X Financial Q3 2024 Earnings Report

X Financial EPS Results

• Actual EPS: $1.24
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

X Financial Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

X Financial Announcement Details

• Quarter: Q3 2024
• Date: 11/26/2024
• Time: After Market Closes
• Conference Call Date: Wednesday, November 27, 2024
• Conference Call Time: 7:00AM ET

X Financial (NYSE:XYF) (NYSE:XYF) is a Beijing-based online credit marketplace focused on providing diversified financing solutions to individuals and small- and medium-sized enterprises (SMEs) in China. The company was established in 2014 and completed its initial public offering on the New York Stock Exchange in 2016. Since inception, X Financial has built a technology-driven platform that connects borrowers with a network of institutional investors, banks and other funding sources, aiming to streamline access to credit and improve lending efficiency.

The company’s core offerings include consumer loans, SME loans, real estate-secured financing and wealth management products. Through its proprietary credit-scoring and risk-management systems, X Financial assesses borrower profiles and matches them with appropriate funding partners. This end-to-end digital approach spans loan origination, underwriting, servicing and collections, enabling the company to support a wide range of credit needs from personal installment financing to working‐capital loans for businesses.

Serving clients across major urban centers and second-tier cities throughout China, X Financial emphasizes strong compliance with local regulations and prudent risk controls. The company’s leadership team comprises executives with deep experience in finance, technology and regulatory affairs, overseeing ongoing platform enhancements and geographic expansion initiatives. By leveraging data analytics and strategic partnerships, X Financial continues to scale its credit marketplace with the goal of addressing underserved lending segments in the Chinese market.

X Financial Q3 2024 Earnings Call Transcript

Key Takeaways

• Q3 total loan origination rose 25% sequentially to RMB28.1 billion—above the high end of guidance—despite a 4% year-on-year decline.
• Asset quality improved, with 31–60-day and 91–180-day delinquency rates falling to 1.02% and 3.22% from 1.29% and 4.38% in Q2.
• Non-GAAP adjusted net income reached a record high of RMB434 million (up 60% year-on-year and sequentially) on net revenue of RMB1.582 billion (up 13% year-on-year).
• Management raised Q4 guidance, expecting total loan origination of RMB30–31 billion and full-year 2024 volumes of RMB100–102.6 billion, setting new records.
• The company extended its US$30 million and US$20 million share repurchase programs (with ~US$14.9 million remaining) and will maintain a semi-annual dividend yield above 6% to return capital to shareholders.

Presentation

[Operator]

Hello, and welcome to the X Financial Third Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one, on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Victoria Yu. Please go ahead.

[Victoria Yu, Head of Investor Relations at X Financial]

Thank you, Operator. Hello, everyone, and thank you for joining us today. The company's results were released earlier today and are available on our website at ir.xfinancial.com. On the call today from X Financial are Mr. Kan Li, President, and Mr. Frank Fuya Zheng, Chief Financial Officer. Mr. Li will give a brief overview of the company's business operations and highlights, followed by Mr. Zheng, who will go through the financials. They are all available to answer your questions during the Q&A session. 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.

[Victoria Yu, Head of Investor Relations at X Financial]

Such statements are based on management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties, or 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 filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events, or otherwise, except as required under law. It is now my pleasure to introduce Mr. Kan Li. Mr. Li, please go ahead.

[Kan Li, President at X Financial]

Hello, everyone. We are pleased to report another strong quarter with known volumes exceeding our forecast and a significant sequential improvement in asset quality. In the third quarter, we continued to promptly adjust known volumes based on risk levels. As asset quality improved, we further intensified our borrower acquisition efforts, which have yielded very positive results. Both the top and the bottom line continue to grow year-over-year. Non-GAAP adjusted net income reached a new record high. Specifically, on the operational front, our total normal amount facilitated and originated was down 4% year-on-year, but up 25% sequentially to CNY 28 billion, above the high end of our guidance.

