FinVolution Group (“FinVolution,” or the “Company”) (NYSE: FINV), a leading fintech platform in China, today announced its unaudited financial results for the third quarter ended September 30, 2020.
Third Quarter 2020 Financial and Operational Highlights
- Net revenue increased by 12.6% to RMB1,793.3 million (US$264.1 million) for the third quarter of 2020, from RMB1,592.5 million in the same period of 2019.
- Operating profit was RMB689.0 million (US$101.5 million) for the third quarter of 2020, representing an increase of 6.2% from RMB648.9 million in the same period of 2019.
- Non-GAAP adjusted operating profit[1], which excludes share-based compensation expenses before tax, was RMB697.6 million (US$102.8 million) for the third quarter of 2020, representing an increase of 6.1% from RMB657.8 million in the same period of 2019.
- Cumulative registered users[2] reached approximately 112.8 million as of September 30, 2020.
- Cumulative number of borrowers[3] was approximately 18.6 million as of September 30, 2020.
- Number of unique borrowers[4] was approximately 1.9 million for the third quarter of 2020.
- Loan origination volume[5] was approximately RMB17.0 billion for the third quarter of 2020.
- Repeat borrowing rate[6] was 89.7% for the third quarter of 2020, compared to 79.4% in the same period of 2019.
- Average loan size[7] was RMB 4,095 for the third quarter of 2020, compared to RMB 3,156 in the same period of 2019.
- Average loan tenure[8] was 8.3 months for the third quarter of 2020.
Mr. Feng Zhang, the Chief Executive Officer of FinVolution, commented, “We are pleased to report continued progress in our results as we continue our shift to attracting higher quality customers. Our reported operational and financial performance were better-than-expected in the third quarter of 2020, a further testament to the agility and robustness of our core capabilities. As China gradually emerges from the aftermath of COVID-19, our loan business recovery has been gathering momentum. Our loan origination volume in Mainland China for the third quarter reached over RMB17 billion[5], representing a 30% increase quarter-over-quarter and exceeding the top end of our previous guidance range.
“Encouragingly, our continual efforts to enhance our technological capabilities and strengthen our risk management have led to significant improvements in delinquency rates across the platform in particular for newly facilitated loans. Due to the shift to better quality customer cohort, our vintage delinquency[9] in the most recent quarter is expected to be significantly lower compared to the past several years.
“Our institutional funding partners continue to be supportive with ample funding and ongoing improvement in funding cost. Going forward, we expect further enhancement in funding cost as we continue to deepen our relationships with our partners.
“As part of our ongoing strategy to leverage our technological capabilities to support new initiatives, our international operations gained significant traction. We are excited to report that our loan volume in Indonesia experienced a strong rebound from the depressed levels in the second quarter and is now much higher than pre-COVID-19 levels. We expect this strong momentum to continue moving forward.
“With a long and proven track record in technology innovation, responsive risk management insights and effective measures taken to navigate across credit and economic cycles, we believe our focus on our core strengths and fundamentals, coupled with our strong culture of innovation, sets a solid foundation for our sustainable operation and unlocks the vast potential in the consumer finance markets in China and internationally,” concluded Mr. Zhang.
Mr. Simon Ho, the Chief Financial Officer of FinVolution, commented, “In the third quarter, amid a recovering COVID-19 environment in Mainland China, we delivered non-GAAP operating profit[10] of RMB697.6 million representing an increase of 21.1% quarter-over-quarter, and further demonstrating the resilience of our core business model. Our balance sheet and liquidity remain strong with RMB3.4 billion of cash and short-term liquidity. Armed with strong technological capabilities, and a conservative balance sheet, FinVolution is well positioned to capture additional opportunities in the evolving environment.”
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[1] Please refer to “UNAUDITED Reconciliation of GAAP And Non-GAAP Results” for reconciliation between GAAP and Non-GAAP adjusted operating profit.
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[2] On a cumulative basis, number of users registered on our platform in Mainland China as of September 30, 2020.
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[3] On a cumulative basis, number of borrowers whose loans were funded in Mainland China on or prior to September 30, 2020.
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[4] Represents the total number of borrowers in Mainland China whose loans were facilitated on our platform during the period presented.
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[5] Represents the loan origination volume facilitated in Mainland China during the period presented.
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[6] Represents the percentage of loan volume generated by repeat borrowers in Mainland China who have successfully borrowed on our platform before.
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[7] Represents the average loan size on our platform in Mainland China during the period presented.
