FinVolution Group

NYSE:FINV

Earnings Call Analysis

Revenue and Transaction Growth Amid Expansion

In a story of resilience and strategic expansion, the company continued to build upon its robust track record of growth despite a dynamic macro environment. Total tourism spending rose 8% year-over-year to record highs, indicating a shift in consumer spending from large to small ticket items. This was mirrored in the company's consumer credit demand, with new borrower applications rising by 3-5% and total unique borrowers in Q4 reaching 2.1 million. The company's day 1 delinquency rate improved to 5.2%, demonstrating strengthened asset quality. Internationally, the company experienced extraordinary growth with international transaction volume for 2023 soaring by 85%, and in the Philippines, new borrower numbers grew by over 188%. For full year 2023, net revenues reached RMB 12.5 billion, up 13%, while net income grew to RMB 2.38 billion, a 5% increase. Looking forward to 2024, the company expects Chinese market transaction volume to increase by 5-10% and international transaction volume to grow by 20-40%.

Economic Resilience Amid Global Challenges

FinVolution, a leader in the fintech space, has faced the evolving economic landscape of China with resilience. Despite China's 5% GDP growth in 2023, the company adeptly navigated market turbulence, leveraging its technological and operational excellence to end the year solidly. China's strong consumer activity during the Lunar New Year, demonstrated by a 19% increase in tourist trips and an 8% climb in tourism spending, provided a favorable environment for FinVolution's strategic initiatives.

Outperforming in The SME Lending Space

Through its commitment to empowering small business owners, the company experienced remarkable growth, serving over 811,000 SMEs and facilitating 47 billion RMB in loans—a substantial 80.5% increase from the previous year. This impressive performance underscores FinVolution's role as a fintech trailblazer and a pivotal provider of SME financing in China.

Technological Investment and Innovation

FinVolution places a significant emphasis on R&D to drive innovation and maintain its industry edge. In 2023, the company invested over 500 million RMB in technology to enhance offerings like automatic speech recognition. This bolstered operational efficiency across its markets and solidified a robust IP portfolio of 339 registered software copyrights and 179 patent applications. Recognitions such as being honored on the 'Shanghai 2023 [100] Leads' for software and IT service excellence highlight the company's R&D prowess.

Financial Performance and Revenue Growth

FinVolution reported a net revenue of 12.5 billion RMB, marking a 13% year-over-year growth, while its international business soared—flourishing by 85% in transaction volume and 58% in the loan balance. The international markets contributed significantly to revenue, exposing an 86% increase to 2.1 billion RMB. Revenue from the China market rose by 4% to 10.4 billion RMB, buoyed by the company's strategic moves to refine borrower demographics and secure higher-quality borrowers.

Operational Efficiency and Competitive Edge

FinVolution has improved its funding cost by roughly 100 basis points year-over-year, benefiting from stable borrowing rates and industry-leading delinquency rates. The company’s leverage ratio held steady at 4.1x, suggesting room for growth. Furthermore, FinVolution’s efficient risk assessment and advanced collection technologies helped the business navigate market headwinds, ensuring services for higher-quality borrowers remained intact.

International Expansion and Market Penetration

The company has made significant strides in international markets like Indonesia and the Philippines, registering robust growth rates. In the Philippines, FinVolution has proactively acquired new customers, leading to an impressive 188% increase in new borrowers and significant transaction volume growth. With an eye on profitability and sustained momentum, the company plans to amplify its expansion with strategic initiatives and to diversify consumer acquisition channels.

Commitment to Shareholder Returns

Highlighting its commitment to shareholder value, FinVolution increased its annual dividend by 10.2% to USD 0.237 per ADS. In 2023, the company returned approximately USD 160 million to shareholders, representing a 49% capital return rate of the net income. With a cumulative return of USD 605 million to date, FinVolution signifies a compelling proposition for value-conscious investors looking for robust capital return programs.

Future Outlook

Looking ahead, FinVolution is poised for growth, projecting a 5% to 10% increase in China market transaction volume in 2024. The anticipated range is between 195.7 billion RMB and 205 billion RMB. Meanwhile, the international transaction volume is expected to grow by 20% to 40%, reaching between 9.4 billion RMB and 11 billion RMB. These growth estimations reflect FinVolution's confidence in its strategic direction and international expansion initiatives as it continues to harness technology and market opportunities.