[Kan Li, President at X Financial]

Delinquency rates for all outstanding loans past due for 31-60 days and 91-180 days were 1.02% and 3.22%, respectively, at the end of the quarter, compared to 1.29% and 4.38% a quarter ago, and 1.11% and 2.50% a year ago. We are pleased with this improvement in asset quality, and we'll continue to optimize our risk management system through advanced technology. In September this year, the Chinese government unveiled a comprehensive stimulus package aimed at improving liquidity, boosting the property market, stabilizing financial markets, and stimulating consumption. We expect this will provide a meaningful boost to the macroeconomic recovery. As an integral part of the economy, the personal finance market we serve should benefit from this upturn. We have already observed positive signs in the markets and are committed to adjusting loan volumes in line with risk levels.

[Kan Li, President at X Financial]

As a result of this favorable environment, we are raising our guidance and expect our monthly known volume to exceed RMB 10 billion in the fourth quarter, setting a new record. Now, I will turn the call to Frank, who will go through our financials.

[Frank Fuya Zheng, CFO at X Financial]

Thank you, Kan, and hello, everyone. I'm pleased to report that our strategy of a balanced business growth and the profitability continue to pay off. Total net revenue was RMB 1.6 billion, up 13% year on year and 15% sequentially. Our non-GAAP adjusted net income reached a record high of RMB 434 million, up 60% year-on-year and sequentially. As we continue to deliver strong profitability and execute on our proven strategy, we have full confidence in our future. We will continue to execute our semi-annual dividend policy and explore opportunities in our share purchase program to return more value to our shareholders over the long term. Now, I would like to brief some financial performance for Q3. Please note that all numbers stated in RMB and rounded up.

[Frank Fuya Zheng, CFO at X Financial]

Total net revenue increased by 30% to RMB 1,582 million from RMB 1,397 million in the same period of 2023, primarily due to growth in the various disaggregated revenue items compared with the same period of 2023. Origination and servicing expenses increased by 14% to RMB 458 million from RMB 403 million in the same period of 2023, primarily due to the increase in collection expenses resulting from the cumulative effect of increased volume of the loans facilitated and originated in the previous quarters compared with the same period of 2023. Borrower acquisition and marketing expenses increased by 21% to RMB 507 million from RMB 420 million in the same period of 2023, primarily due to intensified efforts in borrower acquisitions compared with the same period of 2023. Income from operations was RMB 509 million compared with RMB 435 million in the same period of 2023.

[Frank Fuya Zheng, CFO at X Financial]

Net income was RMB 376 million compared with RMB 347 million in the same period of 2023. Non-GAAP adjusted net income was RMB 434 million compared with RMB 375 million in the same period of 2023. For further financial information, please refer to the earnings release on our website. Regarding our share repurchase plan, in September 2024, we further extended the period of $30 million share repurchase program until the end of March 2026. In Q3, we repurchased approximately 282,000 ADS for a total consideration of $1.3 million. We have approximately $4.1 million remaining for the potential repurchase and our current $30 million share repurchase plan. Additionally, in May 2024, we announced a $20 million share repurchase plan effective until November 30, 2025, following a tender offer completed in July 2024 for approximately $9.2 million and $10.8 million remaining available under this plan.

[Frank Fuya Zheng, CFO at X Financial]

Together, these two share repurchase programs reflect our commitment to enhancing shareholder value. Now, on our business outlook. For Q4 this year, we expect the total loan amount facilitated and originated to be between RMB 30 billion and RMB 31 billion, bringing the total loan amount facilitated and originated for 2024 to be between RMB 102.6 billion and RMB 103.6 billion. This concludes our prepared remarks, and we'd like to open the call to questions. Operator, please.

[Operator]

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Ramsey [Ballastava] with Blackbird Capital. Please go ahead.

[Operator]

Hi there. I was wondering if you can update us on the capital return program and if there is a plan as to what it would be relative to the net income of the company, and as well if you could update us on the regulatory landscape. Thank you.

[Frank Fuya Zheng, CFO at X Financial]

Yeah. We have a share repurchase program with about 15 million remaining in place, and we are in talks with one or two big investors regarding the share repurchase program. If those talks, the current program is not enough, we will have an additional repurchase plan in place too. Between the two methods, dividend return and the share repurchase, based on our current share price, we much prefer our share repurchase. That's our stand. But we will continue to do semi-annual dividend payout on a continued basis. That's our plan.

