X Financial Q1 2024 Earnings Call Transcript

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Provided by Quartr
May 31, 2024

There are 4 speakers on the call.

Operator

Hello, and welcome to the X Financial First Quarter 20 24 Earnings Conference Call. All participants will be in a listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Victoria Yu. 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 atirxiaoyinggroup.com. On the call today from X Financial is Mr. Frank Fuya Zheng, Chief Financial Officer.

Speaker 1

Mr. Zheng will give a brief overview of the company's business operations and highlights, go through the financials and then answer your questions during the Q and A session. I remind you that this call may contain forward looking statements under the Safe Harbor provisions of Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market and operating conditions and relate to events that might 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 filings with the U.

Speaker 1

S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward looking statements as a result of the new information, future events or otherwise, except as required in the law. It is now my pleasure to introduce Mr. Frank Fuya Zheng.

Speaker 1

Mr. Zheng, please go ahead.

Speaker 2

Hello, everyone. We are pleased to start 2024 with a solid financial performance in the Q1. We continue to implement our strategy of proactively and dynamically adjusting loan volumes based on close monetary asset quality dynamics, and this again to effectively in securing our profitability. As a result, despite a year over year and quarter over quarter decline in the loan volume, both top and bottom lines increased on a yearly and quarterly basis, with notable improvements in profits. In the Q1, the total loan amount facilitated and originated decreased by 11% year over year and 18% quarter over quarter to RMB22 1,000,000,000, in line with our guidance.

Speaker 2

Our total outstanding loan balance was RMB44 1,000,000,000 at the end of March 2024. Delinquency rates for the outstanding loans past due for 31 to 60 days 91 to 180 days were 1.61% and 4.37%, respectively, at the end of the quarter compared with 1.05% and 2.4% a year ago. The increase in overdue loans as a percentage of total outstanding loans is primarily due to lower outstanding loan balances at this quarter end as a result of proactive control of the loan facilitated and originating that we initiated in the Q1 of last year. Excluding the impact of the reduced loan volume, asset quality began to stabilize during this quarter. We remain committed to closing monetary borrowers through the entire credit cycle, continuing straining our risk control system and taking all necessary measures to mitigate risks.

Speaker 2

In the Q1, total net revenue was RMB1.2 billion, up 20% year over year and 1% quarter over quarter despite the decline in the loan volumes. Thanks to our strict risk controls and improved operational efficiency, net income increased by 28% year over year and 92% quarter over quarter to RMB363 1,000,000. This once again demonstrates the effectiveness of our strategy, strong execution and the commitment to ensuring long term profitability. Beginning this quarter, we combined the borrower acquisition costs from origination and service expenses indirect expenses from the borrower acquisitions from the general and administration expenses and the sales and marketing expense into the borrower acquisitions and marketing expense with total operation cost and expenses to provide a clear breakdown of the company expenses for the investor. Going forward, we will continue to implement asset quality by borrower acquisition costs to drive sustainable profitability.

Speaker 2

We are confident in our future profitable goals with stabilized asset quality. We have a clear visibility on the loan volume for 2024 under our current strategy and expect total loan amount facilitated and originate for the full year to be around RMB100 1,000,000,000. Our commitment to sustainable profitability and shareholder value creation is unwavering. Our Board of Directors has authorized a new program to repurchase up to $20,000,000 worth of our shares, which will be effective from January 1, 2024, to November 30, 2025. We are confident in our position as a public company, and we will drive long term returns for our shareholders.

Speaker 2

Now I would like to brief some financial performance for the Q1. Please note that all the numbers stated are in RMB and rounded up. Total net revenue increased by 20 percent to RMB1208 million from RMB15 1,000,000 in the same period of 2023, primarily due to growth in various disaggregated revenue compared with the same period of 2023. Please see further analysis of this aggregation of the revenue. Origination and servicing expenses increased by 15% to RMB 427 1,000,000 from RMB371 1,000,000 in the same period of 2023, primarily due to the increase in the collection expenses resulting from the cumulative effect of increased volume of loan facility and provided in the previous quarters compared with the same period of 2023.

