Prepared remarks
Hello, ladies and gentlemen. Thank you for participating in the First Quarter 2020 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, Jasmine. Hello, everyone. Welcome to our first quarter 2020 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. Mr. Tiezheng Li (Tim), our CEO, and Mr. Jiayuan Xu (Alexis), our CFO, will start the call with the 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, 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 2000. 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 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, Yam. Hello, everyone. When we closed out 2025, 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 disciplinary choices we made last year. The macro backdrop 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 efficiency. Despite the typical seasonal softness in the first quarter, transaction volume held broadly steady at RMB 42.6 billion, roughly in line with last quarter. Our group net revenue reached RMB 3.2 billion, up 6% sequentially. Operating profit was up 13% sequentially. Net profit came in at RMB 421 million, 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 clearer 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 RMB 949 million, up 35% year over year. Operating profit reached RMB 46 million, 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, patience. We are seeing early signs of a recovery in progress. The Chinese New Year holiday always makes the first quarter a seasonally softer period, yet transaction volume held up at RMB 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 finding its way back to a healthier baseline. Vintage delinquency eased by 30 basis points. Day-1 delinquency ratio also improved while 30-day collection rates ticked up. This improving environment has given us the operating headroom to reengage with growth—cautiously, not aggressively. As the industry consolidated and some players pulled back, we selectively acquired more high-quality customers at compelling cost. Conversion improved. Acquisition costs came down. And we added roughly 600 thousand 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 I will walk through our overseas business. Our overseas market segment is a regional platform that learns, compounds, and transfers. Under our LEGO+ framework, the capabilities we are building in one market are deliberately designed to flow into the next. That means risk infrastructure, product architecture, customer strategy, and funding relationships—many 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 RMB 4.1 billion, broadly flat sequentially. Indonesia moved through Ramadan. In the Philippines, we deliberately moderated origination ahead of the new interest rate regime taking effect in the second quarter—a mild 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 2.45 million. Our strategy is unfolding on the roadmap we have set. We are firmly executing the initiative we laid out from day one: expanding new customer acquisition channels, migrating the platform onto our proprietary risk infrastructure, deploying credit models and decisioning rules tailored for local consumers. Early results are there—sharper risk detection, tighter borrower segmentation, and 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 and AI are no longer a supporting capability for us; it is 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 business, the results are already tangible. AI collection agents are not only the default touch point for pre-due 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 moat, and we are just getting started. Community: our long-standing community engagement programs continue to make an impact this quarter. Our maker business support program further expanded its reach this quarter, opening its eligibility to retired athletes who run their own businesses 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 multiple 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 growth. To close, the first quarter gave us the early shape of the year: a recovery in China amid regulatory fog; our overseas business is standing on its own with growth and profit; and a technology advantage that is compounding. Against an uncertain macro, we move with the same posture we spoke of last quarter: clarity, not certainty; patience, not haste. 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, Tim.
Thank you, Tim. 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 an engine with its own scale, profitability, 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 a scale, growth, and profitability 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 businesses and helps investors see the underlying profitability 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 segment. China: the macro backdrop was broadly stable—GDP growth of 5%, consumption sentiment is holding its ground. Our China business continues to walk through the reset that began in the second half of 2020. Loan origination volume was largely flat quarter on quarter. Given Q1 seasonality, this is a resilient outcome. Net revenue came in at RMB 2.2 billion, up 7% sequentially. Take rate rose from 3% to 3.2%, supported by better risk performance. On risk, the picture is consistent across indicators. In the first quarter, vintage delinquency eased from 3% to 2.7%. Day-1 delinquency improved from 5.5% to 5.2%. The 30-day collection rate ticked up from 85.9% to 86.8%. As a result, M2 flow-through 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 the funding cost 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 margins. Adjusted EBITDA was RMB 47.5 million, up 87% year over year. More encouragingly, all three markets contributed to this profitability. The deeper picture is in how we deepen our integration into local ecosystems. We are embedding our financial services into the daily life and 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 is a consistent push toward a higher-quality portfolio composition. In Indonesia, offline buy-now-pay-later remains the primary growth engine despite a seasonally slow period. Both transaction volume and the loan balance grew 5% sequentially. Customer quality improved and the take rate held steady even as headline NIM eased modestly to 15.1%. Unique borrowers reached 3.2 million—nearly five times the level of the same period last year. Second, regulatory preparedness as our core capability: our regulator playbook is being applied again in the Philippines. We tightened loan origination ahead of the new pricing regulation and the early read on risk indicators suggests the caution is paying off. We have navigated a pricing transition in Indonesia and China before, and we are approaching this one with the same posture and the same quiet confidence. Third, our proprietary risk infrastructure we have honed over years in China and Southeast Asia is being gradually deployed in Australia. Credit trends there have moved lower from last quarter's seasonal peak, a validation of the portability of our infrastructure. With a renewed credit model, we still achieved sequential 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 growth of the digital credit industry in the country. On a group basis, net revenue for the quarter reached RMB 3.2 billion, marking a 6% increase sequentially driven by an improved take rate. Operating profit improved by 13% quarter on quarter to RMB 547 million, offset by the impact of FX fluctuation. Net income reached RMB 421 million, up 1% sequentially. Our shareholder return: since 2018 we have continuously returned value to our shareholders through share repurchases 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 on 05/07/2026, bringing our total dividend distributions to shareholders for fiscal year 2020 to US$74.5 million. As of the end of April, we have deployed US$154 million towards share repurchase, reflecting our conviction in our business and our commitment to our shareholders. Outlook: for full year 2026, we reiterate our revenue guidance in the range of RMB 11.0 billion to RMB 12.9 billion. We are on track to allow our 2013 ambition: 50% of group revenue from overseas markets. To conclude, China continues to provide a resilient foundation and is steadily finding its footing. Overseas is scaling profitably alongside it. The combination gives us the stability we need today and the 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.
