Yahoo Finance

Jiayuan Xu

Thank you, Li and hello, everyone. Welcome to our fourth quarter and the full year 2024 earnings call. Let's go through our key results for the fourth quarter. To be mindful of the length of our earnings call today, I encourage listeners to refer to our fourth quarter and the full year earnings press release for further details.
China's recovery was uneven throughout 2024 and the fourth quarter was no exception. While China's GDP expanded by 5% for the full year, various uncertainties persist and the consumption recovery remains low. On a brighter note, data from the recent Chinese New Year holiday show that 501 million domestic trips were undertaken, representing a year over year increase of 5.9%. Total spending on domestic travels amounted to CNY677 billion, marking a year on year rise of 7%.
We successfully navigated these [turbulences] by capitalizing on our operational and the tech [strength] to achieve consistent growth throughout 2024 and beyond. Our loan application rate remained strong following the end of September's [stimulus]. As a result, during the fourth quarter, transaction volume and outstanding loan balance further increased to CNY54 billion and CNY69.8 billion up 8% and 6% respectively year over year.
We continue to drive progress across multiple operational metrics in our China market during the fourth quarter. Cumulatively, we have served the 26.8 million borrowers in the China market, with the number of unique borrowers in the fourth quarter remaining steady at 2.1 million. Our consistent investments in IND led to a further improved delinquency rate of 4.7% in recent weeks. While low collection recovery rate remained stable at 89%. Given the ongoing recovery in consumer confidence and our holistic enhancement to technology and operational systems, we expect vintage delinquency for the quarter to improve to around 2.4%.
Moving on to our second growth driver, our international markets, which continue to grow rapidly and deliver and increase the revenue contribution at the group level. As of the end of the fourth quarter, we have a cumulatively served around 7 million borrowers in international markets. Notably, we have acquired around 2.2 million new borrowers in 2024 from a variety of channels up 61% year over year.
For the first time, international transaction volume exceeded CNY10 billion for the full year, while standing loan balance reached CNY1.7 billion, up 28% and 31% respectively year over year. Specifically for the fourth quarter, international transaction volume reached CNY2.9 billion, up 26% year over year and [the 7%] sequentially.
Our strong operational performance drove international revenues to contribution for the full year of 2024 to CNY2.5 billion, up 19% year over year and representing close to 20% of the total revenue. Notably, during the fourth quarter, revenue from international markets further expanded to CNY739 million, up 23% year over year and accounted over 22 -- 21% of total revenue.
Let's look more closely at our first and the largest overseas market, Indonesia. For the full year of 2024, Indonesia's economy grew over 5% compared to 2023, driven primarily by increased household spending and investment. Notably the consumer confidence index in Indonesia has remained above 120% for two consecutive years. In December 2024, expectations of a more favorable macro economy and the stabilized regulatory environment following Indonesia's national election boosted Indonesia's manufacturing PMI to 51.2 points, marking it first return above 50 points since June.
For the full year of 2024, motorbike sales in Indonesia increased by 1.5% year over year to 6.3 million units. I also want to highlight that in January 2025, Indonesia joined BRICS, a strategic move that will allow the nation to leverage various economic opportunities and the partnerships, accelerate its development agenda, diversify trade, and attract crucial investments, empowering its domestic economy, and its position in the global trade landscape.
Indonesia's interest rate reduction implemented in January 2024 poses some challenges to our business. However, we quickly adjusted our operations to adapt to the new interest rate cap, successfully completing the transaction within the first five months of the year. During the second half of 2024, our Indonesia transaction volume grew to CNY3.7 billion, up 11% compared to the first half of the year.
We are also proud to share that with the successful transition, we continue to attract new funding partners such as Super Bank to support our request for financial inclusion in Indonesia. To date, we have 10 solid and active founding partners in the country. With the new business model firmly in place, we are confident of returning to accelerated goals in the country.
I also want to highlight that after several quarters of preparation, we have successfully acquired a large majority stake in the local multifinance company which will enable us to diversify our products into offline consumption loans with different scenarios such as mobile and electronic devices.
