FinVolution(FINV) - 2022 Q1 - Quarterly Report

FinVolution Group Q4 and Fiscal Year 2021 Financial Results Operational and Financial Highlights The company achieved record transaction volume and strong profit growth in 2021, driven by a surge in new borrowers Full Year 2021 vs 2020 Key Operational Metrics | Metric | Full Year 2020 | Full Year 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Total Transaction Volume (RMB in billion) | 65.1 | 137.4 | 111.1% | | Total No. of New Individual Borrowers ('000) | 1,639 | 4,415 | 169.4% | | New Individual Borrowers China's Mainland ('000) | 1,010 | 3,015 | 198.5% | | New Individual Borrowers International ('000) | 629 | 1,400 | 122.6% | Q4 2021 vs Q4 2020 Key Operational Metrics | Metric | Q4 2020 | Q4 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Total Transaction Volume (RMB in billion) | 21.5 | 39.0 | 81.4% | | Total No. of New Individual Borrowers ('000) | 663 | 1,041 | 57.0% | | Total outstanding principal of loans (RMB in billion) | - | 50.3 | 88.4% | Q4 2021 Key Financial Highlights | Metric | Q4 2020 | Q4 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Net Revenue (RMB in million) | 1,853.0 | 2,448.0 | 32.1% | | Net Profit (RMB in million) | 497.3 | 649.7 | 30.6% | | Diluted Net Profit per ADS (RMB) | - | 2.21 | 28.5% | - Asset quality improved, with the 90 day+ delinquency ratio decreasing to 1.26% as of December 31, 2021, compared to 1.56% as of December 31, 2020[6] Management Commentary Management highlighted record transaction volume that surpassed guidance and robust revenue growth in Q4 - CEO Feng Zhang noted that the full-year 2021 transaction volume reached an all-time high of RMB137.4 billion, a YoY increase of 111.1%, surpassing the company's guidance[10] - International market transaction volume for 2021 grew by 270.0% year-over-year to RMB3.7 billion, despite the resurgence of COVID-19 in Southeast Asia[10] - The number of small business owners served in Q4 increased by 161.3% YoY to 507 thousand, with their transaction volume accounting for 22.1% of the total[10] - CFO Jiayuan Xu reported that Q4 net revenues increased by 32.1% YoY to RMB2.4 billion, driven by operational optimization and technological deployment[12] - The company's un-restricted cash and short-term liquidity position strengthened to RMB5.6 billion in Q4 2021, up from RMB4.6 billion in the same period last year[12] Detailed Financial Results The company's financials show strong revenue growth offset by rising sales and marketing expenses Fourth Quarter 2021 Financial Results Q4 revenue grew 32.1% YoY, but higher marketing costs led to a 12.1% decline in operating profit Q4 2021 Revenue Breakdown (RMB in millions) | Revenue Component | Q4 2020 | Q4 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Loan facilitation service fees | 643.3 | 1,005.1 | 56.2% | | Post-facilitation service fees | 175.7 | 422.3 | 140.4% | | Guarantee income | 667.4 | 624.1 | -6.5% | | Net interest income | 204.3 | 294.7 | 44.2% | | Total Net Revenue | 1,853.0 | 2,448.0 | 32.1% | Q4 2021 Expense & Profitability (RMB in millions) | Item | Q4 2020 | Q4 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Sales and marketing expenses | 209.6 | 389.4 | 85.8% | | Credit losses for quality assurance | 308.7 | 582.5 | 88.7% | | Operating profit | 595.6 | 523.5 | -12.1% | | Net profit | 497.3 | 649.7 | 30.6% | Fiscal Year 2021 Financial Results Full-year revenue rose 25.2%, with operating profit up 13.3% despite a sharp rise in marketing spend Fiscal Year 2021 Revenue Breakdown (RMB in millions) | Revenue Component | FY 2020 | FY 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Loan facilitation service fees | 1,908.9 | 3,794.2 | 98.8% | | Post-facilitation service fees | 673.0 | 1,309.6 | 94.6% | | Guarantee income | 3,386.0 | 2,593.5 | -23.4% | | Total Net Revenue | 7,563.1 | 9,470.1 | 25.2% | Fiscal Year 2021 Expense & Profitability (RMB in millions) | Item | FY 2020 | FY 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Sales and marketing expenses | 482.9 | 1,584.2 | 228.1% | | Operating profit | 2,307.5 | 2,613.8 | 13.3% | | Net profit | 1,968.6 | 2,495.3 | 26.8% | Asset Quality and Delinquency Rates Asset quality improved significantly, with the 90 day+ delinquency ratio decreasing to 1.26% - The 90 day+ delinquency ratio for loans in China's Mainland improved to 1.26% as of December 31, 2021, from 1.56% as of December 31, 2020[6] Delinquency Rates of Outstanding Loans (China's Mainland) | As of | 30-59 days | 60-89 days | 90-119 days | 150-179 days | | :--- | :--- | :--- | :--- | :--- | | Dec 31, 2020 | 0.55% | 0.48% | 0.52% | 0.55% | | Dec 31, 2021 | 0.67% | 0.55% | 0.49% | 0.36% | Business Outlook and Corporate Actions The company projects cautious 2022 transaction volume growth and extended its share repurchase program 2022 Business Outlook The company forecasts 2022 transaction volume between RMB175 billion and RMB180 billion - The company forecasts its transaction volume for the full year 2022 to be in the range of RMB175 billion to RMB180 billion[30] - This guidance represents an expected year-over-year growth of 27.4% to 31.0%[30] Share Repurchase Program Update The US$60 million share repurchase program was extended through December 31, 2022 - The company's board extended the existing US$60 million share repurchase program for another twelve months, through December 31, 2022[32] - As of December 31, 2021, the company had repurchased a total aggregate value of approximately US$131.5 million of its ADSs[32] Unaudited Financial Statements Unaudited statements show a strengthened balance sheet with increased assets, equity, and cash reserves Consolidated Balance Sheets Total assets grew to RMB18.1 billion, driven by increased cash and shareholders' equity Key Balance Sheet Items (RMB in thousands) | Item | Dec 31, 2020 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | 2,632,174 | 4,418,127 | | Total assets | 14,882,185 | 18,138,551 | | Total liabilities | 6,451,855 | 7,428,941 | | Total shareholders' equity | 8,430,330 | 10,709,610 | Consolidated Statements of Comprehensive Income Full-year net revenue grew 25.2% to RMB9.5 billion, boosting net profit to RMB2.5 billion Key Income Statement Items - Full Year (RMB in thousands) | Item | FY 2020 | FY 2021 | | :--- | :--- | :--- | | Net revenue | 7,563,087 | 9,470,128 | | Operating profit | 2,307,533 | 2,613,766 | | Net profit attributable to FinVolution Group | 1,972,700 | 2,508,947 | | Diluted net profit per ADS (RMB) | 6.61 | 8.46 | Consolidated Statements of Cash Flows Operating cash flow decreased, but strong investing inflows boosted the year-end cash position Key Cash Flow Items - Full Year (RMB in thousands) | Item | FY 2020 | FY 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | 2,206,909 | 630,227 | | Net cash provided by investing activities | 1,041,496 | 1,994,845 | | Net cash (used in)/provided by financing activities | (3,091,279) | (239,800) | | Cash, cash equivalent and restricted cash at end of period | 6,116,401 | 8,491,541 | Reconciliation of GAAP and Non-GAAP Results Non-GAAP results, which exclude share-based compensation, show higher adjusted operating income - The company uses Non-GAAP measures to evaluate operating results, primarily by excluding the impact of share-based compensation expenses[38] GAAP vs. Non-GAAP Operating Income (RMB in thousands) | Period | GAAP Operating Income | Share-based Compensation | Non-GAAP Adjusted Operating Income | | :--- | :--- | :--- | :--- | | Q4 2021 | 523,511 | 36,923 | 560,434 | | Full Year 2021 | 2,613,766 | 95,213 | 2,708,979 | Non-GAAP Diluted Net Profit per ADS (RMB) | Period | Q4 2020 | Q4 2021 | FY 2020 | FY 2021 | | :--- | :--- | :--- | :--- | :--- | | Non-GAAP Diluted Net Profit per ADS | 1.77 | 2.33 | 6.76 | 8.78 |