FinVolution Group (formerly known as “PPDAI,” or the “Company”) (NYSE: FINV), a leading fintech platform in China, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2019.
Fourth Quarter 2019 Financial and Operational Highlights
- Operating revenues decreased by 4.4% to RMB1,232.8 million (US$177.1 million) in the fourth quarter of 2019, from RMB1,289.4 million in the same period of 2018.
- Operating income was RMB435.1 million (US$62.5 million) for the fourth quarter of 2019, representing a decrease of 10.6% from RMB486.6 million in the same period of 2018.
- Non-GAAP adjusted operating income[8], which excludes share-based compensation expenses before tax and a write-back of provision for expected discretionary payments to investors in investment programs protected by the Company’s investor reserve funds which is only applicable to Q4 2018, was RMB444.5 million (US$63.9million) for the fourth quarter of 2019, representing a decrease of 5.8% from RMB472.1 million in the same period of 2018.
- Cumulative registered users[1] reached approximately 105.9 million as of December 31, 2019.
- Cumulative number of borrowers[2] was approximately 17.9 million as of December 31, 2019.
- Number of unique borrowers[3] was approximately 2.2 million for the fourth quarter of 2019, representing a decrease of 26.8% from the same period of 2018.
- Loan origination volume[4] was approximately RMB16.9 billion for the fourth quarter of 2019, representing a decrease of 4.1% from the same period of 2018.
- The proportion of total loan origination volume facilitated by institutional partners in the fourth quarter of 2019 increased to 100% from 75.1% in the third quarter of 2019.
- Average loan tenure[7] was 8.4 months for the fourth quarter of 2019.
Fiscal Year 2019 Financial and Operational Highlights:
- Operating revenues in 2019 increased by 31.2% to RMB5,962.8 million (US$856.5 million), from RMB4,543.7 million in 2018.
- Loan facilitation service fees increased by 13.4% to RMB3,310.9 million (US$475.6 million) in 2019, from RMB2,919.2 million in 2018.
- Post-facilitation service fees increased by 30.1% to RMB1,200.4 million (US$172.4 million) in 2019, from RMB922.8 million in 2018.
- Operating income was RMB2,646.4 million (US$380.1 million) in 2019, representing an increase of 43.3% from RMB1,846.6 million in 2018.
- Non-GAAP adjusted operating income[8], which excludes share-based compensation expenses before tax and a write-back of provision for expected discretionary payments to investors in investment programs protected by the Company’s investor reserve funds which is only applicable in 2018 increased by 47.1% to RMB2,688.7 million (US$386.2 million) from RMB1,828.3 million in 2018.
- Net profit was RMB2,374.5 million (US$341.1million) in 2019, compared to RMB2,469.5 million in 2018.
- Number of unique borrowers[3] was 6.7 million in 2019, representing a decrease of 1.9% from 2018.
- Loan origination volume[4] was RMB82.2 billion in 2019, representing an increase of 33.6% from 2018.
- Average loan tenure[7] was 8.7 months in 2019.
Mr. Feng Zhang, the Chief Executive Officer of FinVolution, commented, “Despite uncertainties and rapidly evolving market dynamics, we made numerous positive strides in 2019. During the year, we successfully repositioned our business by transitioning the funding sources on the platform from being primarily facilitated by individual investors to being fully funded through our institutional partners, while continuing to deliver solid business growth. Our loan origination volume for 2019 increased by 33.6% year-over-year to RMB82.2 billion, contributing to a 31.2% year-over-year growth in operating revenue to RMB6.0 billion and a 43.3% year-over-year increase in operating income to RMB2.6 billion for the year. This impressive performance demonstrates the resilience and flexibility of our business, the effectiveness of management execution, as well as our strong brand equity that enables us to rapidly expand our partnership with institution partners. With strong confidence in our capability to navigate through market dynamics, the number of active institutional funding partners on our platform has increased progressively throughout the year.
