Hello, ladies and gentlemen, thank you for participating in the Fourth Quarter and Full Year 2022 Earnings Conference Call for FinVolution Group. [Operator Instructions]. I will now turn the call over to your host, Mr. Jimmy Tan, Head of Investor Relations for the company. Thank you, Jimmy, please go ahead.

Hello, everyone, and welcome to our fourth quarter and full year 2022 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 for the company e-mail 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 results may be materially different from the view 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 post 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. I'm Tiezheng Li, Co-Founder of the company and it's a pleasure today and speak with all of you today. I'm deeply honored to take on the role of Chief Executive Officer and excited to explore the great opportunities and the prospects ahead for FinVolution. We are happy to speak with you today following the conclusion of another turbulent year on a strong note. 2022 was a complicated year given the complex macro environment. The situation in the domestic market has been very challenging with the pandemic resurgence throughout the year, leading to varying degrees of lockdown across multiple cities. The Shanghai lockdown was particularly difficult for us as most of our core teams are based here. However, despite all these challenges, we continue to build on our priority technologies in industry-leading digital capabilities, delivering resilient growth each quarter and ultimately producing another set of record-breaking operational and financial results to close out the year. We have invested wisely in the technologies throughout the year and are pleased to share that as of December 2022. We have successfully registered 212 software copyrights and filed 162 patents in fintech-related areas. For full year 2022, we achieved our total transaction volume target with RMB 175.4 billion in total transactions, representing a year-over-year increase of 28%. Our total transaction volume in the fourth quarter reached RMB 48.6 billion, representing a year-over-year increase of 25% and a sequential increase of 7%. Notably, our full year domestic loan volume grew to RMB 171 billion, a year-over-year increase of 28%, and the fourth quarter volume rose to RMB 47 billion, a year-over-year increase of 24% and a sequential increase of 6%. Thanks to our effective local focus, global outlook strategy. International loan volume for the…

Thank you, Tiezheng, and hello, everyone. Welcome to our fourth quarter and full year 2022 earnings call. In the interest of time, I will not go through all of the financial line items on this call. Please refer to our earnings release for further details. As Tiezheng mentioned, we are heartened by the strong financial results we achieved in 2022 despite the unique challenges we encountered. Even more encouragingly, our second growth driver, the International segment, continued to gain progressive momentum and contribute over 10% of our total revenue in 2022. Notably, net revenues in the fourth quarter reached around RMB 3 billion, up 25% year-over-year, with full year net revenues exceeding the RMB 10 billion mark for the first time to reach RMB 11 billion, up 17% year-over-year. Thanks to our ongoing investment in research and development, skill for deployment of our technological capabilities across business and the robust execution of our overall strategy. We also delivered a healthy non-GAAP operating profit of RMB 638 million in the fourth quarter and maintained a solid balance sheet with RMB 12 billion in total shareholders' equity. We are very comfortable with our balance sheet and liquidity position. In particular, our cash position remains strong with over RMB 7 billion of cash and short-term liquidity as of the end of December 2022, an increase of 26% year-over-year. Our leverage ratio, which we define as risk-bearing loan balance divided by the shareholders' equity remained stable at 4.5x, indicating future growth potential. During these times of uncertainty, our strong capital and liquidity position, coupled with our low leverage ratio is an important source of confidence for all our shareholders, including our employees, institutional partners and suppliers. We also continued to return value to our shareholders through share buybacks throughout the year. In full year…

Thank you. [Operator Instructions]. Your first question comes from Alex Ye from UBS.

So my first question is on your consumer credit demand trend so far in Q1. So how is the underlining demand you have been observing? And how is the loan volume run rate you are doing in Q1 versus, say, last quarter? Secondly, on the asset quality trend, could you give us an update about the earlier security indicators in recent months, February and March? Or how does it compare to your historical level?