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[8] Represents the average loan tenure period on our platform in Mainland China during the period presented.
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[9] Represents the historical cumulative 30-day past due delinquency rates by loan origination vintage for all loan products in Mainland China.
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[10] Please refer to “UNAUDITED Reconciliation of GAAP and Non-GAAP Results” for reconciliation between GAAP and Non-GAAP adjusted operating profit.
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Third Quarter 2020 Financial Results
Net revenue for the third quarter of 2020 increased by 12.6% to RMB1,793.3 million (US$264.1 million) from RMB1,592.5 million in the same period of 2019, primarily due to the adoption of ASC 326. Before the adoption of ASC 326, gains or losses related to quality assurance commitments were recorded in one combined financial statement line item within other income. After the adoption of ASC 326, the guarantee income (i.e. the guarantee liability) was recorded as a separate financial statement line item within revenue and the credit losses for quality assurance were recorded within expenses. The increase in net revenue was partially offset by the decline in loan origination volume and decrease in average rate of transaction fees.
Loan facilitation service fees decreased by 45.6% to RMB486.3 million (US$71.6 million) for the third quarter of 2020 from RMB893.6 million in the same period of 2019, primarily due to the decline in loan origination volume and the decrease in the average rate of transaction fees.
Post-facilitation service fees decreased by 46.3% to RMB161.4 million (US$23.8 million) for the third quarter of 2020 from RMB300.7 million in the same period of 2019, primarily due to the decline in outstanding loans serviced by the Company and the rolling impact of deferred transaction fees.
Guarantee income was RMB747.1 million (US$110.0 million) for the third quarter of 2020 due to the adoption of ASC 326. After the adoption of ASC 326, the guarantee liabilities of quality assurance commitment are released as a revenue systematically over the term of the loans subject to quality assurance commitment.
Net interest income decreased by 24.4% to RMB260.9 million (US$38.4 million) for the third quarter of 2020, from RMB345.0 million in the same period of 2019, primarily due to decreased interest income from the reduction in the outstanding loan balances of consolidated trusts and the decrease in interest rates.
Other revenue increased by 158.6% to RMB137.6 million (US$20.3 million) for the third quarter of 2020 from RMB53.2 million in the same period of 2019, primarily due to increased customer referral fees to other third-party service providers.
Origination and servicing expenses increased by 2.0% to RMB338.9 million (US$49.9 million) for the third quarter of 2020 from RMB332.1 million in the same period of 2019, primarily due to an increase in fees paid to third party service providers.
Sales and marketing expenses decreased by 49.7% to RMB115.3 million (US$17.0 million) for the third quarter of 2020 from RMB229.2 million in the same period of 2019, primarily due to the decrease in online customer acquisition expenses as a result of the decline in newly registered users on the Company’s platform.
General and administrative expenses decreased by 15.5% to RMB105.4 million (US$15.5 million) for the third quarter of 2020 compared to RMB124.8 million in the same period of 2019, due to improved operating efficiency.
Research and development expenses decreased by 14.1% at RMB93.0 million (US$13.7 million) for the third quarter of 2020, compared to RMB108.2 million in the same period of 2019, due to a more streamlined team in technology related departments.
Credit losses for quality assurance commitment were RMB326.6 million (US$48.1 million) for the third quarter of 2020 due to the adoption of ASC 326. After the adoption of ASC 326, the expected credit losses of quality assurance commitment will be accounted for in addition to and separately from the guarantee liabilities accounted for under ASC 460.
Provision for loans receivables was RMB90.0 million (US$13.3 million) for the third quarter of 2020, compared with RMB80.1 million in the same period of 2019, primarily due to the adoption of ASC 326, which requires the Company to recognize the life time credit losses upon initial recognition and provisions for new international business.
Provision for accounts receivables and other receivables decreased by 49.3% to RMB35.1 million (US$5.2 million) for the third quarter of 2020, compared with RMB69.2 million in the same period of 2019 as a result of the decline in loan origination volume and improvement in delinquency rates, which was partially offset by provision provided on other receivables.
Operating profit increased by 6.2% to RMB689.0 million (US$101.5 million) for the third quarter of 2020 from RMB648.9 million in the same period of 2019.
Non-GAAP adjusted operating profit, which excludes share-based compensation expenses before tax, was RMB697.6 million (US$102.8 million) for the third quarter of 2020, representing an increase of 6.1% from RMB657.8 million in the same period of 2019.