“Aside from our successful funding transition, we have at the same time, continued to deliver encouraging results on our strategic initiatives. In 2019, we completed an investment of a 4.99% stake in Fujian Haixia Bank and simultaneously entered into a strategic partnership with them. Our online micro lending subsidiary was approved to connect to the PBOC Credit Reference Center, demonstrating our ongoing contribution to a more transparent credit ecosystem while enhancing our risk assessment mechanisms. Our international expansion also achieved an important milestone with our subsidiary in Indonesia receiving the peer-to-peer lending license from the Financial Services Authority of Indonesia.
“In spite of a dynamic and volatile operating environment in 2019, our strong performance and steady progress in business initiatives , reaffirms the enormous underserved demand for consumer finance services in China. By leveraging our extensive proprietary technologies and market leadership, we are dedicated to strengthening our ability to provide a superior experience to both individual borrowers and financial institutions,” Mr. Zhang concluded.
Mr. Simon Ho, Chief Financial Officer of FinVolution, commented, “We realized solid profitability amid rapidly changing market conditions in 2019. Despite the full transition of our funding sources, we delivered non-GAAP operating income of RMB 444.5 million and maintained a healthy non-GAAP operating margin[9] of 36.1% in the fourth quarter. Our balance sheet and liquidity remains strong with RMB2.4 billion of cash and short term liquidity. Notably, our quality assurance fund remains sufficiently funded with a total balance of RMB 5.1 billion, equivalent to 23.5% of the total outstanding off balance sheet loans and interest with quality assurance. These metrics all illustrate a firm foundation of our operation. Our innovative and advanced technologies enables us to effectively manage credit risks and better serve borrowers and institutional funding partners in a challenging operating environment. With steady progress in strengthening our relationships with institutional partners and healthy loan demand for the foreseeable future, we are determined to further explore the enormous potential of the online consumer finance market in China and abroad.”
|
[1] On a cumulative basis, number of users registered on our platform as of December 31, 2019. |
|
[2] On a cumulative basis, number of borrowers whose loans were funded on or prior to December 31, 2019. |
|
[3] Represents the total number of borrowers whose loans on our platform were facilitated during the period presented. |
|
[4] Represents the loan origination volume facilitated during the period presented. |
|
[5] Represents the percentage of loan volume generated by repeat borrowers who have successfully borrowed on our platform before. |
|
[6] Represents the average loan size on our platform during the period presented. |
|
[7] Represents the average loan tenure period on our platform during the period presented. |
|
[8] Please refer to “UNAUDITED Reconciliation of GAAP And Non-GAAP Results” for reconciliation between GAAP and Non-GAAP adjusted operating income. |
|
[9] Please refer to “UNAUDITED Reconciliation of GAAP And Non-GAAP Results” for reconciliation between GAAP and Non-GAAP adjusted operation income and GAAP and Non-GAAP operating margin. |
Fourth Quarter 2019 Financial Results
Operating revenues for the fourth quarter of 2019 decreased by 4.4% to RMB1,232.8 million (US$177.1 million) from RMB1,289.4 million in the same period of 2018, primarily due to the decrease in loan facilitation service fees.
Loan facilitation service fees decreased by 35.6% to RMB538.9 million (US$77.4 million) for the fourth quarter of 2019 from RMB837.4 million in the same period of 2018, primarily due to the decline in loan origination volume and the decrease in the average rate of transaction fees.
Post-facilitation service fees increased by 10.4% to RMB275.8 million (US$39.6 million) for the fourth quarter of 2019 from RMB249.9 million in the same period of 2018, primarily due to the rolling impact of deferred transaction fees.
Net interest income was RMB316.8 million (US$45.5 million) for the fourth quarter of 2019, compared to RMB70.2 million in the same period of 2018, primarily due to increased interest income from the expansion in the outstanding loan balances of consolidated trusts.
Other revenue decreased by 6.0% to RMB101.3 million (US$14.6 million) for the fourth quarter of 2019 from RMB107.8 million in the same period of 2018, primarily due to a decrease in management fees from investment programs that invest in loans protected by the quality assurance fund due to the winding down of our investment programs in the fourth quarter of 2019 as a result of our decision to discontinue our online information intermediary business.
