FINV

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 prepared 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, Yam Cheng, Head of Capital Markets for the company. Yam, please go ahead.

Thank you, Desmond. Hello, everyone. Welcome to our first quarter 2026 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 access 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 US 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 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. 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'll now hand over to our CEO, Tim. Tim, please go ahead.

Thank you, Yam. Hello, everyone. When we closed out 2025, we said 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 disciplined 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 continue to scale with its own strength. 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 stand 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. Credit risk is finding its way back to a healthier baseline. Vintage delinquency eased by 30 basis points. Day one 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, some players pulled back. We selectively acquired more high-quality customers at compelling cost. Conversion improved, acquisition costs came down. 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 I walk through our overseas business. Our overseas market segment is a regional platform that learns, compounds, and transfers. Under our LEGO+ framework, the capability we build in one market are deliberately designed to flow into the next. That means risk infrastructure, product architecture, customer strategy, funding relationships. All 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 rapidly. In the Philippines, we deliberately moderated origination ahead of new interest rate regime, taking effect in the second quarter, a measured 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. Australia 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 proprietary risk infrastructure, deploying credit models and decisioning rules tailored for the Australian consumers. Early results are there, sharper risk detection, tighter 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-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. We are just getting started. Community. Our longstanding community engagement programs continue to make an impact this quarter. Our micro business support program further expanded its reach this quarter, opening eligibility to retired athletes who run their own business in China. Since 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 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 standing on its own with growth and profit, 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.

Thanks, 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 a business with its own scale, profitability, and trajectory. Reported alongside our China operations, the two tell a clearer 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, 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 business 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 of the segments. China. The macro backdrop was broadly stable. GDP growth of 5%. Consumption sentiment holding safe ground. Our China business continues to work through the reset and begin in the second half of 2025.

Loan origination volume was largely flat quarter-on-quarter. Given Q1 seasonality, this is a resilient outcome. Net revenue coming 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 default 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 healthier 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 RMB 47.5 million, up 87% year-over-year. More importantly, all three markets contributed to this profitability. The deeper picture is seeing 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 to better quality borrowers. This is not a collection of one-off products. It's a consistent push toward higher quality portfolio composition. In Indonesia, offline buy now, pay later remains the primary growth engine despite Ramadan, a seasonally slow period. Both transaction volume and loan balance grew 5% sequentially. Customer quality improved and ARPU held steady. Even as headline PMI eased modestly to 50.1.

Unique borrowers reached 3.2 million, nearly five times the level of the same period last year. Second, regulator preparedness as a 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 refined 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're 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 30% quarter on quarter to RMB 547 million, offset by 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 repurchase and dividends. Recently, our Board of Directors approved our eighth annual dividend in the amount of $0.306 per ADS, reflecting a DPS increase of 10.5% year-over-year.

This dividend was distributed to May 7th, 2026, bringing our total dividend distributions to shareholders for fiscal year 2025 to $74.5 million. As of the end of April, we have deployed $54 million towards share repurchase, reflecting our conviction in our business and the commitment to shareholders. Outlook. For full year 2026, we reiterate our revenue guidance in the range of RMB 11.5 billion-RMB 12.9 billion. We are on track toward our 2030 ambition, 15% of group revenue for overseas markets. To conclude, China continues to provide a resilient foundation and it's steadily finding its footing. Overseas is scaling profitability 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 one and one 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. The first question comes from the line of Xiaoxiong Ye from UBS. Please go ahead.

Good morning. Thank you for the opportunity. Two questions. First, on buyback, we are glad to see the company has maintained its pace of buyback in Q1 similar to previous quarters. Can you give us some color in terms of the outlook, including the pace for your buyback in coming quarters? Second question on the regulatory outlook. We have seen several new regulatory documents coming up in past several months, including the latest document, which is so-called the management rules on the online marketing of financial products. Could you share with us what impact could this regulation document bring to your day-to-day operations, and how would the company react to mitigate the impact?

Okay. Thanks. I will take your first question, and the team will take your second question. Your first question is about the buyback.

On buyback execution side, as you have seen, we have been really at a pretty active pace since the fourth quarter last year. We did around $14 million in the fourth quarter. The momentum has carried into 2026. In the first quarter, we executed another $39 million. By the end of April, we have added another $15 million. The total amount this year is about $54 million. The remaining capacity in our current program stands at about $20 million. With that as the backdrop, our board recently approved a new $150 million program and also lasts for two years. It's quite similar to the two programs we did in 2023 and 2025. 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.

We will make sure we have enough firepower to support the business expansion and then deploy the buybacks in a more flexible way based on the liquidity and the price we trade. It will be dynamically balanced.

Hi, Alex. As you mentioned, the online marketing for 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. Some of these 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. Generally, we see three broad areas where the industry will adapt. First, marketing rules are getting tighter. Things like low barrier to entry and instant disbursement and zero costs are out.

