Hello, ladies and gentlemen. Thank you for participating in the third quarter 2024 earnings conference call for FinVolution Group. [Operator Instructions] 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.

Hello, everyone and welcome to our third quarter 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 email alerts by visiting the IR section of our website at ir.finvgroup.com. Mr. Tiezheng Li, our Chief Executive Officer; and Mr. Jiayuan Xu, our Chief Financial Officer, will start the call with their prepared remarks and conclude with a Q&A session. During this call, we will be referring to several non-GAAP financial measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation, or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures and reconciliation 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 U.S. 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. Tiezheng Li. Please go ahead, sir.

Thanks, Jimmy. Hello, everyone, and thank you for joining our earnings call. This is Tiezheng Li, CEO of FinVolution Group. We are happy to speak with you today. FinVolution made great progress despite the perilous challenges through strong execution of our local excellence, global outlook, our LE-GO strategy. Although China's overall economic growth remained restrained in the third quarter, we anticipate more sustainable improvements in the fourth quarter given the bolder than anticipated stimulus measures 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 2030. 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 Dr. Sun Xiaodong to join us as our Senior Vice President for International Business. Dr. Sun has hold key positions at renowned firms such as Ant Financial International, MYbank, American Express, and Citibank. Bolstered by Mr. Sun'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 32.6 million borrowers across China, Indonesia, and the Philippines. For our international markets, we are proud to share that the number of unique borrowers grew from 0.7 million in 2020 to 1.6 million in 2022 and to 2.1 million for the…

Thank you, Li, and hello everyone. Welcome to our third quarter 2024 earnings call. Let's go through our key results for the third quarter. To be mindful of the length of earnings call today, I encourage listeners to refer to our third quarter earnings press release for further details. As Li mentioned, the recent announcement of a series of borders expected stimulus measures during China's national holidays has resulted in positive growth in travel and consumption data. During the national day holiday period, 765 million domestic trips were made, a year-over-year increase of 5.9%. Domestic tourists collectively spend around RMB 701 billion, representing year-over-year growth of 6.3%. Alongside the trend of consumption recovery, consumer willingness to purchase houses in the first-tier cities such as Beijing, Shanghai, Guangzhou, and Shenzhen has rebounded significantly due to favorable real estate policies. Furthermore, the manufacturing PMI rose by 17 basis points in September, reaching 49.8 points, the highest level since May. During the third quarter, we observed ongoing improvement across multiple operational metrics in our China market. For the first 9 months of 2024, the transaction volume in China reached RMB 142 billion, up by over 4% year-over-year. Other operational metrics also exhibited vary degrees of continuous improvement. Furthermore, our average borrowing rate in China remained stable in the third quarter, a strong validation of our commitment to financial inclusion. Leveraging ample market liquidity and a continuous shortage of quality loan assets, we further improved our funding costs by an additional 50 bips in the third quarter. Since the beginning of the year, we have improved funding costs by 190 bips, reflecting financial institutions' strong recognition of our asset quality and credit risk assessment capabilities. Regarding risk, we achieved significant improvement in our recent day 1 delinquency rate, driving a 20 basis point improvement…

[Operator Instructions] Our first question today comes from Alex Ye with UBS.

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 rebounded from 1% Q-on-Q last quarter. So I'm wondering what drove the loan volume pick up during the quarter. Is that an industry-wide trend? And then also going to Q4, have you seen any sort of pick up in credit demand and loan allocation in October and November? And secondly, it's 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 there's continued investment in sales and marketing and other expenses. So I'm wondering when do we expect to see the Indonesia business to start generating more meaningful profits?

[Foreign Language]

Alex, let me do the translation for Alexis. Since the second half of 2023, the industry has experienced some silica fluctuations and the industry is facing the challenges of a size reduction. However, FinVolution with its steady risk performance has still managed to achieve a growth rate of above 4% in transaction volume for the first 9 months of the year with transaction volume in the third quarter reaching RMB 49.5 billion up 6.7% sequentially. And during the third quarter from 2 different perspectives, we have -- number 1, we have observed that customer applications has increased compared to the second quarter reversing the trend of a continuous weak applications during the first half. Customer application in the third 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 third quarter this percentage further grew to 14% reaching 400,000 new borrowers. Investment in high quality borrowers is critical for us to 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 third quarter is able to continue into the fourth quarter. 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.

[Foreign Language]

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 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% although there might be further information in the fourth quarter. And under the stable pricing environment, we believe we are able to contribute more meaningful profits for this Indonesia business for the cash loan business.

And our next question today comes from Cindy Wang with China Renaissance.

[Foreign Language] I have two questions here. First one is the funding cost has been lower 190 bips this year. Do you think is there any room to improve in fourth quarter? And second question is the number of the new borrowers in the international market has surpassed China for the second 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?

[Foreign Language]

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 of the year reflecting the market recognition in our technologies and asset quality. We believe there's still room for improvement in the fourth quarter. However, the improvement rates might be smaller compared to the remaining of the year.

[Foreign Language]

Cindy, let me do the translation. As mentioned by Alexis, we have spent the first 5 months to transit to better quality borrowers in Indonesia and has since resumed growth in the third quarter. 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 SeABank, OCBC Bank 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.

[Foreign Language]

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 institution as well such as SeABank and Maya Bank and today about 60% of our loans are being facilitated through local financial institutions. In addition, we have established strong cooperations 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.

[Foreign Language]

Cindy, let me do the translation for this one as well. Okay, since entering the international 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’ll 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 consume – on loans with consumption scenarios. And in 2030 – by 2030, we have a target of achieving 50% of our revenue from international business and provide more borrowers with better services.

And our next question today comes from Yada Li with CICC.

[Foreign Language] Then I'll do the translation. The question is regarding the shareholders return. Do you expect to deliver more value to the shareholders in 2025? And how the company balance long-term growth and total shareholders return? That's all.

[Foreign Language]

Yada, let me do the translation. The company has prioritized the long-term return of shareholder value. On one hand, we are creating value through rapid sustainable growth of our business. On the other hand, we have established a leading capital return program consisting of share repurchases and dividends. And since 2018, we have launched our dividend and repurchase program for 6 consecutive years, the earliest in the industries. And during this period, we have cumulative return RMB 618 million to our shareholders which is around 43% of our market cap. And during the third quarter, we have deployed USD 24.3 million dollars for share repurchases up 24% year-over-year. And for the first 9 months of the year, we have cumulatively repurchased deployed $81 million up 23% from the same period last year. And we have already utilized 75% of our third share repurchase program by the end of October. Also returning value to shareholders through high quality growth in both international market and China market, our principle is that our high – we will maintain high quality growth and also, we are confident of distributing dividends at a stable growth rate for our shareholders.

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

Hello. Thank you all for joining our earnings conference call today. If you have any further questions, please feel free to contact our Investor Relations team. Thank you all. Have a nice day.

Thank you. This concludes this conference call. You may now disconnect your line and have a wonderful day.