Fin Volition Group (ticker not provided), a leading fintech company, has reported a robust financial performance for the third quarter of 2024. The company's net revenue saw a 3% year-over-year increase, reaching RMB 3.3 billion, while net income grew by 9% to RMB 624 million. Despite economic challenges, particularly in the Chinese market, Fin Volition Group's transaction volume in China for the first nine months of 2024 rose by over 4% year-over-year, totaling RMB 142.1 billion. The company's aggressive international expansion strategy has borne fruit, with international revenue expected to make up 20% of total revenue in 2024, a significant increase from just 3.7% in 2020.
Key Takeaways
- Fin Volition Group's net revenue and net income have shown year-over-year growth in Q3 2024.
- The company's transaction volume in China increased by over 4% from the previous year.
- International expansion has been successful, particularly in Indonesia and the Philippines, with substantial growth in transaction volumes.
- Investments in AI and machine learning have led to innovative solutions and cost savings.
- Risk management has improved, with a lower first-day delinquency rate and a higher loan collection recovery rate.
- The company aims to generate half of its revenue from international markets by 2030.
Company Outlook
- Fin Volition Group is confident in its strategy of "local excellence, global outlook" and aims to become the leading fintech player in the Pan Asian region by 2030.
- The company expects continued growth in China, bolstered by recent stimulus measures, and is exploring further international expansion.
Bearish Highlights
- The economic conditions in China have been challenging, although the company has managed to demonstrate resilience.
Bullish Highlights
- The aggressive international expansion has led to increased revenue contribution from international markets.
- Technological investments have improved operations and reduced costs.
Misses
- No specific misses were highlighted in the summary provided.
Q&A Highlights
- CEO Tianjin Li expressed confidence in becoming the top fintech player in the Pan Asian region.
- CFO Jiayuan Xu noted the growing consumer confidence and the expected positive momentum for the company's operations through the remainder of the year.
- CEO Tianjin Li also emphasized the importance of continued investment in customer acquisitions and user experience to maintain high-quality growth in China.
The company's results and forward-looking statements reflect a strong trajectory for Fin Volition Group as it continues to capitalize on opportunities both within China and in the broader international market. The focus on technological innovation and risk management appears to be paying dividends, positioning the company for sustained growth in the fintech sector.
Full transcript - FinVolution Group (NYSE:FINV) Q3 2024:
Conference Call Operator: Hello, ladies and gentlemen. Thank you for participating in the Q3 2024 Earnings Conference Call for Fin Volition 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 Capital Markets for the company. Jimmy, please go ahead.
Jimmy Tan, Head of Capital Markets, Fin Volition Group: Hello, everyone, and thank you and welcome to our Q3 2024 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 e mail alerts by visiting the IR section of our website at ir.finbgroup.com. Mr. Tier Zhen Li, our Chief Executive Officer and Mr.
Tianwen Xu, our Chief Financial Officer will start the call with their prepared remarks and conclude with a Q and 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 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 filings with the US Securities and Exchange Commission. The company does not assume any obligation to update any forward looking statements except as required under applicable law. Finally, we posted 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.
Tianjin Li, CEO, Revolution Group: Thanks, Jamie. Hello, everyone, and thank you for joining our earnings call. This is Tianjin Li, CEO of Revolution Group. We are happy to speak with you today. Revolution made great progress despite the purest challenging strong execution of our local excellence, global outlook, our legal strategy.
Although China's overall economic growth remained restrained in the 3rd quarter, We anticipate more sustainable improvements in the 4th quarter given the broader than anticipated stimulus virus announced in late September. Also we have made great progress towards the objective of achieving 50% of our revenue coming from the international market by 2,030. By constantly leveraging our experience in China and ongoing technological improvements, we have propelled rapid growth in international transaction volume. This has translated into higher revenue and net income contribution with international revenue contribution increasing significantly from 3.7% in 2020 to 10.3% in 2022 and expected to be around 20% in 2024. Over the years, we have also consolidated our capabilities into individual models which we can flexibly deploy while adapting to the evolving requirements of different countries.
In line with our objective of increasing our international revenues we recently strengthened our international team and invited Doctor. Sun Xiaodong to join us as our Senior Vice President for International Business. Doctor. Sun has held key positions at renowned firms such as Ant Financial International, MyBank, American Express (NYSE:AXP) and Citibank. Both of Mr.