Origination and servicing expenses increased by 9.9% to RMB305.2 million (US$43.8 million) for the fourth quarter of 2019 from RMB277.6 million in the same period of 2018, primarily due to increased volume of loans serviced by the Company.
Sales and marketing expenses decreased by 27.2% to RMB131.7 million (US$18.9 million) for the fourth quarter of 2019 from RMB180.9 million in the same period of 2018, primarily due to the decrease in online customer acquisition expenses.
General and administrative expenses decreased by 21.3% to RMB101.2 million (US$14.5 million) for the fourth quarter of 2019 from RMB128.5 million in the same period of 2018, primarily due to a decrease in salaries and benefits as a result of less bonus accrual. General and administrative expenses for the period included share-based compensation of RMB9.4 million (US$1.4 million).
Research and development expenses increased by 12.0% to RMB93.1 million (US$13.4 million) for the fourth quarter of 2019 from RMB83.1 million in the same period of 2018, primarily due to increased investments in technology.
Provision for loans receivables was RMB102.6 million (US$14.7 million) for the fourth quarter of 2019, compared with RMB79.7 million in the same period of 2018, primarily due to the increased number of consolidated trusts in the quarter.
Provision for accounts receivables was RMB64.0 million (US$9.2 million) for the fourth quarter of 2019, compared with RMB53.0 million in the same period of 2018, primarily due to the cumulative increase in loan origination volume.
Operating income decreased by 10.6% to RMB435.1 million (US$62.5 million) for the fourth quarter of 2019 from RMB486.6 million in the same period of 2018.
Non-GAAP adjusted operating income, which excludes share-based compensation expenses before tax and a write-back of provision for expected discretionary payments to investors in investment programs protected by the Company’s investor reserve funds which is only applicable to Q4 2018, was RMB444.5 million (US$63.9 million) for the fourth quarter of 2019, representing a decrease of 5.8% from RMB472.1 million in the same period of 2018.
Other income was RMB34.5 million (US$5.0 million) for the fourth quarter of 2019, compared with other income of RMB94.4 million in the same period of 2018. In the fourth quarter of 2019, other income consisted primarily of (1) a gain of RMB7.1 million (US$1.0 million) from the quality assurance fund, (2) other income of RMB30.3 million (US$4.4 million) which primarily consists of government grants, interest income and investment income from short term investments. The Company re-evaluates the expected default rate at each balance sheet date to reflect the views of market participants of future defaults of the Company’s loan portfolio based on the latest market changes. For the fourth quarter of 2019, RMB13.5 billion of loans facilitated on the Company’s platform had quality assurance protection provided by the Company.
Income tax expenses (benefits) were RMB57.1 million (US$8.2 million) for the fourth quarter of 2019, compared with income tax benefits of RMB193.6 million in the same period of 2018 due to the non-recurrence of tax write-back that occurred in the fourth quarter of 2018 upon the confirmation of a subsidiary software company status.
Net profit decreased by 46.7% to RMB412.5 million (US$59.3 million) for the fourth quarter of 2019, from RMB774.6 million in the same period of 2018.
Net profit attributable to ordinary shareholders of the Company decreased by 46.9% to RMB411.3 million (US$59.1 million) for the fourth quarter of 2019, from RMB774.2 million in the same period of 2018.
As of December 31, 2019, the Company had cash and cash equivalents of RMB2,324.5 million (US$333.9 million) and short-term investments mainly in wealth management products of RMB114.6 million (US$16.5 million).
The total balance of the quality assurance fund, which includes restricted cash of RMB1,473.7 million (US$211.7 million) and the quality assurance fund receivable of RMB3,649.6 million (US$524.2 million), was equivalent to 23.5% of the total outstanding off balance sheet loans and interest with quality assurance.