Earnings Call Transcript 2023-Q4

[Operator]

Hello, ladies and gentlemen. Thank you for participating in the Fourth Quarter and Full Year 2023 Earnings Conference Call for FinVolution Group. [Operator Instructions] After prepared remarks, there will be a question-and-answer session. Today's conference call is being recorded.

I will now turn the call over to your host, Jimmy Tan, Head of Investor Relations for the company. Jimmy, please go ahead.

[Jimmy Tan, executive]

Hello, everyone, and welcome to our fourth quarter and full year 2023 earnings conference call. The company results were issued via Newswire services earlier today and are posted online. You can download the earnings release and sign up for the company e-mail alerts by visiting the IR section of our website at group, ir.finvgroup.com. Mr. Tiezheng Li, our Chief Executive Officer; and Mr. Jiayuan Xu, our Chief Financial Officer, will start the call with their prepared remarks and conclude with a Q&A session.

During this call, we will be referring to several non-GAAP financial measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For information about these non-GAAP measures, reconciliation to GAAP measures, please refer to our earnings press release.

Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the access today. Further information regarding these and other risks and uncertainties are included in the company's filings with the U.S. Securities and Exchange Commission. The company assumes any obligation to update forward-looking statements, except required under applicable law.

Finally, we post a slide presentation on our IR website providing details of our results for the quarter.

I will now turn the call over to our CEO, Mr. Tiezheng Li. Please go ahead, sir.

[Tiezheng Li, executive]

Thanks, Jimmy. Hello, everyone, and thank you for joining our earnings call. This is Tiezheng Li, CEO of FinVolution Group. We are happy to speak with you today. When I became CEO 1 year ago, FinVolution set a clear objective, become a leader in fintech industry, providing inclusive financial solutions for observed borrowers and small business owners.

In 2023, we advanced towards that goal with continued strong execution for our local focus global outlook strategy, adapting to the unique situations in different markets. I'm thrilled to report that we delivered progress on all fronts.

Throughout the year, we maintained our robust momentum with progressive expansion in China while pursuing much faster growth internationally. While economic conditions were more favorable, we have a leadership position in both Indonesia and Philippines. We're also fortifying our success and high-quality growth in China as we proactively adjust our strategy to suit China's dynamic economy.

Performance-wise, we continue to grow our business across the board despite evolving macroeconomic challenges. The cumulative number of borrowers we served in China, Indonesia and the Philippines has reached 30 million, growing at an accelerated pace with a net increase of around 3 million new borrowers year-over-year. [indiscernible] RMB 194 billion and our outstanding loan finance reached RMB 67 billion, representing year-over-year increases of 11% and 4%, respectively.

Net revenue for the full year 2023 reached RMB 12.5 billion, up 13% year-over-year.

Our international business grew exceptionally well in 2023, propelled by our effective global outlook strategy of pursuing rapid growth in overseas market. International transaction volume for 2023 soared to RMB 7.9 billion and outstanding loan balance rose to RMB 1.3 billion, up 85% and 58%, respectively, compared to the prior year.

International market revenue increased to RMB 2.1 billion, up 86% from full year 2022. Over the past year, international revenue contribution to total revenue increased significantly, rising to 17% in 2023 from 10% in 2022.

Meanwhile, with our local focus strategy of pursuing high-quality growth in China, we continue to achieve progressive growth domestically. Transaction volume increased to RMB 186 billion, while outstanding loan balance reached RMB 66 billion, up 9% and 4%, respectively, compared to the prior year.

Revenue from the China market in 2023 further expanded to RMB 10.4 billion, up 4% compared to the prior year.

Another notable improvement was funding cost, which improved by 30 bps on a quarterly basis and by around 100 bps year-over-year.

Our stable borrowing rates coupled with better than industry delinquency rates and enhanced operational efficiency enabled us to sustainably deliver higher ROA compared to the industry.