Cui's leadership and expertise we are confident of accelerating our international business expansion and achieving new milestones. As of September 30, 2024 we have cumulatively served 32,600,000 borrowers across China, Indonesia and the Philippines. For our international markets we are proud to share that the number of unique borrowers grew from 700,000 in 2020 to 1,600,000 in 2022 and to 2,100,000 for the 1st 9 months of 2024. Also it's worthy to note the number of new borrowers were 0.63000000 in 2020, 1,100,000 in 2022 and 1,500,000 in the 1st 9 months of 2024. Validating the high percentage of new borrowers in our international business.
The acquisition of high quality borrowers across all our markets remains an important element of our strategy. As a result, the total number of new borrowers across our platform once again exceeded the 1,000,000 mark. We are very pleased to share that as we enhanced our global operations during the Q3, the number of new borrowers in international markets reached 671,000 up 60% year over year and 43% quarter over quarter. Notably the number of new international borrowers quarter. Such strong growth and has caused our execution excellence and our strategy effectiveness in driving the rapid expansion of our international business.
For the Q3 total transaction volume reached RMB52.2 billion while total outstanding loan balance reached RMB68.1 billion up 1.8% and 3.3% respectively year over year. This continued growth across other markets in which we operate validates our strategy's efficiency and sustainability. Given the low penetration rate for financial services in our international markets, We continue to enhance our holistic approach to customer acquisition with innovative marketing campaigns that capitalize on our strategic partners' resources and our local team's deep understanding of market trends. For instance, our comprehensive social media strategy continue to attract new site visitors and enhance our brand exposure. Facilitating positive word-of-mouth publicity and projecting a trustworthy image that encourage borrowers conversion.
As of the end of Q3 our total followers on major social media platform reached 2,500,000 up 21% year over year. As a tech pioneer we are leveraging tech innovation to strengthen our operations and promote the FinTech industry's integrity and security. During the Q3 Vemolution presented its detection solutions for combating deep fake voice command scams during the 33rd International Joint Conference on Artificial Intelligence in South Korea. Advancement in voice synthesis technology are making it increasingly difficult to distinguish between genuine and cloned voices, posing significant risk in terms of data security and asset protection affecting different industries. We believe that our sophisticated large language model based solutions have the potential effectively fight voice command fraud.
Subscribing our users' interest in fostering a healthy industry ecosystem. We have also integrated large language models into our loan collection recovery process which has improved our loan collection recovery rate and saved us 1,000,000 of dollars. The development of such innovative technologies is a result of our strong commitment to R and D and the annual Finvolution Technology Cup Competition, which has incubated many cutting edge solutions over its 9 year history. Looking ahead, we will continue to invest heavily in R and D to enhance service quality and operating efficiency empowered by leading technologies across our operations. Before I wrap, a brief update on our ESG efforts.
In line with our corporate commitment to financial inclusion, we continue to support the backbone of the economy by facilitating loans for small business owners during the Q3. As agile, community oriented providers of local employment opportunities, serving small business ultimately contribute to a more rapid economic recovery. During the quarter, we empowered 447,000 small business owners with loans totaling RMB15.4 billion during the quarter, up 25% year over year. In summary, we successfully navigated the 3rd quarter's challenge by capitalizing on our strength in technology, customer acquisition and retention. We also continue to attract quality talents across multiple countries which has further strengthened our R and D capabilities and we will eventually enable business process outsourcing from Indonesia and the Philippines, facilitating our expansion as we enter into more new markets, firm execution of our local excellence, global outlook strategy, continuous technological innovation and our unwavering commitment to our vision of financial inclusion continue to drive our steady progress and long term sustainable growth.
Going forward, we are confident of becoming the leading fintech player across the Pan Asian region. With that, I will now turn the call over to our CFO, Jiayuan Xu, who will discuss the operational and financial results.
Jiayuan Xu, CFO, Revolution Group: Thank you, Lee, and hello, everyone. Welcome to our Q3 2024 earnings call. Let's go through our key results for the Q3. To be mindful of the length of earnings call today, I encourage listeners to refer to our Q3 earnings press release for further details. As Li mentioned, the recent announcement of a series of border's expected stimulus measures during China's national holidays has resulted in positive growth in travel and the consumption data.