Other income decreased by 49.5% to RMB26.3 million (US$3.9 million) for the third quarter of 2020, from RMB52.1 million in the same period of 2019. For the third quarter of 2020, other income primarily consisted gains from investments.
Income tax expenses were RMB118.4 million (US$17.4 million) for the third quarter of 2020, compared with RMB130.7 million in the same period of 2019, due to the decline in pre-tax profit and recognition of gain related to quality assurance in a subsidiary with preferential tax status due to tax planning.
Net profit was RMB596.9 million (US$87.9 million) for the third quarter of 2020, compared with RMB598.5 million in the same period of 2019.
Net profit attributable to ordinary shareholders of the Company was RMB602.7 million (US$88.8 million) for the third quarter of 2020, compared with RMB597.9 million in the same period of 2019.
As of September 30, 2020, the Company had cash and cash equivalents of RMB1,107.2 million (US$163.1 million) and short-term investments mainly in wealth management products of RMB2,278.4 million (US$335.6 million).
The following table provides the delinquency rates for all outstanding loans on the Company’s platform in Mainland China as of the respective dates indicated.
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As of
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15-29
days
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30-59
days
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60-89
days
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90-119 days
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120-149 days
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150-179 days
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September 30, 2017
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0.89%
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1.40%
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1.15%
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1.02%
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0.79%
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0.60%
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December 31, 2017
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2.27%
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2.21%
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1.72%
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1.63%
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1.36%
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1.20%
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March 31, 2018
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0.87%
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2.11%
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2.43%
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3.83%
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2.29%
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1.89%
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June 30, 2018
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0.83%
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1.21%
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1.05%
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0.98%
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1.60%
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2.03%
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September 30, 2018
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1.03%
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1.77%
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1.49%
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1.29%
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1.06%
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1.02%
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December 31, 2018
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0.92%
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1.63%
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1.41%
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1.45%
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1.44%
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1.34%
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March 31, 2019
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0.80%
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1.61%
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1.45%
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1.29%
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1.31%
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1.20%
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June 30, 2019
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0.86%
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1.42%
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1.37%
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1.19%
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1.26%
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1.21%
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September 30, 2019
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0.90%
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1.50%
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1.35%
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1.31%
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1.17%
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1.20%
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December 31, 2019
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1.34%
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2.40%
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1.86%
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1.76%
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1.62%
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1.53%
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March 31, 2020
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1.34%
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3.03%
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2.33%
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2.44%
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2.64%
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2.17%
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June 30, 2020
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0.71%
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1.36%
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1.70%
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2.00%
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2.75%
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2.38%
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September 30,2020
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0.46%
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0.72%
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0.74%
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0.90%
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1.07%
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1.43%
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The following chart and table display the historical cumulative 30-day plus past due delinquency rates by loan origination vintage in Mainland China for all loan products facilitated through the Company’s online marketplace as of September 30, 2020:
Click here to view the chart
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Month on Book
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Vintage
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2nd
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3rd
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4th
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5th
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6th
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7th
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8th
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9th
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10th
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11th
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12th
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2017Q3 . . . .
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2.22%
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3.05%
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4.13%
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5.18%
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6.13%
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6.64%
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6.88%
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7.04%
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7.16%
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7.22%
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7.26%
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2017Q4 . . . .
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2.86%
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4.24%
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5.19%
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5.69%
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5.98%
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6.19%
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6.29%
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6.39%
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6.47%
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6.49%
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6.50%
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2018Q1 . . . .
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1.37%
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2.20%
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2.99%
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3.67%
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4.32%
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4.86%
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5.23%
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5.50%
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5.66%
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5.74%
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5.77%
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2018Q2 . . . .
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1.87%
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3.12%
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4.39%
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5.46%
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6.33%
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6.99%
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7.47%
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7.80%
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7.99%
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8.08%
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8.13%
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2018Q3……
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1.45%
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2.51%
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3.53%
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4.39%
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5.09%
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5.59%
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5.97%
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6.28%
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6.50%
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6.64%
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6.72%
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2018Q4. . . .
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1.43%
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2.49%
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3.55%
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4.42%
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5.18%
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5.76%
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6.20%
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6.54%
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6.81%
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7.01%
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7.16%
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2019Q1……
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1.34%
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2.38%
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3.45%
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4.36%
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5.13%
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5.75%
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6.22%
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6.65%
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6.99%
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7.25%
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7.43%
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2019Q2……
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1.33%
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2.34%
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3.31%
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4.18%
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5.05%
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5.82%
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6.44%
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6.98%
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7.34%
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7.50%
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7.52%
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2019Q3…….