The days of flashy, borderline misleading advertisements are fading. For the industry, that means higher compliance costs, and some players we think may need to make some adjustments to 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 a platform to lenders. The rules add some friction. 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. It's too early to say for sure. 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. We are in close communication. Third, on business boundaries.

The regulation reinforced that core financial decisions such as credit approval and risk assessments 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 raised the bar for the entire industry. There would be adjustments near term. FinVolution 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.

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 first quarter? If credit risk improves, will transaction volume in China in the second quarter would increase? We noticed that the company has made segment disclosure this time. Could you please share the consideration behind the segment disclosure? Could you please introduce some operating indicators for overseas markets including APR, funding costs, and default rate? What percentage of the group's EBITDA is expected to contribute from overseas market by 2030? Thank you.

Okay. Thanks, Cindy. I will take your questions. Your first question is about domestic business. When we look at the risk performance in the second quarter, the improving trend is continued. Yeah

The asset quality 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 better pricing to those high-quality customers. 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 lifted both the business efficiencies and asset quality. As 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. We also selectively offering a wider group of customers of reasonable credit quality to expand our potential customer pool. We are making progress 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. Stay focused on the high-quality growth and continue to keep the balance between volume, risk, and profitability. Okay. Your next question is about the overseas business. I think it's the multi-part question. I will break it into three pieces. Yeah. First is about the overseas operating metrics. Yeah.

We will not break our APR funding cost or release it by market because each is very different from interest rate to borrowing profile, but I will give you some high-level guidance for reference. APR, competitive 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 bank operator product as an example. It help us reach more prime customers. For the funding cost, more institutions will recognize our asset quality. Our funding partners grow from 15 in 2024 to 18 today, which is continuously optimizing our funding cost. For the delinquency rate, as we upgrade customer quality and advance our risk capabilities, the risk metrics are improving across all markets. We continue aim to progressively bring this down going forward. Okay.

The second part is about the EBITDA contribution. For 2030 overseas EBITDA, I think it's still too early to guide on that because it depends on too many variables, the contribution for our Chinese business, the accounting rules impact, and the pace of the overseas business. 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. The conference will resume shortly.

Excuse me, this is the operator. Please continue from the second part of the answer. Thank you.

Hi Desmond, can you hear us?

Much, please continue.

Okay. If you look back over the past few years, you will see a very clear roadmap. We clarify our strategy, execute it, deliver the results, and report them. Segmented 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 approved the viability and the profitability of our business model in Indonesia. This was our first zero to one breakthrough in overseas market. We replicate the success to the Philippines. Step 2, we set a long-term goal and deliver that steadily. As our overseas business took shape, we formulated a group strategy to guide operations and growth, our Local Excellence, Global Outlook, or LEGO strategy. We also clearly laid out the goal of reaching 50% overseas revenue by 2050.

We are now already at 30% today, steadily on track. Step 3, the full strategic upgrade to LEGO+. As we expanded into developed markets like Australia, we have 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, replicate experience, product structures, risk capabilities, and founding networks, all validated in new markets can be systematically reused and migrated to new markets. That has greatly accelerated the de-risk of new market entry. The next step, the formal segmented disclosure. Now, we truly have built a business that is both high growth and profitable on its own. That's the right time to provide separate disclosure for better understanding of the value in our business.

This segmented disclosure is a major link in our overseas story, and it ties together what we have done and where we are headed. Validates the success of our LEGO strategy to date, and it provides a transparent window into the high-quality global growth we are building for future. In the coming years, you will see that overseas engine is not only fast, but also increasingly profitable, with unit economics that keeping improving.

Okay. Thank you.

Thanku, 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'm [Yujie Jing] from CICC. I have a question regarding overseas market expansion. Now that other overseas business has achieved profitability, what will be the key drivers for its sustainable growth? Could you also share your outlook for this business? Thank you.

Thanks, Yujie Jing. I will answer this question. As previously mentioned, our overseas business continues to deliver strong and resilient further growth. Over the past five years, from 2020 to 2025, overseas transaction volume grew at 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 EBITDA up 87%. Overseas business is now the group's second-largest growth engine. The co-driver behind this growth is a dual flywheel loop we built as a data-driven tech platform.

With over 56 million registered users, our growing data pool sharpens our risk models. The 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 have graduated from the early investment phase and are now profitable. For Indonesia market, after the adjustments in the past years, growth has resumed. The first quarter transaction volume grew over 30% year-over-year, and our approach is to proactively pursue higher quality customers. The continuous traction of our offline BNPL product is a direct result of that strategy. In the first quarter, offline BNPL volume doubled from last year. In the Philippines, we proactively adjusted our lending pace in the first quarter ahead of the new interest rules. It took effect in the second quarter this year.

Even so, transaction volume still grew on double digits year-over-year. We also broadened our funding sources with one new international bank, a clear recognition of our asset quality. For the Australia market, we are systematically deploying our fintech expertise and risk management capabilities, automated system, 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 would 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 a challenge. With our mature tech moat and operational agility, we are very confident about the journey ahead. Thanks.

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.