Questions and answers
Thank you, management. We will now begin the question-and-answer session. To ask a question, please press star 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 to management in Chinese, we ask that you please kindly repeat your question in English. One moment for the first question. First question comes from the line of Xiaoxiong Ye from UBS. Please go ahead.
I will translate for my question. First, on buyback: we are glad to see the company has maintained its pace of buyback in Q1 similar to the previous quarter. Can you give us some color in terms of the outlook, including the pace for your buyback in the coming quarters? Second, on the regulatory outlook: we have seen several new regulatory documents in the past several months, including the latest document on management rules for online marketing of financial products. Could you share what impact this regulation could bring to your day-to-day operations, and how the company would react to mitigate the impact?
Okay. Thanks. I will take your first question, and the team will take your second question. On buyback execution, as you have seen, we have been at a very active pace since the fourth quarter last year. We did around US$14 million in the fourth quarter, and the momentum has carried into 2026. In the first quarter, we executed another US$39 million and by the end of April, we had added another US$15 million. So the total amount this year is about US$54 million. The remaining capacity under our current program is about US$20 million. With that as the backdrop, our board recently approved a new US$150 million program for two years. It is quite similar to the two programs we executed in 2023 and 2025. On capital allocation, our goal is always to maximize shareholder return. Return accretion could come from business expansion, especially from the overseas business, and it could also come from share repurchases at dislocated prices. We will make sure we have enough firepower to support business expansion and then deploy buybacks in a flexible way based on liquidity and the price we trade. It will be dynamically balanced.
As you mentioned, the online marketing 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. All of these are already well established. Right now, it is still early to determine the full impact. The industry is working through the details on execution. Generally, we see three broad areas where the industry will adapt. First, marketing rules are getting tighter. Things like low barriers to entry, instant disbursement, and zero-cost offers are out. The days of flashy or borderline misleading advertisements are fading. For the industry, that means higher compliance cost and some players may need to adjust their processes. Our approach has always focused on responsible lending and long-term brand building. We see this as an opportunity to raise our standards even further. Second, on user traffic flow from platforms to lenders: the rules add some friction. They require third-party platforms to refer users directly to the financial institutions' own platforms. A lot of details still need to be hammered out on implementation, so it is too early to say for sure, but we are working with financial institutions and internet platforms to restructure some of the workflow under this renewed framework. There will certainly be some adjustments to the process, and we are in close communication. Third, unbroken boundaries: the regulation reinforced that core financial decisions, such as credit approval and 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. Overall, this regulation raises the bar for the entire industry. There will be near-term adjustments, but a company like Finvolution, with strong compliance and technology infrastructure, sees it as a net positive over the medium to long term. Thanks.
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.
Thanks for taking my call. I have two questions. First, could you let us know whether domestic risk performance in April and May continued to improve from the first quarter? If credit risk improves, will transaction volume in China in the second quarter increase? Second, we noticed that the company has made segment disclosure this time. Could you please share the consideration behind the segment disclosure? Also, could you please introduce some operating indicators for the overseas market, including APR, funding costs, and default rate? And what percentage of the group's EBITDA is expected to be contributed by the overseas market by 2030? Thank you.
