FinVolution Group (FINV) Earnings

Management highlights

- **Strategic Milestone: Segment Reporting Change** * Management introduced separate segment reporting for the first time, reflecting that the overseas business has matured into a standalone profitable growth engine separate from the mature China core business. This change improves transparency for investors to value each business segment independently. * The company's updated strategic positioning frames China as the stable cash flow foundation and Overseas as the primary growth engine, with the two segments aligned in long-term strategy. - **China Business Operational Progress** * Credit risk has gradually improved to healthier levels, with all key risk metrics moving in a positive direction following risk mitigation actions taken in H2 2025. * As the industry has consolidated, the company selectively acquired high-quality customers at lower acquisition costs, growing new borrowers sequentially even with reduced marketing spend. * Management is taking a cautious, patient approach to re-engaging growth while closely monitoring the evolving domestic regulatory landscape. - **Overseas Business Strategic Execution** * Growth and expansion follow the company's LEGO+ framework, which allows capabilities (risk infrastructure, product architecture, customer strategy, funding relationships) built in one market to be leveraged and replicated in new markets, accelerating entry and reducing risk. * In Indonesia, offline buy now pay later remained the primary growth engine, with transaction volume and loan balance both growing 5% sequentially, unique borrowers reaching nearly 5x the year-ago level, and customer quality improving. * In the Philippines, management deliberately moderated loan origination ahead of a new second-quarter interest rate regime, continuing the company's proven playbook for navigating regulatory transitions. * In Australia, the company's proprietary China and Southeast Asia-honed risk infrastructure is being gradually deployed, resulting in sequential transaction volume growth even with Q1 seasonal softness and improved risk segmentation and detection. * The overseas funding ecosystem continues to expand, with a new prominent international bank added as a funding partner in the Philippines. - **Technology and AI Investment** * The company is deploying nearly 120 active AI and automation initiatives across the business, with over 50% embedded directly in frontline operations. For example, AI collection agents now handle 50% of early-stage collections with recovery efficiency matching historical benchmarks. * Management is building proprietary AI-native infrastructure to support new product launches across all current and future markets, creating a durable, compounding competitive advantage. - **Shareholder Returns and ESG** * The board approved an eighth annual dividend of US$0.306 per ADS, a 10.5% year-over-year increase in dividends per share. As of the end of Q1, total 2026 fiscal year dividend distributions reach US$74.5 million. * The company has deployed US$154 million in share repurchases as of the end of April 2026. * Community engagement initiatives expanded in Q1, including opening the company's maker business support program to retired athlete small business owners in China and partnering with local institutions to combat fintech cybercrime in the Philippines.

Guidance

- Management reaffirms the full-year 2026 group revenue guidance range of RMB 11.0 billion to RMB 12.9 billion, with no upward or downward revision. - The company remains on track to hit its long-stated target of 50% of total group revenue coming from the overseas segment by 2030, having already reached 30% in Q1 2026. - Management declined to provide specific guidance for overseas EBITDA contribution by 2030, citing too many uncertain variables that will impact the final figure. - The newly approved $150 million 2-year share repurchase program provides the company with flexible capacity to balance buybacks with funding overseas expansion, with dynamic allocation based on market price and liquidity conditions.

Segment performance

Finvolution Group now reports two distinct operating segments: China Mainland and Overseas Markets. For the full group in Q1 2026, total net revenue reached RMB 3.2 billion, a 6% sequential increase; operating profit rose 13% sequentially to RMB 547 million; net profit was RMB 421 million, up 1% sequentially. 1. China Mainland Segment: This is the company's mature cash flow and stability foundation. Q1 transaction volume was RMB 38.5 billion, flat sequentially. Net revenue came in at RMB 2.2 billion, up 7% sequentially, representing 68.75% of total group revenue. Key credit quality improvements included a 30 basis point reduction in vintage delinquency (to 2.7%), a 30 basis point improvement in Day 1 delinquency (to 5.2%), and a 90 basis point increase in 30-day collection rates (to 86.8%). The segment added 600,000 new borrowers, up 7% sequentially, even as sales and marketing spend was reduced. 2. Overseas Markets Segment: This is the company's high-growth profitable engine, consisting of operations in Indonesia, the Philippines, and Australia. For the first time, this segment is reported separately. Q1 transaction volume was RMB 4.1 billion, flat sequentially. Revenue reached RMB 949 million, up 35% year over year, representing 30% of total group revenue. Operating profit was RMB 46 million, up 88% year over year, and adjusted EBITDA hit RMB 47.5 million, up 87% year over year. All three individual markets contributed to profitability. Loan balance grew 38% year over year, and total unique borrowers across the segment reached 2.45 million, more than doubling year over year.

