Hello, ladies and gentlemen. Thank you for participating in the Third Quarter 2023 Earnings Conference Call for FinVolution Group. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. I'll now turn the call over to your host, Jimmy Tan, Head of Investor Relations for the Company. Please go ahead.

Hello, everyone, and welcome to our third quarter 2023 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's e-mail alerts by visiting the IR section of our website at ir.finvgroup.com. Mr. Tiezheng Li, our Chief Executive Officer; and 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 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. During the third quarter, we steadily executed our local focus, global outlook strategy. We are strengthening our efforts to build our business throughout the Pan-Asian region. Cumulatively, we are proud to [indiscernible] serve over 29 million borrowers in China, Indonesia and the Philippines. As we continue to expand our presence in these countries, we have tapped more deeply into our leading [results] and are now successfully deploying from [indiscernible]. Now our regional funding partners can now support our loan facilitation operations across different countries, greatly improving our capability to serve more borrowers in our markets. We plan to leverage and replicate this success as we expand into additional countries while strengthening our presence in existing markets. China's post-COVID economic recovery continued to progress gradually during the third quarter, with macro data reflecting uneven improvement in different areas. For instance, in September, the consumer confidence index came up slightly to 87 points but is still hovering at a relatively low levels. Also, according to data from the national statistical bureau, employment rate officially peaked at 5.3% in July before trending down to 5% in September, although there has been some moderate recovery in the consumption market. The bulk of the recovery has been in children's education, above medical, health care, domestic travel and other off-line activities. Purchase intention for big ticket items such as property, cars and luxury goods remain relatively weak. Meanwhile, the overall macro environment in Indonesia, our largest overseas market, remained robust as the region is in a faster stage of development. For instance, Indonesia's consumer confidence index from August to October remained high at about 125 points, a positive…

Thank you, Li, and hello, everyone. Welcome to our Third Quarter 2023 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 Li mentioned, the domestic macro recovery has been gradual and reflects uneven improvements in certain areas. For instance, the official manufacturing purchasing managers' index, PMI, from August through October fluctuated between 49.7, 15.2 and 49.5 points according to data released by the National Bureau of Statistics on October 31, 2023. Meanwhile, total social financing data in October increased to RMB1.8 trillion, up 9% from the same period last year. Total retail consumption in October increased to RMB4.3 trillion, up 7.6% compared with the same period last year. Our stable and better-quality borrower base empowered us to maintain steadfast and the resilient operational metrics domestically in the third quarter despite the uneven macro environment. Cumulatively, we have served around 25 million borrowers in China with the number of unique borrowers remaining stable at around 2.3 million. Additionally, our domestic transaction volume reached RMB49 billion, up 11% year-over-year and 8% sequentially. Meanwhile, our outstanding loan balance reached RMB64.6 billion as of September 30, 2023, up 8% year-over-year and 3% sequentially. All these achievements demonstrate our solid standing in the China market and also highlight our unwavering commitment to serving our customers. We continue to employ prudent risk management tactics and effective fraud detection technologies, resulting in only minor fluctuations in our risk levels during the quarter. Day one delinquency rate was 5.7%, while vintage and delinquency rate is expected to be around 2.4% to 2.5% for the quarter. Going forward, we will continue to monitor the credit risk performance closely and make timely adjustments when necessary. Finally, boosted by…

[Operator Instructions] First question will be from Alex Ye of UBS.

So I'm asking about the [security] outlook for both domestic and international markets. So for the China's market, we have seen your payment delinquency tick up a bit in Q3. Could you share more color on the drivers and the outlook for the coming one to two quarters? Also few more question for your Indonesia market. Any color on the [security] trend and outlook?

[Foreign Language]

Hello, Alex. This is Jimmy. Let me translate for Alexis. The overall economy in China, such as the PMI, total social financing are recovering very slowly. And being affected by these factors, our risk metrics have some fluctuations during the third quarter. For example, during the third quarter, day one delinquency was around 5.7% and day 1 to 30 days loan collection recovery rate was around 80% -- 89%, while 90 days particular delinquency was around 1.67%. And we have actually done several things such as increasing the accuracy and update the model of our pre-loan models, such as through the accurate positioning of data mining, data analyzing and user behavior analyzing, we have increased -- we have enhanced the credit limit accuracy, and we have also accessed the user repayment willingness and probability of default rates. For post-loan models, we have deployed different tools such as WeChat, pushed IVR and automated loan collection robots to design a combination of the model strategy. Such combination strategies have proven to be effective with a deduction in delinquency rate of up to 0.5% in absolute amount. And for borrowers with probably of missing payments due to carelessness, we will also remind them in advance. Leveraging on our collection scores, we segment borrowers into different categories such as repayment behavior remaining of loan balances and changes in debt borrowers' debt levels. And using all these strategies, our repayment rate actually increased by around 2%. The slow recovery in economy and slow recovery in consumer confidence is still weak. And thus, risk is an important metric for us. And based on all these strategies that we have deployed our day one metric in the fourth quarter has also remained at similar level with the third quarter.

[Foreign Language]

Hello, Alex, let me do the translation for Alexis. Indonesia overall macro economy is much more robust than the China market in terms of employment rate, consumer competent index, et cetera. And the risk metrics for our Indonesia market has been stable over the last one year. In the third quarter, I believe you have also noticed that we have acquired many new borrowers to maintain rapid growth, and this is the reason why we are having more flexibility for our risk metrics. And we also segment our borrowers into different segments in order to achieve a better and more accurate risk profiling. And also, the U.S. interest rate increase is ending soon, and which will be very beneficiary for our international business.