Speaker 2

Borrower acquisitions and marketing expenses decreased by 9% to RMB248 1,000,000 from RMB272 1,000,000 in the same period of 2023, primarily due to the decrease in the borrower acquisition costs compared with the same period of 2023. Provision for the loan receivable was RMB62 1,000,000 compared with the RMB20 1,000,000 in the same period of 2023, primarily due to an increase in loan receivable hold by the company as a result of the accumulated effect of increased volume of loan facility and provided in the previous quarters compared with the same period of 2023. Income from operations was RMB377 1,000,000 compared with RMB328 1,000,000 in the same period of 2023. Net income was RMB363 1,000,000 compared with RMB284 1,000,000 in the same period of 2023. Non GAAP adjusted net income was RMB 322 1,000,000 compared with RMB 307 1,000,000 in the same period of 2023.

Speaker 2

For further financial information, please refer to the earnings release on our IR website. Now our business outlook. For Q2 this year, we expect the total loan amount facilitated and originated to be between RMB23 1,000,000,000 and RMB24.5 billion. For the full year of 2024, we expect the total loan amount facilitated and originated to be between RMB90 1,000,000,000 to RMB110 1,000,000,000. This concludes our prepared remarks, and we would like to open the call to questions.

Speaker 2

Operator, please.

Operator

The first question today comes from Mason Born with AWH Capital. Please go ahead.

Speaker 3

Hi, thanks for taking the question. I hope you could talk about what you're seeing in the Chinese economy and how it's related to loan volumes and your outlook for the rest of the year?

Speaker 2

Overall, Chinese economy is still facing a lot of challenges. And contract to the U. S, there is a inflation environment that we are sort of in the deflation environment. So overall, for the overall, generally, overall, for the loan demand is stable or a little bit declining. I think if you look at the order Q1 financial reports from the all the Chinese major banks, they are all their loan volume and their income and profit are down a little bit.

Speaker 2

So we are living in that kind of environment. But for our demand, I think, mainly is a risk factor. And we are still stay our overall loan portfolio still elevated risk level. But we kind of in the Q1, we kind of stabilized that situation. Technically, there's a little bit of improvement compared with the Q4 last year, but still on elevated level.

Speaker 2

So that is, I think, is the main factor instead of economic environment to restrain give everybody in our sector cautious to expand loan volume in a more aggressive way. We are all under some kind of pressure for the loan quality. That's the main factor, I believe.

Speaker 3

Okay. And then I was hoping you could also talk about the regulatory environment, how you view that going forward?

Speaker 2

Regularly, Kwan, there's not much new development in this quarter. And as we just basically, the stable situation is not much news coming out from the regulatory side.

Operator

It appears there are no further questions at this time. I'd like to turn the call back over to Victoria Yu for any closing remarks.

Speaker 1

Thank you, everyone, for joining us on the call today. If you haven't got a 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

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Key Takeaways

  • Profitability growth: Despite an 11% YoY and 18% QoQ decline in loan origination, Q1 net revenue rose 20% YoY and net income jumped 28% YoY and 92% QoQ to RMB363 million.
  • Loan origination outlook: Q1 loan facilitation totaled RMB22.1 billion, with full‐year 2024 guidance set at approximately RMB100 billion and Q2 expected between RMB23 billion and RMB24.5 billion.
  • Asset quality stabilization: Delinquency rates increased to 1.61% (31–60 days) and 4.37% (91–180 days) but management reports early signs of stabilization due to proactive risk controls.
  • Expense optimization: Borrower acquisition and marketing expenses fell 9% YoY following a new consolidated expense categorization, while origination and servicing costs grew 15% due to higher collection outlays.
  • Share repurchase program: The Board authorized up to $20 million in share buybacks effective January 2024 through November 2025 to drive long‐term shareholder value.
AI Generated. May Contain Errors.
Earnings Conference Call
X Financial Q1 2024
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