This in turn will empower us to expand our presence to serve more borrowers. The completion of this acquisition underscores the regulators' trust and the confidence in our local operations. The Philippines, our second international market, achieved an economic growth rate of 5.6% for 2024, positioning it as one of the fastest growing economies in the Asia Pacific region.
As manufacturing PMI has remained above 50 points for three consecutive years, and the unemployment rate declined by 80 bps from 3.9% in October to 3.1% in December 2024. Reflecting sustained individual activity, heightened production, and healthy job creation, a youthful and the growing population, stable inflation, and the consistent [remittance] for overseas Filipino workers are also following consumer demand.
Also final consumption expenditure recorded the highest year on year growth rate at 9.7% in 2024. Together, these conditions create a solid foundation for sustained economic growth.
Our operations in the Philippines continue to grow rapidly in 2024, with transaction volume reaching CNY3.1 billion for the year, up 138% year over year. We are the first platform in the country to introduce the concept of institutional funding through our loan facilitation model in 2024 with a list of reliable trusted partners.
We are also proud to share that the percentage of the loan facilitated by local financial institutions has grown from nearly 10% in the first quarter of 2024 to around [17%] in the first quarter of 2024. Going forward, we are confident of maintaining high double digit growth in the Philippines as we cement our roots in the country, for expand our funding sources and diversify our business models.
As part of our strategy to translate to better quality borrowers, our exciting initiative we have undertaken in the Philippines is our cooperation with mainstream e-commerce players such as TT and other leading players to promote an operator model.
By directly embedding evolutions fintech capabilities in the e-commerce platforms payment interface, we gradually broaden our reach while also facilitating financial inclusion for more Philippines consumers. In 2024, the [bine operating] model contributed 19% of Philippines transaction volume, and we expect a further contribution from this segment in 2025.
Now turn to our financial metrics. This quarter's operational excellence resulted in a solid financial performance. Net revenue for the fourth quarter CNY3.5 billion marking a 7% increase in over a year and a 6% increase sequentially. Net income was CNY681 million representing a 29% increase year over year and a 9% sequential increase. Meanwhile, sales and marketing expenses rose by 8% year over year to CNY532 million as we continue to stress efforts to upgrade new borrowers of high quality in both China and the international markets.
Furthermore, our leverage ratio defined as risk bearing loans divided by shareholders equity, improved to around 3 times reflecting potential growth opportunities as the macroeconomic environment stabilize. Our total liquidity position consisting of cash and the cash equivalent plus short-term investments remains strong at CNY7.5 billion, showcasing a robust balance sheet that is well able to support our business growth across multiple countries while consistently increase shareholder return.
Before I conclude, a few words about our ongoing efforts to ensure shareholders value. Since 2018, we have continuously returned value to our shareholders in the form of share repurchase and dividends.
Recently, our Board of Directors approved our 7th annual dividend in the amount of USD0.277 per ADS, reflecting a DPS increase of 17% year over year. After thought for consideration, our Board of Directors have also approved the revision of dividend policy from no less than 10% of net income to between 20% to 30% of net income for 2025 onwards, validating the company's commitment to enhancing shareholders value.
In addition, our Board of Directors have also approved the evolution for share repurchase program of up to USD150 million. We believe the current environment presents an opportunity to further increase shareholder value and shares repurchase as an effective capital management tool to achieve our goal.
For full year 2024, we returned a total of over USD160 million to our shareholders consisting of USD70 million in dividends and the USD90 million through share repurchase, representing a total payout of 49% of 2024 net income. As of December 31, 2024, the company has cumulatively returned the USD765 million to our shareholders, demonstrating our consistent commitment to enhancing shareholder value.
In summary, our business continued to grow and thrive in 20e4 through firm execution of our local excellence, global outlook strategy. Despite an uneven micro environment for 2025, we will remain committed to expanding our international presence and diversifying our product offering by providing outstanding service to a growing consumer base at home and abroad.
As shared previously, we have established a target of achieving 15% revenue contribution from international markets by 2030. In lieu of this, we would like to introduce our revenue guidance for 2025 to be in the range of around CNY14.4 billion to CNY15 billion, representing an increase of between 10% to 15% year over year.
So that concludes my remarks. We will now open the call to the questions, operator.