Thanks, Cindy. I will take your questions. On the domestic business: the improving trend continued into the second quarter. Asset quality has continued to get better. By the end of April, our day-1 delinquency had already fallen below 5%, back to where we were in July and August of last year. The sustained improvement in asset quality is a reflection of the risk management we have been building across the full credit life cycle. On the front end—customer acquisition and preapproval—we have been actively moving up the credit quality curve, offering higher limits and better pricing to those high-quality customers. On the technology side, we have been leveraging large language models to refine risk analysis, fraud detection, and intelligent post-loan collections, which has meaningfully lifted both business efficiencies and asset quality. As asset quality stabilizes, we have selectively raised our appetite in the second quarter. We are now running a diversified approach backed by AI models. For high-quality existing borrowers, we are offering more credit limit at a controlled pace, and we are also selectively offering credit to a wider group of customers of reasonable credit quality to expand our potential customer pool. We are making progress on sustaining the first-quarter growth momentum into the second quarter, and we will keep a close eye on the macro environment and our early risk indicators. We stay focused on high-quality growth and continue to balance volume, risk, and profitability. Okay? Now, your next question is about the overseas business. It is a multi-part question, so I will break it into pieces. First, about overseas operating metrics: we will not break out APR, funding costs, or default rates by market because each market is very different in terms of interest rates and borrower profiles. But I will give you some high-level guidance. Compliance is always our first priority; we strictly follow local pricing rules. At the same time, moving toward higher-quality customers gives us the flexibility to offer different prices. Take buy-now-pay-later as an example: it helps us reach more prime customers. For funding cost, more institutions recognize our asset quality. Our funding partners grew from five in 2024 to 18 today, which is continuously optimizing our funding cost. For delinquency rates, as we upgrade customer quality and advance our risk capabilities, risk metrics are improving across all markets. We continue to aim to progressively bring these down going forward. The second part is about EBITDA contribution for 2030: I think it is still too early to guide on that because it depends on many variables—the contribution from our China business, accounting rule impacts, and the pace of overseas business. But for 2026, we have a very clear target.
Excuse me. This is the operator. The speaker is experiencing some technical difficulties. Please continue to stand by. The conference will resume shortly. Gentlemen, the speaker is experiencing some technical difficulties. Please continue to stand by. Excuse me. This is the operator. Please continue from the second part of the answer. Thank you.
Hi, Jasmine. Can you hear us now? Please continue. Okay. If you look back over the past few years, you will see a very careful roadmap: we clarify our strategy, execute it, deliver results, and report them. The segment disclosure is a major milestone in that ongoing narrative. When we look back at our international journey, it goes like this: Step 1, prove and replicate the operating model. We first proved the viability and profitability of our business model in Indonesia—this was our first zero-to-one breakthrough in overseas markets—and then we replicated the success in the Philippines. Step 2, we set a long-term goal and delivered steadily. As our overseas business took share, we formulated a group strategy to guide operations and growth with local excellence and a global outlook—our LEGO+ strategy. We also clearly laid out the goal of reaching 50% overseas revenue by 2015. We are already at 30% today—steadily on track. Step 3, a full strategic upgrade to LEGO+: as we expanded into developed markets like Australia, we made a fundamental upgrade to what we call LEGO+. We moved from being a collection of local wings to an integrated platform with compounding platform-level advantages. Under this framework, regional experience, product structures, risk capabilities, and funding networks that were validated in market can be systematically used and migrated to new markets. That has greatly accelerated and de-risked new market entry. The next step was the formal segment disclosure. Now we truly run a business that is both high-growth and profitable on its own. That is the right time to provide separate disclosure for better understanding of the value in our business. This segment disclosure is a natural link in our overseas story. It ties together what we have done and where we are headed. It is the success of our LEGO+ strategy to date and it provides a transparent window into the high-quality global growth we are building for the future. In the coming years, you will see that our overseas engine is not only fast but also increasingly profitable, with unit economics that are continuously improving. Okay. Thank you, Cindy.
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 am from CICC. I have a question regarding overseas market expansion. Now that our overseas business has achieved profitability, what will be the key drivers for its sustained growth? Could you also share your outlook for this business? Thank you.
Thanks, Yujie. That is a good question. Our overseas business continues to deliver strong and resilient growth. Over the past five years, from 2020 to 2025, overseas transaction volume grew at a 69% CAGR. In the first quarter of this year, despite the seasonally slow period, we still delivered solid results: revenue grew 35% year over year with adjusted EBITDA up 87%. Overseas business is now the group's second-largest growth engine. The core driver behind this growth is a dual flywheel loop we have built as a data-driven platform. With over 56 million registered users, our growing data pool sharpens our risk models. 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, we are graduating from the early investment phase and are now profitable. In Indonesia, after fee adjustments in the past years, growth has resumed. The first quarter transaction volume grew over 30% year over year. Our approach is to proactively pursue higher-quality customers and continue to gain traction with our offline buy-now-pay-later product—it is a direct result of that strategy. In the first quarter, offline buy-now-pay-later volume doubled from last year. In the Philippines, we proactively adjusted our lending pace in the first quarter ahead of the new interest rules taking effect in the second quarter. Even so, transaction volumes still grew on a double-digit year-over-year basis. We also broadened our funding sources with one new international bank, a clear recognition of our asset quality. For the Australian market, we are systematically deploying our fintech expertise and risk management capabilities, automated systems, and funding capacity from the group. In 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. Looking ahead, as our business scales, the flywheel loop will accelerate. Our long-term vision is to become a global example of a technology-driven inclusive financial platform. Operating on multiple fronts globally comes with challenges, but with our mature tech model and operational agility, we are very confident about the journey ahead.
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, Jasmine. Thank you once again for joining us today. If you have any further questions, please feel free to contact our IR team. Thank you so much.
That does conclude today's conference call. You may now disconnect your lines. Thank you.