Risks & headwinds

- Foreign exchange fluctuation negatively impacted net profit growth in the first quarter, limiting sequential net profit growth to just 1% despite stronger operating profit growth. - There is ongoing uncertainty surrounding the evolving Chinese domestic regulatory landscape for fintech and consumer credit. - The new Chinese regulation on online marketing of financial products will increase near-term compliance costs for the industry and require operational workflow adjustments for all market participants. - Expansion into international markets carries inherent challenges related to differing local regulatory environments, interest rate regimes, and consumer credit dynamics. - Macroeconomic uncertainty in both domestic and global markets could impact consumer credit demand and credit performance going forward.

Analyst Q&A

• Q: The company has maintained a steady share repurchase pace in Q1. What is the outlook for future buyback pace? What impact will the new financial product online marketing regulation have on operations, and how is the company responding? /

  A: The company has executed $54 million in buybacks in 2026 as of the end of April, with $20 million remaining under the prior program. The board just approved a new $150 million 2-year buyback program. Capital allocation will dynamically balance funding for overseas expansion and flexible buybacks at dislocated market prices to maximize shareholder returns. For the new regulation, management notes it is a continuation of existing industry trends focused on consumer protection and clarifying boundaries between tech and finance, which aligns with the company's existing compliant model. Near-term adjustments are required, including tighter marketing standards, workflow changes for user traffic referral, and reinforced boundaries for core credit decisions. As a compliant, tech-enabled player, management views the regulation as net positive for the company over the medium to long term as it raises industry barriers and consolidates the market.

• Q: Has domestic credit risk performance continued to improve in April and May after Q1? Will that lead to higher Q2 transaction volume in China? What was the reasoning for the new segment reporting, and can you share overseas operating metrics and 2030 EBITDA contribution guidance? /

  A: The improving domestic credit risk trend has continued into Q2, with Day 1 delinquency falling below 5% by the end of April, back to mid-2025 levels. The improvement comes from shifting to higher quality customers and AI-driven improvements to risk analysis, fraud detection, and collections. As a result, the company has selectively increased credit appetite and expects Q2 growth momentum to continue, while remaining focused on balancing volume, risk, and profitability. Segment reporting is a natural milestone in the company's overseas roadmap: the business is now a standalone profitable growth engine, so separate disclosure improves investor transparency. Management declined to break out APR, funding costs, and default rates by market due to cross-market heterogeneity, but noted funding costs are falling as the partner base expands from 5 to 18, and risk metrics are improving across all markets. It is too early to guide 2030 overseas EBITDA contribution due to multiple variables.

• Q: Now that the overseas business is profitable, what are the key drivers for sustained long-term growth, and what is your outlook for the segment? /

  A: The core driver of sustained overseas growth is a dual flywheel model: a growing user base and data pool improves risk model accuracy, which produces higher quality assets that attract more low-cost institutional funding, which in turn allows expansion to broader, higher quality customer segments. All three core markets are performing well: Indonesia has resumed growth with offline BNPL volume doubling year over year, the Philippines delivered double-digit year-over-year growth despite pre-regulatory lending moderation, and Australia grew 25% year over year as risk infrastructure is deployed. Management is confident the flywheel will accelerate as the business scales, and that the company's mature tech model and operational agility will support its long-term vision of becoming a leading global technology-driven inclusive financial platform.