FINV

Strategic Direction:

• Internationalization remains the core strategy, diversifying risk away from single markets.
• The company is transitioning to a profit-focused model in overseas markets, balancing growth with unit economics.
• Long-term goal is for overseas revenue to exceed 50% of total group revenue by 2030.

Operational Performance (China):

• Book quality improved with C2M2 decreasing from 0.68% to 0.56%.
• Vintage credit cost remained steady at ~2.7%.
• Unique borrowers grew 6% sequentially due to selective focus on high-quality repeat customers.
• Customer acquisition costs decreased quarter-over-quarter.

Operational Performance (Overseas):

• Indonesia: Offline Buy Now Pay Later (BNPL) now accounts for ~25% of volume (up from single digits), driving new borrower momentum.
• Philippines: Deliberate pullback in origination to comply with new interest rate caps; unique borrowers continued to grow despite this.
• Australia: Unique borrowers grew 22% sequentially; expansion into large-ticket, lower-interest products to attract strong credit profiles.
• Total unique borrowers doubled year-over-year to 5.3 million.

Risk & Compliance:

• Early risk indicators in China showed a ~20% uptick in July due to an isolated industry credit incident and tightened collection regulations.
• Implemented stricter underwriting bars and refined customer segmentation to protect unit economics.
• Launched 'Golden Satin Nail' consumer protection system, resolving 74.5% of cases on first contact with 98.5% satisfaction.

ESG & Technology:

• Anti-fraud system flagged >9,000 suspicious activities daily and blocked >17,000 fraud attempts.
• Invested in open banking infrastructure in Australia for sharper borrower grading.

Capital Allocation:

• Repurchased US$27.4 million in shares in Q2, bringing H1 2026 repurchases to US$66.8 million.
• Maintained strong liquidity with RMB 7.5 billion in cash/short-term investments and RMB 5 billion in highly liquid assets.

• Reiterated full-year revenue guidance of RMB 11.5 billion to RMB 12.9 billion.
• Expects to land in the lower part of the range due to tighter funding and credit conditions in China.
• Confident in delivering US$13 million full-year EBITDA for the overseas segment (doubling last year).
• Expects overseas volume to grow at a double-digit rate year-over-year for the full year.
• Anticipates gradual recovery in Philippine volume in Q3 as the new pricing environment stabilizes.

China Mainland Segment: Revenue was RMB 2.4 billion, up 8% sequentially, accounting for approximately 71% of total group revenue. Operating profit grew 4.3% sequentially to RMB 625 million. Loan volume reached RMB 41 billion, up 6.5% quarter-over-quarter.

Overseas Segment: Revenue was RMB 930 million, up 18% year-over-year, representing roughly 27% of group revenue. Operating profit was RMB 54 million, up 17% sequentially and more than double year-over-year. Overseas loan volume rose 19% year-over-year.

• Funding Tightening: Institutional partners reduced funding supply following an isolated credit incident in June/July, leading to a ~50% drop in China volume in July.
• Rising Costs: Funding costs increased by 30 basis points in July to 3.7%, with expectations of further upward pressure.
• Regulatory Changes: New fee disclosure requirements (effective Aug 1) and online marketing rules (effective late Sept) require compliance adjustments.
• Collection Industry Crackdown: Regulatory actions against the collection industry have tightened capacity, impacting recovery efficiency.
• Macroeconomic Headwinds: Subdued household consumer confidence in China and potential currency impacts from oil prices on overseas operations.

Q: Cindy Wang asked about business adjustments post-June platform incident, current funding supply, and the impact of small platform exits on industry risk.

A: Alexis Xu explained that institutional funding tightened sharply after the event due to compliance concerns. Finvolution adjusted by increasing transparency with partners and prioritizing high-quality customers over scale. While short-term volume dropped ~50% in July, liquidity remains strong (RMB 12.5 billion total). Recovery depends on institutions completing self-checks; the company expects volatility to persist for 1-2 quarters before confidence returns.

Q: Alex Yeh inquired about recent funding cost trends and whether capital deployment/buybacks would adjust given domestic funding bottlenecks.

A: Funding costs rose ~30bps in July and are expected to trend higher in the next 1-2 quarters. To mitigate reliance on external funding, the company is exploring capital injections into licensed businesses (e.g., micro-lending) to diversify sources. Share buybacks remain flexible and secondary to operational needs, but long-term shareholder return commitments remain unchanged. The strong overseas profit engine provides patience to navigate China's temporary headwinds.

Q: Youyou Fan asked for the key drivers of overseas profit growth in the second half of the year.

A: Growth will be driven by three complementary markets. Indonesia contributes bulk incremental volume, benefiting from peak seasons and expanding offline BNPL products. The Philippines is recovering sequentially after deliberate pre-Q2 pullbacks to adjust to interest rate caps, improving customer mix. Australia continues rapid double-digit expansion with high-value, low-risk customers. This diversified structure reduces single-market dependency and supports the long-term goal of overseas revenue exceeding 50% of total group revenue by 2030.