go from 13 in 2004 to 18 today, which is continuously optimizing our funding cost. And for the delinquency rate, as we upgrade customer quality and advance our risk capabilities, the risk metrics are improving across all markets. We continue and to progressively bring this down going forward. Okay. And the second part is about the EBITDA contribution. Okay. For 2030 overseas EBITDA, I think it's still too early to guide on that because it depends on too many variables. The contribution from our Chinese business, the accounting use impact, and the pace of the overseas business. But for 2026, we have a very clear target. Yeah. But if you look back over the past few years, you will see a very clear roadmap. We clarify our strategy and then execute it, deliver the results, and report them. So segmented culture is a natural milestone in that ongoing narrative. When we look back at our international journey, it goes like step one, prove and replicate the operating model. We first proved the viability and the probability of our business model in Indonesia. This was our first zero to one breakthrough in overseas market, and then we replicated the success to the Philippines. And step two, we set a long-term goal and deliver the Finally, as our overseas B&As took shape, we formulated a growth strategy to guide operations and bureaus on local excellence, global outlook, or legal strategy. We also clearly laid out the goal of reaching 50% overseas revenue by 2013. We are now already at 30% today, standing on track. And step three, the full strategic upgrade to LegalPlus. As we expanded into developed market like Australia, we have made a fundamental upgrade to what we call LegalPlus. We moved from being a collection of local wings to an integrated platform with combining platform level advantages. So under this framework, regulatory experience, product structures, risk capabilities and the funding networks, all validating new markets. Can be systematically reused and mitigated to new markets. That has great accelerates and the risk of the new market entry. And the next step, the formal segmented disclosure. Now, we truly realize that is both high growth and the probability, probable on its own. That's the right time to provide separate this culture for better understanding of the value in our business. And this segment of this culture is a nature link in our overseas story. It ties together what we have done and where we are headed. It validates the success of our legal strategy to date and it provides the transparent window into the high quality global goals we are building for the future. In the coming years, you will see that our overseas India is not only fast, but also increasingly profitable with unit economic flat keeping improving. Okay, thank you.

Thank you, Cindy, for the questions.

One moment for the next question. Our next question comes from the line of Yujie Jing from CICC.

Please go ahead.

Thanks for taking my question. I have a question regarding overseas market expansion. Now that other overseas business has achieved profitability, what will be the key drivers for it? Could you also share your outlook for this business? Thank you.

Thanks, Yujie. I will answer this question. As I previously mentioned, our overseas business continues to deliver strong and resilient Google Chrome. And over the past five years, from 2020 to 2025, Overseas transaction volume grew at 69 . In the first quarter of this year, despite the seasonally slow period, we still delivered solid results. And revenue grew 35% year over year, with EBITDA up 87%. And overseas business is now the group's second largest growth engine. The co-driver behind this growth is a dual fly-quill loop we built as a disk drive and type platform. With over 56 million registered users, our green data pool sharpens our risk models. And high-quality assets consistently attract more institutional funding. More capital at better cost allows us to serve broader and higher-quality customer segments. Across Indonesia, the Philippines, and Australia, new from the early investment phase and now profitable. And for Indonesia market, after adjustments in the past years, growth has resumed. The first quarter convection volume grew over 30% year-over-year. And our approach is to proactively pursue higher-quality customers. And continuous traction of our offline binopilator product is a direct result of that strategy. In the first quarter, offline binopilator volume doubled from last year. And the 15th, We proactively adjust our lending piece in the first quarter, and ahead of the new interest use, it take effect in the second quarter this year. Even so, transaction volumes still grow on double-digit year over year. We also broadened our funding service with one new international bank, a clear recognition of our asset quality, And for the Australian market, we are systematically deploying our FinTech expertise and risk management capabilities, automated system, and funding capacity from the group. And the first quarter transaction volume grew 25% year-over-year with more local data and ongoing model improvements. We are confident Australia will continue to grow in both top line and profitability. And looking ahead, as our business scales, the fly-through loop will accelerate. Our long-term vision is to become a global example of technology-driven inclusive financial platform operating on multiple fronts globally, comes with a challenge, but we are mature tech mode. But with our mature tech mode and operational agility, we are very confident about the journey ahead. Thanks, Yijie.

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

Thank you, Desmond. Thank you once again for joining us today. If you have any further questions, please feel free to contact our groups and our team. Thank you so much.

That does conclude today's conference call. You may now disconnect your lines. Thank you.