During the National Day holiday period, 765,000,000 domestic trips were made, a year over year increase of 5.9%. Domestic tourists collectively spend around RMB701 1,000,000,000, representing year over year growth of 6.3%. Alongside the trend of consumption recovery, consumer willingness to purchase houses in the 1st tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen has rebounded significantly due to favorable real estate policies. Furthermore, the manufacturing PMI rose by 70 basis points in September, reaching 49.8 points, the highest level since May. During the Q3, we observed ongoing improvement across multiple operational metrics in our China market.
For the 1st 9 months of 2024, the transaction volume in China reached RMB142 1,000,000,000 up by over 4% year over year. Other operational metrics also exhibited varied degrees of continuous improvement. Furthermore, our average of borrowing rate in China remained stable in the 3rd quarter. A strong validation of our commitment to financial inclusion, leveraging ample market liquidity and our consumer shortage of quality loan assets, we further improved our funding cost by an additional 50 bps in the 3rd quarter. Since the beginning of the year, we have improved funding cost by 190 bps, reflecting financial institutions strong recognition of our asset quality and the credit risk assessment capabilities.
Regarding risk, we achieved significant improvement in our recent day 1 delinquency rate, driving a 20 basis point improvement to 4.9% through effective use of our end to end involving credit risk assessment models. Meanwhile, our loan collection recovery rate rebounded to 88.5 percent, up 50 basis points quarter over quarter. Given our growing confidence in the acceleration of the macroeconomic recovery, we anticipate sustaining the improvement for the remainder of the year. We also maintain our expectation that vintage delinquency rate for the quarter will improve to around 2.54%. Turning now to our international expansion.
Our validated second growth driver for the 1st 9 months of the year. Internationally transaction volume reached RMB7.2 billion, up 29% year over year. Revenue contribution from the international markets grew further to RMB636 million, up 9% year over year and representing 19% of total revenues. Capitalizing on a reverse the global macro environment through effective execution of our legal strategy, we are confident in our international operations sustainability and the diversification of our business models across various countries. Let me begin with our 1st and largest overseas market, Indonesia.
This market continues to exhibited strong growth momentum with the consumer confidence index remaining above 120 points for 21 consecutive months. We expect further simulation in local consumption following of 25 basis point reduction in the benchmark 7 day reserve report rate to 6%. In September 2024, motorbike sales in Indonesia increased by 3.7% year over year, reaching 529,000 units. After several months of business adjustments and attracting high quality borrowers under the new pricing cap, we are pleased to announce that our transaction volume in Indonesia has resumed growth. Reaching RMB1.8 billion, a security increase of 11%.
This quarter also marks one of our best performing quarters ever in terms of transaction volume. Following the completion of our recent business adjustments, we forged a new strategic partnership agreement with SuperBank, a leading digital bank in Indonesia, highlighting the trust and the recognition we have earned from our local financial institutions. To date, we have entered into strategic partnerships with multiple renowned digital and the traditional local financial institutions, including Silver Bank, Bank Jago, Bank, OCBC Bank and Palmetto Bank among others. I also want to highlight that after several quarters of preparation, we have successfully acquired a large majority stake in a local multi finance company, which will enable us to diversify our products into non cash loans. This in turn will empower us to expand our presence to some more borrowers.
The completion of this acquisition underscores regulators' trust and confidence in our local operations. In the Philippines, our 2nd international market, robust macroeconomic conditions are boosting consumption. In September, the purchase managers index PMI reached 53.7 points, reflecting year over year growth of 6% and a sequential increase of 5%. This macro trend also drove a reduction in the Philippines unemployment rate to 3.7% in September 2024, down from 4.5% during the same period last year. Notably, private consumption in the Philippines has accounted for over 70% of its nominal GDP for over a decade, serving as the country's primary growth engine, boosted by steady remittance inflows and a strong labor market.
Our Philippines operations continue to outperform expectations with the transaction volume growing 137% year over year and 24% sequentially to RMB RMB838 million. It's also worth noting that as contribution to international transaction volume grew to about 32% for the quarter. We have established robust financial and operational partnerships in the region and remain highly confident in our ability to sustain rapid growth here. For example, we're strengthening our buy now, pay later BNPL partnership with TikTok. We have also initiated a pilot project with another leading e commerce platform to diversify our customer acquisition channel.