The following table provides the delinquency rates for all outstanding loans on the Company’s platform as of the respective dates indicated.
|
As of |
15-29 |
30-59 |
60-89 |
90-119 days |
120-149 days |
150-179 days |
|
March 31, 2017 |
0.57% |
0.95% |
0.79% |
0.59% |
0.54% |
0.51% |
|
June 30, 2017 |
0.86% |
1.11% |
0.79% |
0.51% |
0.55% |
0.52% |
|
September 30, 2017 |
0.89% |
1.40% |
1.15% |
1.02% |
0.79% |
0.60% |
|
December 31, 2017 |
2.27% |
2.21% |
1.72% |
1.63% |
1.36% |
1.20% |
|
March 31, 2018 |
0.87% |
2.11% |
2.43% |
3.83% |
2.29% |
1.89% |
|
June 30, 2018 |
0.83% |
1.21% |
1.05% |
0.98% |
1.60% |
2.03% |
|
September 30, 2018 |
1.03% |
1.77% |
1.49% |
1.29% |
1.06% |
1.02% |
|
December 31, 2018 |
0.92% |
1.63% |
1.41% |
1.45% |
1.44% |
1.34% |
|
March 31, 2019 |
0.80% |
1.61% |
1.45% |
1.29% |
1.31% |
1.20% |
|
June 30, 2019 |
0.86% |
1.42% |
1.37% |
1.19% |
1.26% |
1.21% |
|
September 30, 2019 |
0.90% |
1.50% |
1.35% |
1.31% |
1.17% |
1.20% |
|
December 31, 2019 |
1.34% |
2.40% |
1.86% |
1.76% |
1.62% |
1.53% |
The following chart and table display the historical cumulative 30-day plus past due delinquency rates by loan origination vintage for all loan products facilitated through the Company’s online marketplace:
Click here to view the chart.
|
Month on Book |
|||||||||||||||||||||||
|
Vintage |
2nd |
3rd |
4th |
5th |
6th |
7th |
8th |
9th |
10th |
11th |
12th |
||||||||||||
|
2017Q1 . . . . |
1.51% |
2.09% |
2.71% |
3.33% |
3.87% |
4.33% |
4.68% |
4.98% |
5.33% |
5.61% |
5.80% |
||||||||||||
|
2017Q2 . . . . |
2.19% |
3.01% |
3.86% |
4.56% |
5.13% |
5.78% |
6.32% |
6.79% |
7.05% |
7.19% |
7.24% |
||||||||||||
|
2017Q3 . . . . |
2.22% |
3.05% |
4.13% |
5.18% |
6.13% |
6.64% |
6.88% |
7.04% |
7.16% |
7.22% |
7.26% |
||||||||||||
|
2017Q4 . . . . |
2.86% |
4.24% |
5.19% |
5.69% |
5.98% |
6.19% |
6.29% |
6.39% |
6.47% |
6.49% |
6.50% |
||||||||||||
|
2018Q1 . . . . |
1.37% |
2.20% |
2.99% |
3.67% |
4.32% |
4.86% |
5.23% |
5.50% |
5.66% |
5.74% |
5.77% |
||||||||||||
|
2018Q2 . . . . |
1.87% |
3.12% |
4.39% |
5.46% |
6.33% |
6.99% |
7.47% |
7.80% |
7.99% |
8.08% |
8.13% |
||||||||||||
|
2018Q3…… |
1.45% |
2.51% |
3.53% |
4.39% |
5.09% |
5.59% |
5.97% |
6.28% |
6.50% |
6.64% |
6.72% |
||||||||||||
|
2018Q4. . . . |
1.43% |
2.49% |
3.55% |
4.42% |
5.18% |
5.76% |
6.20% |
6.54% |
6.81% |
7.01% |
7.16% |
||||||||||||
|
2019Q1…… |
1.34% |
2.38% |
3.45% |
4.36% |
5.13% |
5.75% |
6.22% |
6.65% |
|||||||||||||||
|
2019Q2…… |
1.33% |
2.34% |
3.31% |
4.18% |
5.05% |
||||||||||||||||||
|
2019Q3…… |
1.02% |
2.16% |
|||||||||||||||||||||
Fiscal Year 2019 Financial Results
Operating revenues for the fiscal year 2019 increased by 31.2% to RMB5,962.8 million (US$856.5 million) from RMB4,543.7 million in 2018, primarily due to the increase in loan facilitation service fees, post facilitation service fees and net interest income from loans invested mainly through trusts.