Okay. Alex, let me do the translation for Mr. Xu. The first question is actually related to user demand. At the end of last year, the macro environment has changed a lot due to the reopening and before Chinese -- the period before Chinese New Year, we have seen that demand has increased a lot, up by around 10% to 20% on a year-over-year basis. And after Chinese New Year, we have seen the trend declining, but the overall trend is still positive. We think that the demand is still growing, and it is mostly due to a compensation recovery. And going forward, we believe that this trend will continue to grow. Okay. Alex, let me do the translation for the REIT as well. On the REIT trend, actually similar to the demand trend, both had some fluctuations. During the reopening period, early indicators such as day 1 delinquency increased rapidly, but it has fallen back to 5.3% right now. And also, we have seen the day 1 to 30 collection recovery rate has some fluctuation as well, but right now, it expect 91%. And we have also seen some vintage delinquency remaining stable at 2.3%. Our existing loan books for those loans disbursed during the COVID reopening period has been optimized by 10%. And the current loans disbursed is now below 2.2%.

Your next question comes from Yada Li from CICC.

Hello, management, this is Yada from CICC. My first question today is, from the perspective of the choice of lending model, what is the trend of capital-light and capital-heavy in the future? And would there be any plans to inject capital into the small loan license? My second question is, during the COVID pandemic, the growth of our SME segment actually slowed down due to the macroeconomic impact. And I was wondering about the positioning of SME business in our overall strategy in 2023 and 2024, and what is the proportion in the future?

Yada, let me do the translation for Mr. Xu. Your question is related -- first question is on capital-light versus capital-heavy. And for the full year of [Technical Difficulty] under the capital-light model was 16%, and we have been making very good progress. And we have been -- the number of funding partners whom has cooperated with us under this business model has reached 17. This validates our capabilities to operate under the capital-light model and also the trust our funding partners have in our credit risk assessment models. We will also monitor the attitude of the regulators towards the capital-light. As right now, we have seen that both models of capital-heavy and light are acceptable to them. We will also consider the attitude of our funding partners and their needs. Yada, let me do the translation for this question as well. Our focus is on individuals with business certificate or license. The loans is for them for their daily necessities. And during the pandemic, the demand for small business owner loans have actually increased. And from the data that we have seen during the pandemic period, the delinquency rate is actually about 10% higher than our consumption loans. And with the reopening of the pandemic, the rest has resumed back to normal levels and with the gradual easing of the COVID policies, we believe the risk for this segment will be further improved and stabilized compared to our consumption loans. And going forward in 2023, we believe our focus on this segment will still be between 20% to 30% of our loan volume.

[Operator Instructions]. Your next question comes from Thomas Chong from Jefferies.

My question is about our international business. Given the progress that we are making in Indonesia and Philippines, which other countries should we expect we are going to further explore the opportunities into the future? And another question is on the spending in overseas business. How much more spending should we expect for this year? And would that affect the bottom line?

Hello, Thomas, let me do the explanation -- translation for Mr. Xu. We are actually expanding very fast in the international markets, as you can see. We have -- in Indonesia, we have actually completed the transition to better quality borrowers and this is actually much faster than our expectation. And after the transition completion, we have been growing -- our growth has actually resumed above 20% Q-over-Q since the third quarter, and our outstanding loan balance has grown to RMB 800 million by the end of December, growing 167% year-over-year. And this has actually led to a larger revenue contribution. For example, it has contributed 13% of total revenue in the fourth quarter. And for the full year of 2022, it has contributed more than 10%. Apart from Indonesia, we are also focusing our efforts in the Philippines, which is also growing very rapidly and we believe we will continue to contribute more to our revenue and other operational metrics. In the meantime, we will continue to evaluate most of these issue countries, and we believe we are able to duplicate our successful Indonesia business model into more countries. Hi, Thomas, let me translate for Mr. Xu. As you can see, international expansion is a long-term strategy for our company. We have started our investment in Indonesia 5 to 6 years ago and you can see that with all these international investments actually need some to bear fruit. And also, we will not sacrifice our short-term earnings for short-term gains, but also look for more longer-term investment, and we will constantly keep a balance between our investment and our earnings on a longer-term basis.

Thank you. If there are no further questions, now I would like to turn the call back over to the management team for closing remarks.

Thank you all for joining our Q4 and 2022 earnings conference call. If you have any further questions, please feel free to reach out to the IR team at FinVolution. Thank you very much.

This concludes this conference call. You may now disconnect your lines, please. Thank you.