Furthermore, we have ample funding from leading local financial institutions such as Meyer Bank, C Bank and Union Bank to support our growth. These solid partnerships have enabled us to capitalize on the vast opportunities in the Philippines market. Given the accomplishments we have achieved in our international markets, we are confident we can replicate this success in additional countries and the regions by leveraging our in-depth experience and the technological advantages. Now turning to our financial metrics. This quarter's operational expenses resulted in the solid financial performance.
Net revenue for the quarter reached RMB3.3 billion, marking a 3% increase year over year and a 3% increase sequentially. Net income was RMB624 1,000,000 representing a 9% increase year over year and a 13% increase sequentially. Meanwhile, sales and marketing expenses rose by 6% year over year to RMB560 1,000,000 as we continued to strengthen efforts to acquire new borrowers of high quality in both China and international markets. Furthermore, our leverage ratio defined as risk bearing loans divided by shareholders' equity remained low at 3.2 times, reflecting potential growth opportunities as the macroeconomic environment stabilize. Our total liquidity position consisting of cash and cash equivalents plus short term investments reached around RMB9 1,000,000,000 up 13% from December 2023, showcasing our reverse balance sheet that's well able to support our business growth and exploration of new opportunities, while consistently increasing shareholders' returns.
Before I conclude, let me briefly update you on our share repurchase program. During the Q3, we deployed around US24.3 million dollars to repurchase around US4.6 million ADS on a secondary market. For the 1st 9 months of 2024, we deployed US81.1 million dollars to repurchase our shares in the market, up 23% year over year. As of September 13, 2024, we had cumulatively returned US361.1 million dollars and US325 million dollars to our shareholders in the form of share repurchase and dividend distribution respectively, for a total return of US686.1 million dollars to our shareholders, underscoring our strong commitment to enhancing shareholders' value. In summary, our reverse results for the Q3 demonstrated the effectiveness of our local excellence global outlook strategy, empowered by our Android business model and the technological advantages.
Given consumers' growing confidence in an accelerating economic recovery, we believe our operations will continue to build positive momentum throughout the remainder of the year. We will remain committed to seizing the global market's vast opportunities and sharing our achievements with all shareholders through sustainable business growth and our strengthening capital return program. That concludes my prepared remarks. We will now open the call to the questions. Operator, please continue.
Conference Call Operator: Thank you. Today's first question comes from Alex Yee with UBS. And I do apologize, I did want to mention that for the benefit of all participants on today's call, And our first question today comes from Alex Yi with UBS. Please go ahead.
Alex Yee, Analyst, UBS: Good morning, management. So thanks for taking my question. So my first question is on China business. So we have seen your loan volume was up by 7% Q on Q. So the growth has rebounced from 1% Q on Q last quarter.
So I'm wondering what drove the loan volume pickup during the quarter, you said an inventory wide trend? And then also going into Q4, have you seen any sort of pickup in credit demand and loan allocation in October November? And secondly is on your international business. So after the price ceiling adjustment this year, do you expect a further decline into next year? And then also we also see this continued investment in sales and marketing and other expenses.
So I'm wondering when do we expect to see the Indonesian business to start generating more meaningful profits? Thank you.
Jimmy Tan, Head of Capital Markets, Fin Volition Group: Hello Alex, let me do the translation for Alexis. Since the second half of twenty twenty the industry has experienced some silica fluctuations and the industry is facing the challenges of a size reduction. However Finvolutions with its steady risk performance has still managed to achieve a growth rate of above 4% in transaction volume for the 1st 9 months of the year with transaction volume in the Q3 reaching RMB49.5 billion up 6.7% sequentially. And during the Q3 from 2 different perspectives, number 1, we have observed that customer applications has increased compared to the 2nd quarter reversing the trend of a continuous weak applications during the first half. Customer application in the 3rd quarter increased by 12% sequentially.