We are also strengthening our commitment to small business owners, supported by a prudent approach during this fragile and sometimes volatile recovery period. In 2023, we served over 811,000 small business owners and facilitated RMB 47 billion of loans further, up 80.5% compared with the last year and representing 25% of total transaction volume in China.

FinVolution is a fintech frontrunner with profound expertise across an extensive industry footprint. Part of our commitment to shareholders is to continue providing the company's sustainable development and industry-wide digital transformation through technology innovation.

I'd like to share just a few of the pivotal technological advancements we made throughout the year. We amplified our investment in technological R&D, driving high-quality growth, leveraging cutting-edge technology. This significantly improved and optimized our operational process across all markets in which we operate. This includes increased R&D investment of over RMB 500 million in 2023 to strengthen different aspects of our technologies, such as the automatic speech recognition capabilities, greatly improving its growth of Chinese dialogs while boosting our chatbot's efficiency and accuracy.

R&D is critical to our ongoing success. And we continue to invest in our tech and our people. As of December 31, 2023, we proudly employed a dedicated R&D team of around 700 skilled professionals and have built a comprehensive IP portfolio that comprised 339 registered software copyrights and the successful filing of 179 patent applications, including 53 invention patents already granted. Each of our R&D accomplishments enhance our offering to consumers and set new benchmarks for the financial services industry, supporting FinVolution's growth and the industry's wide progress.

In recognition of these efforts, the Shanghai Municipal Commission of economy and information recently honored FinVolution on its Shanghai 2023 [ 100 ] leads for software and IT service excellence. We earned prestigious ranking on both leads, securing the 18th and the 26th position, respectively. These commendations recognized our contributions to technology innovation and the advancement of the in industry.

Last but not least, ESG remains a top priority at FinVolution. We diligently enhanced our integrated ESG program throughout 2023 with the focus on inclusion and giving back to society. For example, we have cumulative offered RMB 120 million of interest-free loans for eligible small business owners to help build their dreams into reality. Our commitment and efforts have also been led by several renowned independent rating agencies this above-average industry rating.

We celebrated FinVolution's 16th anniversary in 2023 amongst those that affords us a glimpse of our future prospects as an enterprise grounded in sustained long-term growth.

Over the past 16 years, our business model and strategy have been validated by success in the face of multiple challenges, such as the P2P transition, shift towards better quality borrowers and international expansion amidst the pandemic.

As an independent platform with limited resources, we are proud to have expanded and flourished in all markets in which we operate. Going forward, we will remain committed to serving borrowers in our existing markets while increasing the pace of our international expansion by acquiring more licenses and expanding into additional countries and the regions to deliver innovative financial services to more borrowers.

Our local focus, global outlook strategy will continue to guide us and drive our healthy and sustainable development as we embarked on 2024. By leveraging technologies and operational advantages, we are confident to replicate our domestic and international success in new markets, unlocking value and making the company a world-class fintech enterprise while consistently returning value to our shareholders.

With that, I will now turn the call over to our CFO, Jiayuan Xu, who will discuss our operational and financial results.

[Jiayuan Xu, executive]

Thank you, Li, and hello, everyone. Welcome to our fourth quarter and full year 2023 earnings call. Let's go through our key results for the fourth quarter. To be mindful of the length of our earnings call today, I encourage your listeners to refer to our fourth quarter earnings press release for further details.

Despite GDP growth of over 5% in 2023, China's overall economic environment continues to evolve. We leveraged our various strengths to navigate the turbulence and conclude 2023 on a solid note.

Our domestic transaction volume reached RMB 50 billion for the fourth quarter, up 6% year-over-year and 2% sequentially while outstanding loan balance grew to RMB 66 billion, up 4% year-over-year and 2% sequentially. Achieving growth in both metrics are made such as soft consumer environment is a testament to our business resilience as well as our outstanding technology, innovation and operational excellence.

We have observed several notable improvements as we move through the first quarter of 2024.

During the recent Lunar New Year, consumption activities picked up rapidly with 474 million tourist trips nationwide, up 19% from the comparable period in 2019. Total tourism spending also climbed 8% to RMB 633 billion from the comparable period in 2019, with air and train travel surpassing 2019 levels by 15% and 36%, respectively, reaching new record highs.

