X Financial Q3 2023 Earnings Call Transcript

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November 22, 2023

There are 4 speakers on the call.

Operator

Hello, and welcome to the X Financial Third Quarter 2023 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Victoria Yu.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Hello, everyone, and thank you for joining us today. The company's results were released earlier today and are available on the company's IR website at ir.xiaoying.com. On the call today from X Financial are Mr. Ken Li, President and Mr.

Speaker 1

Frank Fu Yajun, Chief Financial Officer. Mr. Li will give a brief overview of the company's business operations and highlights, followed by Mr. Zhen, who will go through the financials. They are all available to answer your questions during the Q and A session.

Speaker 1

I remind you that this call may contain forward looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on the management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward looking statements. Further information regarding these and other risks, uncertainties and factors is included in the company's filing with the U. S. Securities and Exchange Commission.

Speaker 1

The company does not undertake any obligation to update any forward looking statements as a result of new information, future events or otherwise, except as required under the law. It is now my pleasure to introduce Mr. Ken Li. Mr. Li, please go ahead.

Speaker 2

Hello, everyone. We are pleased to see that our eSTEPS strategy continued to deliver strong results in the Q3. Our loan facilitation and origination amount reached the high end of our previous guidance and both our top line and bottom line showed a substantial year over year improvement. During the quarter, as macroeconomic conditions improved moderately and the regulatory environment stabilized, the personal finance business has returned to normal across the industry, resulting in increased competition. As a result, our unit borrower acquisition costs increased quarter over quarter.

Speaker 2

Our loan delinquencies fluctuated within their historic low to middle range. During the Q3, our total loan amount facilitated and originated increased by 49% year over year and 14% quarter over quarter to RMB29 1,000,000,000. With the total outstanding loan balance reaching nearly RMB50 1,000,000,000 at the end of September 2023, RMB legacy rates for all outstanding notes past due for 31 to 60 days and 91 to 180 days were 1.11% and 2.5%, respectively, at the end of the quarter compared with 0.77% and 2.22% respectively a year ago. We have enhanced our efforts to acquire more quality borrowers, but we expect the denuency rates to continue to fluctuate for some time. We will maintain healthy asset quality leveraging our coordinated risk management system and focusing more on asset quality than on expanding new borrower base.

Speaker 2

Going forward, we will continue to execute our proven strategy and enhance our ability to drive long term growth and returns for our shareholders. Now, I will turn the call to Frank, who will go through our financials.

Speaker 3

Thank you, Ken, and hello, everyone. We are very pleased with our solid financial results in the Q3. Total net revenue increased by 56% year over year and 14.5 percent quarter over quarter to RMB1397 1,000,000, while our net income saw a remarkable 64% year over year increase to RMB347 1,000,000. There was a slight decline quarter over quarter. This decrease was primarily attributable to the rising cost of our borrowing acquisition and management asset quality risks.

Speaker 3

We remain dedicated to achieving balanced growth in revenue and earnings in the long term, which is clearly a key driver of shareholder value. To achieve this goal, we will take a comprehensive consideration of the borrower acquisition costs and the risk control based on the close monitoring of market dynamics to ensure that we grow both our revenue scale and profits in a sustainable manner. Now I would like to brief some financial performance for Q3. Please note that order numbers stated in RMB and round up. Total net revenue increased by 56% to RMB1397 1,000,000 from RMB895 1,000,000 in the same period 2022, primarily due to an increase in the total loan amount facilitated and originate this quarter compared with the same period of 2022.

Speaker 3

Origination and the servicing expenses increased by 50% to RMB 811 1,000,000 from the RMB 540 500,000 in the same period of 2022, primarily due to the increase in borrowing acquisition costs and the collection expenses resulting from the increase in total loan amount of facility and originate this quarter compared with the same period of 2022. Provision for the loans receivable was RMB54 1,000,000 compared with RMB 17,000,000 in the same period of 2022, primarily due to an increase in loans receivable held by the company as a result of the increase in total loan amount facilitated and originated this quarter compared with the same period of 2022. Income from operations 2023 was RMB435 1,000,000 compared with RMB300 1,000,000 in the same period of 2022. Net income was RMB347 1,000,000 compared with RMB 212,000,000 in the same period of 2022. Non GAAP adjusted net income was RMB 3 75,000,000 compared with RMB231 1,000,000 in the same period of 2022.

Speaker 3

For further financial information, please refer to the earnings release on our IR website. Regarding our share repurchase plan, in Q3, we repurchased approximately 396,000 ADS for a total consideration of US1.7 million dollars Since the beginning of 2023, we have repurchased an aggregate of approximately 802,000 ADS for a total consolidation of US3.3 million dollars We have approximately US5.6 million dollars remaining for the potential repurchase at our current plan. Now, our business outlook. For Q4 this year, we expect the total loan amount facilitated and originated to be between RMB26.5 billion and RMB28 1,000,000,000. For fiscal year 2023, we expect the total loan amount of facility and originate to be between RMB 100 and RMB 5,900,000,000 and RMB 107,400,000,000.

Speaker 3

This concludes our prepared remarks and we'd like to open the call to questions. Operator, please. Operator?

Operator

Yes. We'll now begin the question and answer session. At this time, we have no questions. Let's return the call back to Ms. Victoria Yu for closing remarks.

Speaker 1

Thank you everyone for joining us on the call today. If you haven't got the chance to raise your questions, we will be pleased to answer them through follow-up contacts. We look forward to speaking with you again in the near future. Thank you.

Operator

Conference has now concluded.

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Earnings Conference Call
X Financial Q3 2023
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