And another view is that the continued investment in new customer acquisitions enable us to have a leading status in the industry. Historically, our percentage of new customers have constantly been above 10% and during the Q3 this percentage further grew to 14% reaching 400,000 new borrowers. Investment in high quality borrowers is critical for
Translator/Interpreter: us to
Jimmy Tan, Head of Capital Markets, Fin Volition Group: achieve continued growth. I believe you guys have also noticed the stimulus package announced in late September. We have observed that the daily transaction volume has shown some improvement along with an increase of around 10% in application rates and entering into late October customer application has gradually slowed down and returned to the September levels but still it has shown a significant improvement compared to the first half of the year. And we believe the trend exhibited in the Q3 is able to continue into the Q4. The September end bolder than anticipated stimulus greatly motivated us.
It provides us with greater confidence regarding the development of our China market. As you know we have been maintaining high quality growth in our China market and through continued investment in areas such as customer acquisitions and user experience. We believe the impact of such investment will be multiplied as the stimulus package gradually materializes and during this period we all should have some patience. Okay, Alex, let me do the translation for this question as well. In 2024 we have been through a price reduction process from 0.4% to 0.3% on a daily basis.
And we have completed the transition to better quality borrowers and upgrade our credit risk assessment models in nearly 5 months. Transaction (JO:TCPJ) volume has since resumed growth and up by 10% sequentially. And throughout these several times of price reduction, we have accumulated sufficient experience in handling interest rate reduction and currently we didn't receive any notifications for further price decline. We are still operating at the current level of 0.3 percent although there might be further information in the Q4. And under the stable pricing environment, we believe we are able to contribute more meaningful profits for this Indonesia business, for the cash flow
Translator/Interpreter: business.
Conference Call Operator: Thank you. And our next question today comes from Cindy Wong with China Renaissance. Please go ahead.
Cindy Wong, Analyst, China Renaissance: Thanks for taking my question. I have two questions here. First one is the funding cost has been lower 190 bps this year. Do you think is there any room to improve in 4th quarter? And second question is the number of the new borrowers in the international market has surpassed China for the 2nd consecutive quarter.
So can you talk about your Indonesia and Philippines customer acquisition strategy and customer acquisition cost? And how would that impact your sales and marketing expenses? Thank you.
Jimmy Tan, Head of Capital Markets, Fin Volition Group: Hello, Cindy. Let me do the translation for Alexis. I believe you guys have seen that our funding cost in China has improved a lot since the beginning
Translator/Interpreter: of the year, reflecting the market recognition in our
Jimmy Tan, Head of Capital Markets, Fin Volition Group: technologies and asset quality. Remaining of the year. Hello Cindy, let me do the translation. As mentioned by Alexis, we have spent the 1st 5 months to transit to better quality borrowers in Indonesia and has since resumed growth in the Q3. And along this process we have been expanding our base of local funding institutions and now we have been working with 7 different partners such as C Bank, OCBC among JAGO among others and all our loans facilitated in Indonesia are facilitated by these local players.
We have also acquired a multi finance license validating the recognition and trust from local regulators. We have also established cooperations with renowned local partners such as OPPO and OOP. And you have also noticed that our customer growth has been very robust in both year over year and Q over Q growth. And take rate is also stable and like Alexis mentioned there will be much more meaningful profit in 2025. Cindy, let me do the translation.
The Philippines macro is robust and we have achieved great operational results. For example we have established strong partnerships with local financial institutions as well such as C Bank and Mya Bank and today about 60% of our loans are being facilitated through local financial institutions. In addition, we have established strong cooperation with local partners such as TikTok Shop and today around 20% of our transaction volume is from them and we expect it to grow further in 2025. The business operations performance in Philippines is beyond our above our expectation with strong growth both in year over year and Q over Q comparisons. And also we expect Philippines operations to contribute profits in 2025.
Cindy, let me do the translation for this one as well. Okay, since entering the Indonesian market in 2018, right, we have been doing international business for 7 years. And as you can see along all these years, our operational metrics such as risk customer acquisition has all been improving. And currently, the revenue contributions for international operations has reached around 20%. And we have also been proactively planning and deploying resources into more new countries and we will share more when there is more concrete news.
Some of the ideas is that when we enter into a new country, we will focus on the cash loan first and then adapt to local regulators, regulations and eventually upgrade to better borrowers and secondly, we will then adapt into loans with consumption scenarios and by 2,030 we have a target of achieving 50% of our revenue from international business and provide more borrowers with better services.
Conference Call Operator: Thank you. And our next question today comes from Yada Li with CICC. Please go ahead.
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