Loan facilitation service fees increased by 13.4% to RMB3,310.9 million (US$475.6 million) for the fiscal year 2019 from RMB2,919.2 million in 2018, primarily due to the increase in loan origination volume, offset by the decrease in the average rate of transaction fees.
Post-facilitation service fees increased by 30.1% to RMB1,200.4 million (US$172.4 million) for the fiscal year 2019 from RMB922.8 million in the prior year, primarily due to the rolling impact of deferred transaction fees.
Net interest income for the fiscal year 2019 was RMB1,106.7 million (US$159.0 million), compared with RMB256.1 million in 2018, primarily due to increased interest income from the expansion in the outstanding loan balances of consolidated trusts.
Other revenue decreased by 8.5% to RMB344.8 million (US$49.5 million) for the fiscal year 2019 from RMB376.9 million in 2018, primarily due to the decrease in management fees from investment programs that invest in loans protected by the quality assurance fund. This decrease was due to the winding down of the investment programs in the fourth quarter of 2019 as a result of our decision to discontinue the online information intermediary business.
Origination and servicing expenses increased by 22.6% to RMB1,208.2 million (US$173.5 million) for the fiscal year 2019 from RMB985.6 million in the prior year, primarily due to an increase in fees paid to third parties for loan collection services as a result of the increased volume of loans serviced by the Company.
Sales and marketing expenses increased by 1.3% to RMB720.3 million (US$103.5 million) for the fiscal year 2019 from RMB710.8 million in 2018, primarily due to an increase in online customer acquisition expenses.
General and administrative expenses increased by 13.7% to RMB435.8 million (US$62.6 million) for the fiscal year 2019 from RMB383.4 million in 2018, primarily due to an increase in fees paid to third parties for trust management. General and administrative expenses for the period included share-based compensation of RMB42.3 million (US$6.1 million).
Research and development expenses increased by 22.8% to RMB390.6 million (US$56.1 million) for the fiscal year 2019 from RMB318.0 million in 2018, primarily due to increased investments in technology.
Provision for loans receivables was RMB299.5 million (US$43.0 million) for the fiscal year 2019, compared with RMB192.7 million in 2018 due to the increased number of consolidated trusts in fiscal year 2019.
Provision for accounts receivables was RMB261.9 million (US$37.6 million) for the fiscal year 2019, compared with RMB106.7 million in 2018 due to the increase in loan origination volume.
Operating income increased by 43.3% to RMB2,646.4 million (US$380.1 million) for the fiscal year 2019 from RMB1,846.6 million in 2018.
Non-GAAP adjusted operating income, which excludes share-based compensation expenses before tax and a write-back provision for expected discretionary payments to investors in investment programs protected by the Company’s investor reserve funds which is only applicable in 2018, increased by 47.1% to RMB2,688.7 million (US$386.2 million) for the fiscal year 2019 from RMB1,828.3 million in 2018.
Other income recorded a gain of RMB210.1 million (US$30.2 million) for the fiscal year 2019, compared to a gain of RMB774.1 million in 2018. In 2019, other income primarily consisted of (1) a gain of RMB98.4 million (US$14.1 million) from the quality assurance fund, (2) other income of RMB136.5 million (US$ 19.6 million) which primarily consists of government grants, interest income and investment income from short term investments.
Income tax expenses (benefits) were RMB482.0 million (US$69.2 million) for the fiscal year 2019, compared with RMB151.2 million in 2018. The increase was due to the non-recurrence of tax write-back that occurred in 2018 upon the confirmation of a subsidiary software company status.
Net profit was RMB2,374.5 million (US$341.1 million) for the fiscal year 2019, representing a 3.8% decrease from RMB2,469.5 million in 2018.
Net profit attributable to ordinary shareholders of the Company was RMB2,372.9 million (US$340.8 million) for fiscal year 2019, compared with a net profit attributable to ordinary shareholders of RMB2,469.1 million in 2018.