Box office ticket sales also rebounded and reached more than RMB 8 billion, setting a new record for the holiday period. Furthermore, several macro metrics exhibited varying degrees of improvement. For example, total social financing in general increased to RMB 6,500 million, up 9.5% year-over-year.

For the retail consumption in December was increased to RMB 4,355 billion, up 7.4% year-over-year.

February's manufacturing and service PMI Index also improved slightly to 149.1 points and 15.1 points. We believe these signs reflect the down of New Year. [indiscernible] consumer spending trends are shifting away from large ticket items, such as automobiles and property to small ticket items like travel-related expenditures and other consumption activities.

Amid these competitive dynamics, we drove a modest yet encouraging recovery in our consumer credit demand through our ongoing refinement of borrower demographics and quality with the number of new borrower application increasing by between 3% to 5%. Cumulatively, we have sold over 25 million borrowers in China, and the number of unique borrowers for the fourth quarter was 2.1 million. In addition, we further enhanced our credit risk assessment and fraud detection technologies during the quarter, which empowered us to navigate macro headwinds and stabilize our asset quality.

Our day 1 delinquency rate improved to 5.3% in December and further improved to 5.2% in February. We expect our vintage delinquency for the most recent 3 months to be 2.5%, [indiscernible] our business resilience.

Boosted by the deployment of our advanced [indiscernible] recombination technologies as well as the AI-powered chatbot we mentioned early, our loan collection recovery for the recent 3 months remained healthy at 87%.

In terms of our funding partners, as our reputation in the industry continue to rise, we have further diversified our funding sources. The cumulative number of our funding partners has expanded to 94 financial institutions as of the end of the fourth quarter, with funding costs improving by around 100 basis points year-over-year.

Moving on to our second growth driver. Our international expansion, which continues to outperform our targets and expectations. We embarked on our global expansion January in 2018 and have been deeply investing in FinVolution's visibility worldwide overseas.

Indonesia, our first overseas market, continued to record macroeconomic growth as consumer confidence index remained high to 125 points in January. Full year sales of the motor cycles, the most appropriate model of the transportation in Indonesia, surged by 19.4% to 6.2 million units year-over-year.

Our second overseas market, The Philippines, also ended 2023 with positive macro data. The Philippines will amount further growing economics in Asia with fourth quarter GDP growth of 5.6%.

Manufacturing PMI was 51 points in February and has remained above 15 points since September.

Cumulatively, we have served over 4.8 million borrowers in international markets as we continue to explore diversified consumer acquisition channels to attract new borrowers.

The number of new borrowers for international markets increased by 20% year-over-year to 1.37 million, and the number of unique borrowers rose by 18% year-over-year to around 1.9 million in 2023.

International transaction volume for the full year 2023 soared by 85% year-over-year reached RMB 7.9 billion.

Transaction volume for the fourth quarter reached RMB 2.25 billion, up 64% year-over-year. At the same time, our outstanding loan balance as of December 31, 2023, grew to RMB 1.3 billion, up 58% year-over-year.

As we deepened our rules in Indonesia and fortified our reputation, the population of loans facilitated from local financial institutions in Indonesia increased to over 90% from 63% in the same period of 2022, reflecting our credit assessment model effectiveness as well as giving interest from our local financial institutions.

The Philippines has also demonstrated excellent growth. During 2023, the number of new borrowers are in the Philippines grew by over 188%. This led to exponential growth in transaction volume and outstanding loan balance, registered by over 200% on a year-over-year basis, contributing around 20% of international transaction volume in the fourth quarter.

Thanks to our proven record as attractive lending partner, we have also secured the institutional fundings in the Philippines and also have a strong pipeline of future institutional partners in place. These accomplishments have boosted our confidence as well as our visibility and we emerge as one of the top players in the Philippines.

In 2024, we expect our Philippines operation to remain -- to maintain a robust high double-digit growth momentum.

International business revenue in the fourth quarter progressively increased to RMB 602 million, up 53% year-over-year. and represented around 19% of the company's total revenue.