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1.02%
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2.16%
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3.42%
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4.55%
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5.64%
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6.45%
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6.92%
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7.13%
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7.20%
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7.20%
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7.15%
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2019Q4…….
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0.83%
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2.07%
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3.37%
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4.45%
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5.12%
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5.50%
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5.68%
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5.79%
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2020Q1…….
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0.81%
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1.73%
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2.46%
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2.97%
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3.35%
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2020Q2……
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0.44%
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0.92%
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Changes in Board of Directors and Management
The Board of Directors of the Company (the “Board”) has approved and appointed Mr. Simon Tak Leung Ho as a member of the Board effective on November 16, 2020. At the same time, the Board has approved the appointment of Mr. Jiayuan Xu, as the Company’s new Chief Financial Officer, effective on December 1, 2020. Mr. Xu currently serves as the Company’s Senior Vice President for Finance and will succeed Mr. Ho, who tendered his resignation from the position as the Company’s incumbent Chief Financial Officer due to personal reasons. To ensure a smooth transition, Mr. Ho will remain in his capacity until November 30, 2020.
Mr. Jiayuan Xu has been serving as our Senior Vice President for Finance and Head of Financial Institutions Department since March 2018. Mr. Xu served as the Vice President for finance from June 2016 to March 2018. Mr. Xu joined us as our Financial Controller in June 2015. Prior to joining us, Mr. Xu served as the Head of Financial Management Department of Nanyang Commercial Bank (China) Co., Ltd. from 2008 to 2015. Mr. Xu was an Audit Manager at PricewaterhouseCoopers Zhong Tian LLP from 2003 to 2008. Mr. Xu received his bachelor’s degree in international trade and finance from Shanghai Jiaotong University in and FMBA degree from China Europe International Business School. Mr. Xu is also a member of Chinese Institute of Certified Public Accountants.
Company’s Share Repurchase Update
As of November 12, 2020, the Company has deployed approximately US$10.9 million under its existing repurchase program with an authorization of US$60 million to repurchase its American Depositary Shares (“ADSs”). In combination with the Company’s previous repurchase program with authorization of US$120 million, the Company has deployed a total of approximately US$121.9 million to repurchase its ADSs.
FinVolution Group’s Chairman Ownership Update
Mr. Shaofeng Gu, the Chairman and Chief Innovation Officer of the Company, has informed the Company on August 11, 2020 that he had continued to purchase in his personal capacity 0.4 million of the Company’s ADSs in the second quarter of 2020. The purchases were made during an open window period and in compliance the Company’s guidelines. As of September 30, 2020, Mr. Shaofeng Gu beneficially owned an aggregate number of 414,256,580 ordinary shares, representing approximately 28.9% of beneficial ownership in the Company.
Business Outlook
As China gradually recovers from the aftermath of the COVID-19 outbreak, the Company has continued to experience improvements in delinquency trends for newly facilitated loans. The Company will continue to closely monitor the global development of the pandemic and remain agile in its business operations. The Company holds a cautiously optimistic view on its operations and expects progressive growth for its loan origination volume in the fourth quarter of 2020 to be in the range of RMB18 billion to RMB20 billion. With a gradual recovery in the macro economy, the Company expects it’s vintage delinquency9 risks to further improve.
The above outlook is based on current market conditions and reflects the Company’s preliminary expectations as to market conditions, its regulatory and operating environment, as well as customer and institutional investor demand, all of which are subject to change.
Conference Call
The Company’s management will host an earnings conference call at 7:00 AM U.S. Eastern Time on November 17, 2020 (8:00 PM Beijing/Hong Kong time on November 17, 2020).
Dial-in details for the earnings conference call are as follows:
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United States (toll free):
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1-888-346-8982
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International:
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1-412-902-4272
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Hong Kong, China (toll free):
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800-905-945
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Hong Kong, China:
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852-3018-4992
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Mainland China:
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400-120-1203
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Participants should dial-in at least 5 minutes before the scheduled start time and ask to be connected to the call for “FinVolution Group.”
Additionally, a live and archived webcast of the conference call will be available on the Company’s investor relations website at https://ir.finvgroup.com.
A replay of the conference call will be accessible approximately one hour after the conclusion of the live call until November 24, 2020, by dialing the following telephone numbers:
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United States (toll free):
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1-877-344-7529
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International:
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1-412-317-0088
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Replay Access Code:
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10149966
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