Question and Answer Session

Operator

(Operator Instructions)
Xiaox Ye, UBS.

Xiaoxiong Ye

(spoken in foreign language)
So I'll translate for my question. First question is about your international business. So we are glad to see, the company's target of, international revenue contribution to raising to 50% of the group by 2030. So, just want to have some more color in terms of the operating cost space for the overseas segment. For example, what's the total OpEx for this, and then the thematic growth for this year and down to the bottom line contribution for this year.
Second question is about your shareholder return policy. So we have noted the company has end up paying about 50% total payout in last year, consisting of about 20% in cash and 30% buyback. And we have noticed that the pace of buyback has accelerated visibly from previous year. So how should we think about the total payout going forward, for this year and then the [split between] cash and buyback.

Jiayuan Xu

Okay, thanks Xiaox. I will take your questions. Your first question is about our overseas business. Thanks for attention for our ambitious target by 2030. And then you can see we have shift our guidance from the [origination] to revenue. This adjustment is closely aligned with our long term strategy we'll go by 2030.
So, the revenue guidance not only demonstrates our confidence in the future development of our international business, but also it provides the shareholders with a more transparent and specific room map in understanding the company's long term strategic growth.
And then in terms of the overseas operation costs and the profit contributions, well, they were subject to the different stages of the business. So the [proportion] of the operation cost were decreased where our business operations enter the mature stage, and then the unit economics will improve as well.
I will give you some examples. In 2024, we achieved a profit of $5 million in Indonesia. And in 2025, we expect that the profit of Indonesia will be at least double. And for our Philippines market, it was at loss in '24 and we expect it will begin to make profit graduate from '25. So the proportion of profit from these two countries will increase significantly in 2025.
But also, we will accelerate our overseas expansion. So it will require the initial investment in the early stage, and there we'll have some material impact on our bottom line. But generally speaking, if we are looking ahead to the 2030 strategy, the percentage of the international profit contribution is sure to rise and the pace of the increase should be tied to the development of our [fit].
And your second question is about our shareholder return. We are committed to delivering the long term sustainable returns to our shareholders. We aim to create the value for our shareholders primarily through the sustainable and rapid growth of our business. And also we are exploring to utilize the capital tools to reward our shareholders.
Although we have mentioned, since 2018, we have consecutively distributed the dividends and conducted the share buybacks for seven years, [it has make] us one of the earliest in the industry to do so. So, over the past seven years, we have returned a total of $765 million to our shareholders by these two measures. It's almost close to 40% of our market cap.
And in '24, we deployed $90 million for share repurchase and distribute USD70 million in dividends. Its result in the total cap return of $160 million for shareholders and it represents almost 49% of the net profit.
[Let me allow] with our long term capital return strategy. As we have mentioned, we have revised our dividend policy to raise the payout ratio for at least 10% to the range of 20% to 30% of net profit. The revision reflects our strong commitment to rewarding our shareholders.
And for 2024, the dividend per share reached USD0.277, representing a 17% increase compared to the previous year. And this marks the fifth consecutive year of DPS goals with a five year CAGR of 18%. And at the same time, our Board of Directors has approved a fourth share repurchase program of an allocation of $150 million with the duration of two years. Basically, the specific execution will depend on market condition, liquidity, and the regulatory requirements.
So, the new repurchase plan and the strength and dividend policy demonstrates that we are not only delivering the returns to our shareholders through business growth, but also consistently utilizing the capital tools toward our shareholders. And then supported by the strong cash flow and the solid profitability, even during the -- we accelerated the rise of global expansion. We are capable of balancing the long-term strategic investments with the increasing shareholder return.
And also, I want to draw attention is the revision of our given policy indicates the company will have the flexibility to create the value for our shareholders. Thanks.

Operator

Yada Li, ICC.

Yada Li

(Spoken in foreign language)
Then I'll do the translation. Thank you for taking my questions. The first one is about the user demand, and can you elaborate more about whether there's a sense of user demand recovery in 4Q '24 and 1Q '25. Additionally, how to view the loan guidance of domestic business for 2025.
Secondly, the question is about the progress of AI development. I was wondering how the AI tools such as DeepSeek utilized to help increase the operational efficiency and are there any potential for decreasing the overall credit risks and increasing the profitability in future? And that's all. Thank you.

Jiayuan Xu

Okay, thanks, Yada. I will take your first question and the Tiez will take your second question. For the domestic business, the customer demand in the fourth quarter continue the recovery trend, as we have observed since the last quarter in 2024. In terms of the quarter on quarter and the year on year basis, the growth rate exceed at least 10%. So it reflects the gradual recovery of our consumer confidence in the second half of the year.
And if we look at the full year of 2024, we have observed the consumer demand [exhibit] pattern of being weaker in the first half and the stronger in the second half. And then the recovery trend in the second half we believe will be expected to continue in 2025. And for the first quarter of 2025, it's always the typically the season long period due to the factors such as the Chinese New Year holiday, we have observed the customer demand remains resilient.
And for example, the application volume shows some high single digit year over year growth. So it will led a solid foundations for our full year development. And also, yeah, at the national level, the government is actively implementing various measures to boost the consumer confidence.
Following the two sessions meetings, the newly proposed action plan to stimulate the consumption through multiple channels, including the increasing household income, ensuring the spending capacity, improving the quality of the service consumption and the larger ticket size item consumption. So these efforts are designed to comprehensively expand [domes] demand.
And also, you must have seen the notice from last week, the National Financial Regulatory Administration issued a document to encourage the healthy development of consumer finance. So we believe this series of regulatory measures will largely boost the sector's confidence and it will provide support for the continued the recovery of consumer sentiment.
So look ahead, we are optimistic to wait and see those detailed implementations for consumer finance from [regulatory side]. And the consumer credit demand is expected to receive an additional boost. And it will be long term stable and the positive growth trend in our domestic business.