For our full year 2023 perspective, international revenue reached RMB 2.1 billion, up 86% year-over-year, representing 17% of the company's total revenue, marking a significant achievement in our international development. This success has readied us to amplify our international expansion efforts with strategic initiatives such as refining more demographics acquiring license and venturing into new countries. The outstanding progress we have made in our overseas markets across multiple operational and financial metrics serves as a springboard for our ongoing expansion and development.

On a related note, we continue to build our international business presence and brand awareness on leading social media platform through AIGC-driven upgrades to our creative advertising campaigns.

As of the end of the fourth quarter, we had more than 1 million followers on Facebook, and our followers on TikTok grew at an accelerated pace to reach over 816,000, up more than 15% quarter-over-quarter.

Social media will be a key means of reaching our target audience with our overseas marketing efforts as we enter new countries and debut innovative products.

Now turning to our financial metrics. Driven by strong execution of our local focus, global outlook strategy, net revenues for full year 2023 increased to RMB 12.5 billion, up 13% year-over-year while net income increased to RMB 2.38 billion, up 5% year-over-year.

As of the fourth quarter, our leverage ratio, which is defined as the risk value loans divided by shareholders' equity, remained stable at 4.1x, reflecting opportunities for growth when the macroeconomy mobilized.

Our strong balance sheet and liquidity position continued to enhance shareholders' confidence while providing us with optimal flexibility to execute our strategy. In particular, our cash position remains robust with over RMB 7.9 billion of cash and short-term liquidity as of the end of December 2023, representing an increase of 12% year-over-year.

We believe our current cash position is sufficient to support our business expansion while increasing our return of value to our shareholders.

Now let me briefly update you on our capital return program. Since 2018, we have continuously returned value to our shareholders in the form of share repurchase and dividends. Recently, our Board of Directors approved our sixth annual dividend in the amount of USD 0.237 per ADS, an increase of 10.2% year-over-year. For full year 2023, we returned a total around of USD 160 million to our shareholders, consisting of USD 62 million in dividends and USD 98 million through share repurchase, representing a capital return rate around 49% of 2023 net income.

As of December 31, 2023, the company has cumulatively returned USD 605 million to our shareholders. These actions underscore our consistent commitment to enhancing shareholder value.

Before I conclude my remarks, I would like to provide some additional color on our base outlook for 2024. Despite the evolving macro environment, our business continues to thrive and progress. We are gaining substantial momentum as we focus on advancing our international initiatives, preparing technological for innovation, expanding our healthy consumer base and optimizing our product profile. As a result, we expect our transaction volume in the China market in 2024 to be in the range of RMB 195.7 billion to RMB 205 billion, representing an increase of around 5% to 10% year-over-year.

In addition, we expect international transaction volume in 2024 to be in the range of RMB 9.4 billion to RMB 11 billion, representing year-over-year growth of around 20% to 40%.

That concludes my prepared remarks. We will now open the call to the questions. Operator?

[Operator]

[Operator Instructions] The first question comes from Yada Li with CICC.

[Yada Li, analyst]

[Foreign Language] Firstly, considering the current macro environment, I was wondering what adjustments have we done in the lending strategy, customer acquisition and risk management. With the help of these measures, how to view the asset quality going forward?

And secondly, for the international branches, what are the growth and the profit outlook for Indonesia and the Philippine market, respectively?

[Jiayuan Xu, executive]

[Foreign Language]

[Jimmy Tan, executive]

[Interpreted] Okay, Yada, let me do the translation. From observation and study, China macro economy is still facing uncertainties but expect to have a gradual recovery. Around the third quarter last year, we have observed some negative impact on the industry, which results in asset fluctuations. We have been quick with our responses. For example, we have reduced customer acquisitions from the work quality channels and step up our model updates from higher quality China's updating the models, tightening the approval rates and credit limit for borrowers who are more prone to economic uncertainties such as those with a higher level of debts.

We have also closely monitor changes in our core metrics such as day 1 delinquency and loan collection recovery rates for the disbursed loans. And through the analysis of different borrowers, segments and tighter approval rates, we have ensured financial services for higher-quality borrowers, example those with lower debt levels remain intact.