[Foreign Language]

Hello, Alex, let me do the translation for team. As Alexis has mentioned earlier, China economy is recovering slowly and thus, had some fluctuation in the risk metrics. And in Q3, there's sort of a small mini credit cycle ongoing. And going forward in 2024, we believe the credit risk will be better. And for FinVolution all along our credit -- our asset quality has been better than most, which we believe will be very beneficial for us when the economy recover.

Next question will be from Yada Li of CICC.

[Foreign Language] Then I'll do the translation. Hello management, this is Yada with CICC. And my first question is regarding the loan demand. During 4Q '23 are we observing kind of recovery of user demand and looking forward to the end of next year? I was wondering how to view the overall growth trend? And what are the circumstances that we may accelerate or slow down the pace of our loan growth. And the second question is about International business. What will be the volume revenue and the profit contribution from the overseas branches this year and next year? And will Indonesia maintain the high growth trend? And how to view the profitability and the prospects of the other branches, such as Philippines and Vietnam? That's all.

[Foreign Language]

Hello, Yada. Let me do the -- translate for Alexis. Okay, from internal, we think that the demand is fine. As we continue to invest in the acquisition of new borrowers and currently working to reactivate the inactive repeat borrowers. We can share a few data. From internal demand, right, the application rate for repeat borrowers has maintained a steady growth of around 3%. And for new -- sorry, and from new borrowers the application rate also showed an increase of between 4% to 7%. We think that consumers still recognize our brand and is much more active. Based on the current weakness on the recovery of the macro environment, we need to have a certain judgment. And we need to balance the growth in demand and also our risk metrics, and we believe we need to have more patience in the overall recovery as risk is our top priority metrics right now, and we will balance the risk metrics together with the loan demand of the consumers in order to achieve high-quality growth.

[Foreign Language]

Yes, let me do the translation for the second question. The macro environment of Indonesia and the Philippines is much more robust when compared to our China markets. And all these positive macro environment factors actually support our rapid development in these countries. You can see that our transaction volume during the third quarter was about CNY 2.21 billion, while our outstanding loan balance was about CNY 1.29 billion. Outstanding balance was up 102% year-over-year and transaction volume was up 99% year-over-year. And the number of new borrowers also reached a record high of 423,000, up 27% year-over-year and 36% quarter-over-quarter. Please also note that this is the first time where the number of international new borrowers exceed the number of new borrowers in China. We still think that there is a huge market potential. In the Indonesia market, there are over 100 P2P players, and we are currently ranked number three in terms of outstanding loan balance with a market share of around 6%. Let me briefly touch on the Philippines market. We believe Philippines has very strong growth potential and the transaction volume for this year is expected to grow around 3x. And Indonesia, I forgot to mention just now that Indonesia household debt ratio is -- and it's way below those of the developed countries, and there's a lot of potential. Regarding profitability, we are in the stage of rapid development with healthy LTV. And our main priority now is grow rapidly and increase market share. Increasing the market share is of a much more important priority for us now. Profit is being affected by many factors such as our continued investment in customer acquisitions and the time difference created by accounting principles. We believe that as long as we are able to maintain healthy development, profits will be a natural result of our operations.

[Operator Instructions] Next question will be from Cindy Wang of China Renaissance.

[Foreign Language] I have two questions. First question is related to Indonesia. So as one of your competitors has been restricted buy now pay later services in Indonesia. So any opportunity to further gain market shares from here? And do you have any color in terms of like mid to long term for the Indonesia business strategy and the new loan facilitation outlook? The second question is regarding to marketing expenses. As we see the marketing expenses update sequentially. What's the reasoning behind it? And also, can you break down the domestic and international customer acquisition cost? How do you expect the customer acquisition costs going forward?

[Foreign Language]

Hello, Cindy, let me translate the question. Okay. Indonesia right -- have huge opportunities to grow from multiple different aspects. As regulation tighten the players will be affected, but we believe the market will consolidate with -- to the better quality players. From the Company perspective, right -- sorry, I was saying that the entry barrier will also increase when regulations tighten. For example, the registered capital for [new] players increased to [IDR 25 billion] from just [IDR 1 billion], and we can share what we are currently doing. Apart from online information feeds, we are also doing offline customer acquisitions, multiproduct, installment loans, electronics, installments and buy now pay later, coupled with multiple scenarios such as mobile phone, electric bike, home electronics and furnitures to read the borrowers. Indonesia has this trend of young population -- of large young population and they tend to change mobile phones whenever there's a new release thus we have also begun our operation with Oppo, a well-known mobile phone manufacturer to provide such services for them.

[Foreign Language]

Hello, Cindy. Let me do the translation. For S&M cost, right, about 70% of them are for China, while about 20% to 30% is for the international markets. From the CPS perspective in Q3, the China market optimized about -- the overall CPS optimized about 6%, while China market optimized about 7%. International CPS maintained stable. Going forward, depending on the macro environment and the Company-owned strategy, we believe our sales and marketing costs will remain stable, and we true -- the Company's strategies of upgrading the models on customer acquisition and all those, we believe all these will -- all these costs will be further optimized.

There are no further questions. We'll conclude our question-and-answer session now and turn the call back over to management for closing remarks. Thank you.

Thank you all for joining the call. If you have any other further questions, please reach out to FinVolution Investor Relations team. Thank you all.

Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.