Changes of Management
The Board of Directors of the Company (the “Board”) has approved the resignation of Mr. Jun (Cliff) Zhang from his position as the Company’s Co-Chief Executive Officer and Chairman of the Board. Mr. Zhang’s resignation was due to personal reasons. Mr. Zhang will continue to serve as an advisor to the Company and remain on the Board as a director.
Mr. Feng Zhang will serve as the sole Chief Executive Officer of the Company. Mr. Feng Zhang has been serving as the Company’s Co-Chief Executive Officer since September 2018. Prior to that, he served as the Company’s Chief Operating Officer from July 2017 to September 2018 and served as the Company’s Chief Risk Officer from April 2015 to July 2017. Prior to joining the Company, Mr. Zhang held various positions across customer acquisition, risk management and customer management at Capital One Financial Services from 2003 to 2015.
In the meantime, Mr. Shaofeng Gu, the Company’s director and Chief Innovation Officer will assume the role of Chairman of the Board of Directors. Mr. Gu is one of our four co-founders and has been serving as our Director since April 2009 and Chief Innovation Officer since March 2019. Mr. Gu served as our Strategy Advisor from December 2016 to March 2019, Chief Strategy Officer from August 2014 to December 2016, Chief Technology Officer from January 2011 to August 2014 and Chief Executive Officer from 2007 to 2011. Prior to founding FinVolution (formerly PPDAI), Mr. Gu was the founder and the Chief Executive Officer of Shanghai Jufei Internet Technology Co., Ltd. (Podlook), a startup running podcast aggregation business, from 2005 to 2007. Prior to founding Podlook, Mr. Gu served as a technical lead of Microsoft Corporation from 2000 to 2005. Mr. Gu received his bachelor’s degree in communication science and engineering from Shanghai Jiaotong University in China.
Mr. Feng Zhang said, “Cliff has served the Company with pride and dedication for close to a decade. He has worked tirelessly over his tenure for all of our stakeholders to drive value and growth for FinVolution Group. We thank him for his invaluable contributions and many years of service.”
Mr. Shaofeng Gu, added, “On behalf of the Board, we extend special thanks to Cliff for his unwavering efforts in shaping and managing our rapidly expanding business both domestically and internationally. We look forward to Cliff’s continued contributions in his new role as our advisor.”
Shares Repurchase Update
The Company has repurchased approximately 4.2 million American depositary shares (“ADSs) between December 2019 and January 2020. As of January 31, 2020, the Company has cumulatively deployed approximately US$79.1 million to repurchase its ADSs under the Company’s shares repurchase program with a total authorized amount of up to US$120 million.
Business Outlook
The recent coronavirus (COVID-19) outbreak has brought uncertainties and interruptions to the consumer finance industry and the overall economy. Delinquency rates have risen across the industry and we are taking a more prudential approach towards managing loan origination volume. In light of this situation, together with the Company’s institutional funding partners and other stakeholders, FinVolution is adjusting its business strategies to minimize the pandemic’s impact on operations, while providing borrowers with greater flexibility in this challenging time. At this time, the duration of COVID-19’s impact is difficult to estimate. The Company is continuing to closely monitor this evolving situation and adopts an optimistic view in the Company’s business operations over the long term. The Company expects its loan origination volume in the first quarter of 2020 to be in the range of RMB 12 billion to RMB 13 billion
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 8:00 AM U.S. Eastern Time on March 19, 2020 (8:00 PM Beijing/Hong Kong time on March 19, 2020).
Dial-in details for the earnings conference call are as follows:
|
United States (toll free): |
1-888-346-8982 |
|
International: |
1-412-902-4272 |
|
Hong Kong, China (toll free): |
800-905-945 |
|
Hong Kong, China: |
852-3018-4992 |
|
Mainland China: |
400-120-1203 |
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 March 26, 2020, by dialing the following telephone numbers:
|
United States (toll free): |
1-877-344-7529 |
|
International: |
1-412-317-0088 |
|
Replay Access Code: |
10140299 |