[Frank Fuya Zheng, CFO at X Financial]

I hope by end of the year, and you will see whether even though we do not give out in terms of the percentage out to return the capital, but by end of this year, I hope you will see we will do beyond normally the percentage in terms of the capital return. Thank you. I'll attempt to answer the first question.

[Kan Li, President at X Financial]

In terms of the regulatory environment, it is the management view that there is right now the regulation has been fairly stable. And normally, the end of the year is not the time for the government to issue some new rules or regulations. So at this moment, I would say the environment is fairly stable, and we do not expect any significant regulations in our industry. And that being said, we have seen that the Chinese government has been fairly active in trying to stimulate the economy to push up the development rate. And we think that will in turn sort of benefit our industry as a whole and basically as we are in this industry. So that's why that we expect our volume will continue to grow from at this moment. That's it.

[Frank Fuya Zheng, CFO at X Financial]

Thank you. Thank you.

[Operator]

As a reminder, if you would like to ask a question, please press star then one to enter the question queue. The next question comes from Mason Bourne with AWH Capital. Please go ahead.

[Mason Bourne, Equity Analyst at AWH Capital]

Hi. It's good to see the strong results and appreciate the return of capital. Frank, I think you started sort of alluding to it on the dividend, but I just wanted to follow up on that. I mean, the stock is trading on this quarter's results if you annualize them at 1.3x earnings. You're paying out about 6.5% of your earnings per share as a dividend. It seems like that could be potentially significantly higher. I know you said you're not looking at setting a percentage of income, but if you look at your peers, they're paying somewhere in the low 20s as a percentage. So it seems like you could pay a lot more and not affect your business. I was just kind of hoping that you would consider that. Do you have any thoughts on that?

[Frank Fuya Zheng, CFO at X Financial]

Hi, Mason. We did this year the public buyback, and at least we did a public buyback. We were only able to collect about just over about 2 million ADS. So we definitely, yes, have more money available to do more, except the technical currency exchange issue, but that's not an excuse. But yes, yes, for you. We would like to do more in terms of the share repurchase. Hopefully, with lately, whatever with prices since end of September, the prices from below $5 up to right now almost $7, we will attract more attention and hopefully there will be more available share for us to buy back.

[Frank Fuya Zheng, CFO at X Financial]

But we will, in terms of our dividend yield, we will continue, as I told you before, we will continue to pay above the industry and yield over things like right now is after two federal rate cuts, it will be like around about 4.5%. We will keep the yield around about 6%. Even as we stock price go up, we will adjust that accordingly. Other than that, I don't know public buyback offering, what else we can do, which is to the just again, we will continue to attract to do dividend payout at an attractive rate yield. And also, we will do every possible available share buyback. We will do that. And hopefully, and in terms of the valuation or whatever, I think over time it will address by itself. We will continue to focus on the operations. Thank you.

[Mason Bourne, Equity Analyst at AWH Capital]

Just, if I could follow up on that, I think that your peers, I think when you first instituted your dividend, it was about a 10% yield, and now you're right, it's around 5%. The difference, though, is that your peers, some of them trade at three, four, five times earnings, and you're trading at just over one times earnings. And so, yeah, if you can get the buyback done there and you're trading at about a third of your tangible book value, you can get the buyback done, that's great. I just know you've had limits on that in the past. And so maybe the dividend increase could be a way that you sort of help the shares re-rate, is that you increase that and then eventually it gets to a 5% dividend yield from share price appreciation. But just some thoughts there.

[Mason Bourne, Equity Analyst at AWH Capital]

I know that you guys are focused on returning capital, and that's been a real positive over the past year. So I'm not knocking it, just having discussion.

[Frank Fuya Zheng, CFO at X Financial]

Just one more thing. In terms of the only major issue we faced, the challenge is our volume very low. And so we hope this volume went up for the last month, so we could do more buybacks during the open period. That's another thing we will definitely do. And that's what I say. In every possible way, we will do the maximum in terms of the yield and the share buyback. And hopefully, we will address just the low valuation issue in a short period of time. But we.

Participants

Executives

• Kan Li, President
• Victoria Yu, Head of Investor Relations
• Frank Fuya Zheng, CFO

Analysts

• Mason Bourne, Equity Analyst at AWH Capital
• Analyst at Blackbird Capital