For post-loans, I believe you are aware of the impact on loan collections due to the reductions of telephone lines. The impact on us is minimal due to our sufficient advanced preparations of telephone lines which are able to satisfy the needs of our post-loan collection team. Although our loan collection recovery rate slightly declined from 89% to 87%, we are still leading ahead of the industry. And with the implementation of these efforts, we have seen positive results in December. For recent 3 months, our day 1 delinquency rate improved to 5.3% from 5.7% in the third quarter and further improved to 5.25% in February. While loan collection recovery rate remained stable at 87% with vintage delinquency returning to 2.5%, our recovery should be ahead of the industry. and we are confident to maintain industry-leading asset quality with continuous improvement going into 2024.

[Jiayuan Xu, executive]

[Foreign Language]

[Jimmy Tan, executive]

[Interpreted]. Okay, Yada, let me do the translation. Your question is on the whole international expansion, and we will break down the explanation into different countries. For example, Indonesia has a new price cap in 2024. Our Indonesia operations in the fourth quarter has been impacted by local regulation change. And since January 1, 2024, all our new loans has met regulatory requirements and fully compliant. The pricing adjustments means that our borrowers cohort model data and rules had to undergo a series of adjustment. Based on our past experience, we will need around 6 months to complete all these changes. And from the current outcome, these changes has been positive. Example, through adjusting our borrowers' cohort, the risk metrics have improved by 20%, reducing the impact of rate reductions. And also, from a customer acquisition perspective, we have seen many small and medium platforms reducing their customer acquisition efforts, which led to an 8% decrease in our customer acquisition costs, and this further helps to reduce the impact of price reduction in Indonesia.

And part in the first half of 4, Indonesia operation focus will be on product adjustment and improving the quality instead of a rapid growth. And during the second half of 2024, we will reevaluate our strategies based on macro situation. And in 2024, we expect Indonesia to achieve profitability. The profitability from the business view will be better compared to the financial view due to the growth of the accounting policies.

In addition, we have also disclosed some additional data points for our Philippines operations. Over the past few years, Philippines operations has been developing very rapidly. And from current observation, Philippines countries, economic and regulatory environment has been relatively stable. We will expect the rapid growth to continue into 2024, and we are currently #2 in the segment of the market. We believe we can achieve our target of #1 by the end of the year.

Additionally, we expect that our Philippines operations can achieve profitability in the second half of the year under the relevant accounting rules.

We have managed to achieve profitability in both Indonesia and Philippines. And going forward, we will consider to strengthen our investment in different types of licenses, diversify our operations and enhance our brand image to further increase our competitive advantage.

We are also actively exploring new countries, and these countries are not limited to Southeast Asia, and we also consider other matters of expansion to speed up our international footprint.

[Jiayuan Xu, executive]

Okay. Thank you, Yada.

[Jimmy Tan, executive]

Thank you, Yada.

[Operator]

The next question comes from Cindy Wang with China Renaissance.

[Yun-Yin Wang, analyst]

[Foreign Language] So the first question is related to the customer acquisition cost. Since you are aggressive on the international market expansion, so what is your [indiscernible] market this year?

And the second would relate to the Philippines market. Philippines market growth is very strong in 2023. Can you talk about the competitive landscape? And how do you achieve to be the first -- #1 market share position this year? And how will that contribute to the international market revenue in 2024?

[Jiayuan Xu, executive]

[Foreign Language]

[Jimmy Tan, executive]

[Interpreted] Cindy, let me do the translation. We have been operating in the Indonesia market for quite a period of time, in fact, 6 years and we have a deep understanding of the market. Information fees continue to be the main matter to acquire better quality borrowers for us.

Although the pricing cap has some impact on our operations, we have made adjustments to our models and the results has been very positive. For example, when we have higher quality borrowers, we are able to increase our loan, our ticket size with longer loan tenure, and the fee rates further improved with weaker competition. And we believe this trend will continue in 2024, and we will reevaluate our customer acquisition strategies in the second half when the macro environment stabilize.

For the Philippines, it is in a much earlier stage compared to the Indonesia market. And over the past 2 years, our marketing efforts are much more proactive and it has been pretty stable among the top, and we believe this trend will continue into 2024.

