Hello, ladies and gentlemen. Thank you for participating in the Fourth Quarter and Full Year 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 fourth quarter and full-year 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 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 certain 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 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 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. This is Tiezheng Li, CEO of FinVolution Group. We are happy to speak with you today. 2024 marked another strong year of growth and progress for the company. Despite the persistent uncertainties over the macro economy in China, our operations in Indonesia and the Philippines have experienced favorable macro supported by strong growth and a stable foreign exchange environment. Through strong execution of our local excellence, global outlook, and legal strategy, we successfully navigated through 2024's challenges and continued to deliver progressive growth in the Chinese market and rapid expansion in the international market. For example, in terms of transaction volume, we have achieved 5% growth in China and a rapid growth of around 28% in our international market. Both our total transaction volume and outstanding loan balance also reached new record highs for the full year, rising to RMB 206 billion and RMB 72 billion, respectively, both up by 6% year-over-year. Cumulatively, we have served around 34 million borrowers across China, Indonesia, and the Philippines, representing a net increase of around 4 million new borrowers in 2024. Achieving growth in all of these metrics amid 2024's soft consumer environment is a strong testament to our business resilience, outstanding technology, innovation, and overall operational excellence. It's worth noting that while the industry's transaction volume was generally shrinking in 2024, we continue to deliver growth in our business at stable risk levels. In line with our strategy, we have expanded our regulatory license portfolio in our key markets, including micro-lending license in China, multifinance license in Indonesia and nonbanking financial companies license in Pakistan. This additional license helped us expand our customers' outreach and product offerings. We have also further expanded our customer acquisition channels. In China, we have…

Thank you, Li, and hello, everyone. Welcome to our fourth quarter and 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 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 slow. On a bright 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 travel amounted to CNY 677 billion, marking a year-on-year rise of 7%. We successfully navigated this turbulence by capitalizing on our operational and tech strengths to achieve consistent growth throughout 2024 and beyond. Our loan application rate remained strong following the end of September stimulus. As a result, during the fourth quarter, transaction volume and outstanding loan balance further increased to RMB 54 billion and RMB 69.8 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 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 R&D led to a further improved day delinquency rate of 4.7% in recent weeks, while the loan collection recovery rate remained stable at 89%. Given the ongoing recovery in consumer confidence and our holistic enhancement to technology and operational system, 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…

[Operator Instructions] Today's first question comes from Alex Ye with UBS.

The first question is about your international business. So we are glad to see the company's target of international revenue contribution to raise to 50% of the group by 2030. So just wanted to have some more color in terms of the operating cost base for the overseas segment. For example, what's the total OpEx for this and then the expected growth for this year? And down to the bottom line contribution for this year? The second question is about your shareholder return policy. So we have noticed the company ended up paying about 50% total payout in last year, consisting of about 20% in cash and 30% via buyback. And we have noticed that the pace of buyback has accelerated visibly from the previous year. So how should we think about the total payout going forward for this year and then the split between cash and buyback?

Okay. Thanks, Alex. I will take your questions. Your first question is about our overseas business. Thanks for your attention to our ambitious target by 2030. As you have seen we have shifted our guidance from the origination to revenue. This adjustment is closely aligned with our long-term strategic goal 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 road map in understanding the company’s long-term strategic goals. And in terms of the overseas operation costs and profit contributions, well, they were subject to the different stages of the business. So the preparation of the operation costs will decrease when our business operations enter the mature stage and 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 from Indonesia will at least double. And for our Philippines market, it was at a loss in ‘24. And we expect it will begin to make profit graduate from ‘25. So the operation of profit from these 2 countries will increase significantly in 2025. But also, we will accelerate our overseas expansion. So it will require initial investment in the early stage, and they will have some P&L impact on our bottom line. But generally speaking, if we are looking ahead to 2023, 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 business. Your second question Is about our shareholder return. We are Id to delivering long-term sustainable returns to our shareholders. We aim to create value for our shareholders primarily through…

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

The first one is about user demand. And can you elaborate more about whether there's a sense of user demand recovery in 4Q '24 and 1Q? Additionally, how to view the loan guidance of domestic business for 2025? And secondly, the question is about the progress of AI development. I was wondering how the AI tools such as DS are utilized to help increase operational efficiency. And is there any potential for decreasing the overall credit risks and increasing the profitability in the future? That's all.