Tiezheng Li

Hi, Yada. This is Tiezheng. I will answer the AI question. Generally, we are very excited about the AI opportunities in front of us. And we have explored integrating AI into various parts of our business. And here are some key highlights for our AI strategy. Last November, just as I mentioned, we successfully completed the general AI service filing with Cyberspace Administration of China.
For self-divide to right seat larger language model, with this qualification, we are now able to integrate a larger language model into customer facing application. This means we could productively gain from AI automation across customer facing processes, like customer service, user acquisition, and the loan collection, et cetera.
We have also developed various AI agents and the AI automation tools for our operations, from user acquisition, customer service, credit risk management, to process automation. Here are some examples. The first example is on our user acquisition and customer service. We use AI to simplify the content production process. In our recent pilot test, we were able to generate 50% of our advertising content with the AI. And the lower contention production costs by 60%. We have also implied AI bots for our customer service.
The second example is about credit risk. With AI and our domain data, we create an AI model that successfully identifies a fraud, credit application based on deep fake technology in Indonesia. And we are replicating the experience in other countries. On the loan collection fund, we are developing AI powered bots that are capable of calling and interacting with customers for early delinquency. Typically with the first three days of overdue.
The AI bots is automized and replicate human-like conversation capabilities from tone, pitch, rhythm, and the general ability to react to complex emotion and the intention from human conversation. And additionally, by analyzing factors such as repayment timelines mentioned by users, their attitudes, and emotion, and the system comprehensively assesses their willingness to repay and set timely reminder.
And the third example is on our process automation. Now, some of our automation are progressively implemented across our organization. For example, code generation, AI agents for document review and facilitate booking and management. Overall, we see a lot of opportunities from AI and we continue to explore the potential applications in our business.
Thank you, Yada.

Operator

Cindy Wang, China Renaissance.

Cindy Wang

(spoken in foreign language) Thanks for taking my question. My question is related to the international market. So your international market is growing fast, and now you operate not only in Indonesia and the Philippines, but also tapping Pakistan. So could you talk about your international business expansion strategy and outlook in these three markets in 2025? Thank you.

Tiezheng Li

Thanks Cindy. This is Tiezheng. I will answer the question. First, it's about Indonesia. In the past year, the Indonesia business, we achieved two significant milestones. The first one is the, successfully completed the transformation to target higher quality customers, within six months. After the pricing adjustment, the business returned to healthy growth. The average loan amount per customer increased by 12%, while risk decreased 25%, and the customer acquisition costs improved by low double digit and we take rate return to pre-adjustment levels. Now. members of our institutional funding partners reached a 10, and the business achieved the full year profitability for the first time.
And the second milestone is we completed the acquisition of around 84% stake in the multi-financial license. And it began laying the groundwork for offline business operations combining multiple channels and the scenarios. And also in Indonesia, there has been some positive development on the policy front. At the end of 2024, the Indonesia Financial Regulatory Authority, or OJK issued a new interest rate adjustments inside of the previous plan to reduce fees to 0.2%.
The new policy difference pricing based on loan tenure. The interest rate cap for a loan with a tenure of six months or life is set at 0.3%, while loan with a tenure exceeding six months have a cap of 0.2%. Given that our average loan tenure is about three to four months, so the impact on our business is limited. So this policy shift signals a chance in all the extent eliminating long term regulatory uncertainties and providing strong support for our sustainable growth.
And then looking ahead for the year, the Indonesia business is expected to continue its growth trajectory while maintaining healthy profitability. Just as Jiayuan mentioned, the Indonesia business achieved a net profit of CNY5 million. And it's projected to at least double its net profit in 2025.
And the Philippines part, the Philippine business achieved three major milestones -- in last year. The first one is we have rapid expansion in cash loan business. The transaction volume more than doubled year over year, and the business successfully reached the break even by the year end.
And the second one is we broke through in targeting higher quality customer segments and the installment scenarios. We established a strategic partner with TikTok Shop to provide online installment payment service for its users. By 2024, TikTok related transaction accounted for 19% of total volume.
The third one, it is about the institutional funding. We are the first platform in the Philippines to introduce in institutional fundings. And we saw rapid growth in the number of institutional partners reaching five by 2024. And the proportion of institutional funding increased significantly, from 10% at the beginning of the year to nearly 7% by year end.
Looking at the Philippine business is expected to maintain rapid growth, with the share of buy-now-pay-later transaction further increasing. At the same time, the Philippine business will begin contributing profit through the group.
And the last is for the new market expansion. In terms of the new market expansion, we obtained a Non-Banking Financial Company NBFC license from the Security and Exchange Commission of Pakistan SCCP. And we plan to accelerate our operations in Pakistan in 2025. We also actively exploring opportunities in other countries. And we will share more updates when appropriate.
So thanks Cindy.

Operator

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

Jimmy Tan

Thank you once again for joining our call today. If you have any further questions, please feel free to contact FinVolution group investor relations team. And have a good night.

Operator

And thank you. Thank you, sir. This concludes the conference call. You may now disconnect your lines. Thank you.