[Jiayuan Xu, executive]

[Foreign Language]

[Jimmy Tan, executive]

[Interpreted] Let me do the translation. We entered the Philippine markets in 2020, and this is our fourth year of operations. Philippines has a population of around 130 million, and our target customer base is around 40 million. And to date, we have registered users of around 5 million, and our borrowers is around 740,000. There are currently over 100 players, and the largest players are from the U.S. and local Philippines companies.

We believe as a local -- as a fintech company from China, our advantages is obvious, and we will continue to leverage on our advantages and duplicate our success in China and Indonesia in the Philippines market.

Around 20% of our transaction volume for the international market is coming from the Philippines in the fourth quarter, and we believe this proportion will continue to increase in 2024.

[Tiezheng Li, executive]

Okay. Thank you, Cindy.

[Operator]

The next question comes from Alex Ye with UBS.

[Xiaoxiong Ye, analyst]

[Foreign Language] First, on the Indonesian market. After the pricing adjustment this year, how do you expect the impact on revenue and earnings? And do you expect any further move from the regulators with regard to the timetable to further adjust that cap and how we will be the tranche?

And second, in terms of the total shareholders' return, we know the company has also speeded up the pace of share repurchase this year, bringing the total payout ratio to 48.5%. So how should we expect a more sustainable payout ratio going forward?

[Jiayuan Xu, executive]

[Foreign Language]

[Jimmy Tan, executive]

[Interpreted] Hello, Alex, let me do the translation. We have actually shared some Indonesia data earlier. And take rate, we expect the take rate after our pricing adjustment to be around 10%, and prior to the pricing adjustment, it was around 13%. And from an ROE perspective, we expect it to be around 2.4% after the deduction of CAC and some other costs.

And based on the current regulators advice, there might be a further change in price reduction. We need to reevaluate this in the second half of the year. However, based on the current [indiscernible], we believe our business will remain at the sub-healthy level even if further price reduction kicks in.

[Jiayuan Xu, executive]

[Foreign Language]

[Jimmy Tan, executive]

[Interpreted] Hi, Alex, let me do the translation. First of all, I would like to reiterate FinVolution position. We are a global consumer finance technology company. Our success has been validated in China, Indonesia and the Philippines with leadership position. In the recent years, as China market matures, our business entered into a stage known as high-quality progressive growth. On the other hand, based on our observation, the international markets are still in early stages of development where market opportunity for growth is enormous. And we are very confident to cement our success in Indonesia and the Philippines while expanding to more countries, ensuring a rapid growth rate for our company.

Our capital return program is closely in line with our company positioning. We hope rapid and healthy business growth can be the main way to create value for our shareholders. Over the last 3 years, we have proven this point. We have completed the business transition of our China business and expanded internationally with an average CAGR growth of over 44% and revenue growth of around 20%. And apart from these, we have also returned value to shareholders through our capital return program.

We began our dividend program and share repurchase program since 2018, the earliest in our industry. Over the last 6 years, we have cumulatively returned over USD 600 million to our shareholders, equivalent to almost half of our market cap today.

In 2023, we deployed close to USD 100 million to repurchase our shares and $62 million for dividend distribution, representing around 50% of net income for 2023 and a combined dividend of 11%.

In 2023, our dividend per ADS was USD 0.237, the fourth year of consecutive increase. And on the 5-year average, this increase in dividend was above 10%.

And I would like to emphasize on this, for China ADR, there are not more than 6 companies with 5 years of consecutive dividend and consistent increase in EPS and we are one of these companies.

And in summary, we are returning value to shareholders in terms of growth and a leading capital return program. Going forward, we will continue with this belief and let high-quality growth remain as our core method to return value to our shareholders and concurrently maintain a leading capital return program.

Regarding dividends, we are confident to maintain our track record and continue to deliver consistent increase in dividends for our shareholders.

[Operator]

As there are no further questions now, I'd like to turn the call back over to the company for closing remarks.

[Jimmy Tan, executive]

Thank you all once again for joining us today. If you have any further questions, please feel free to contact FinVolution's Investor Relations team.

[Operator]

This concludes the conference call. You may now disconnect your line. Thank you.

[Tiezheng Li, executive]

Thank you.