Thanks, Yada. I will take your first question, and Tiezheng will take your second question. For the domestic business, the customer demand in the fourth quarter continued their 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 exceeds at least 10%. So it reflects the gradual recovery of our consumer confidence in the second half of the year. If we look at the full year of 2024, we have observed that consumer demand exhibits a pattern of being weaker in the first half and stronger in the second half. And the recovery trend in the second half, we believe, will be expected to continue in 2025. For the first quarter of 2025, it's always typically the seasonal low period due to factors such as the Chinese New Year holiday. We have observed that customer demand remains resilient. For example, the application volume shows high single-digit year-over-year growth. So it will lay a solid foundation for our full-year development. Also at the national level, the government is actively implementing various measures to boost consumer confidence. Following the 2 session meetings, the newly proposed action plan to stimulate consumption through multiple channels, including 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 domestic demand. Also, you must have seen the notice from last week, that the National Financial Regulator 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 recovery of consumer sentiment. So looking ahead, we are optimistic to wait and see those detailed implementations for consumer finance from the regulatory side. And the consumer credit demand is expected to receive an additional boost. And it will long-term stable and positive growth trends in our domestic business.

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. Here are some key highlights for our AI strategy. Last November, just as I mentioned, we successfully completed the generative AI service filing with the Cyberspace Administration of China for our self-directed large language model. With this qualification, we are now able to integrate large language models into customer-facing applications. This means we could productively gain from AI automation across customer-facing processes like customer service, user acquisition, and loan collections, et cetera. We have also developed various AI agents and AI automation tools for our operations from user acquisition, customer service, and credit risk management to process automation. Here are some examples. The first example is 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 AI and lower content 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 created an AI model that successfully identifies fraud credit applications based on Deepfake technology in Indonesia, and we are replicating the experience in other countries. On the loan collection front, we are developing AI-powered bots that are capable of calling and interacting with customers for early delinquency, typically within the first 3 days of our due. The AI bot is automized and replicates human-like conversation capabilities from tone, speech, rhythm, and general ability to react to complex emotions and intentions from human conversation. Additionally, by analyzing factors such as repayment timelines mentioned by users, their attitude, and motion the system comprehensively assesses their willingness to repay and assess timely remainder. The third example is our process automation. Now some of our automation is progressively implemented across our organization. For example, code generation, AI agents for document review, and facilitating booking and management. Overall, we see a lot of opportunities from AI, and we will continue to explore the potential applications in our business.

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

My question is related to the international market. So your international market is growing fast. And now you operate not only in Indonesia and Philippines, but also tapping Pakistan. So could you talk about your international business expansion strategy and outlook in these 3 markets in 2025?

Thanks, Cindy. This is Tiezheng, I will answer the question. First is about Indonesia. In the past year, in the Indonesia business, we achieved 2 significant milestones. The first one is we successfully completed the transformation to target higher-quality customers within 6 months. After the pricing adjustment, the business returned to healthy growth. The average loan amount per customer increased by 12%, while risk decreased by 25% customer acquisition costs improved by low double digits, and the take rate returned to pre-adjustment levels. Now number of institutional funding partners reached 10 and the business achieved full-year profitability for the first time. The second milestone is we completed the acquisition of around 84% stake in the multifinance license and began laying the groundwork for offline business operations combining multiple channels and scenarios. 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 adjustment inside of the previous plan to reduce fees to 0.2%. The new policy has different pricing based on loan tenure. The interest rate cap for a loan with a tenure of 6 months or life is set at 0.3%, while a loan with a tenure exceeding 6 months has a cap of 0.2%. Given that our average loan tenure is about 3 to 4 months, the impact on our business is limited. So this policy shift signals a chance in all these expenses eliminating long-term regulatory uncertainties and providing strong support for our sustainable growth. Looking ahead for the year, the Indonesia business is expected to continue its growth trajectory while maintaining healthy profitability. Just as Alexis mentioned, the Indonesia business achieved a net profit of USD 5 million and is projected to at least double its net…

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

Thank you once again for joining our call today. If you have any further questions, please feel free to contact the FinVolution Group Investor Relations team. And have a nice day.

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