X Financial Q1 2024 Earnings Report

X Financial EPS Results

• Actual EPS: $0.88
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

X Financial Revenue Results

• Actual Revenue: $167.30 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

X Financial Announcement Details

• Quarter: Q1 2024
• Date: 5/30/2024
• Time: N/A
• Conference Call Date: Friday, May 31, 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 Q1 2024 Earnings Call Transcript

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.

Presentation

[Operator]

Hello, and welcome to the X Financial Q1 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, Investor Relations Manager 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 the company's IR website at ir.xiaoying.com. On the call today from X Financial is Mr. Frank Fuya Zheng, Chief Financial Officer. 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&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.

[Victoria Yu, Investor Relations Manager at X Financial]

Such statements are based on management's current expectations and current market and operating conditions, and relate to events that, like, 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 risks 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 the new information, future events, or otherwise, except as required in the law. It is now my pleasure to introduce Mr. Frank Fuya Zheng. Mr. Zheng, please go ahead.

[Frank Fuya Zheng, CFO at X Financial]

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 monitoring of asset quality dynamics, and this again proved effectively in securing our profitability. As a result, despite a year-over-year and a quarter-over-quarter decline in the loan volume, both top and bottom lines increased on a yearly and a quarterly basis, with notable improvements in profits. In the Q1, the total loan amount facilitated and originated just decreased by 11% year-over-year and 18% quarter-over-quarter to CNY 22 billion, in line with our guidance. Our total outstanding loan balance was CNY 44 billion at the end of March 2024.

[Frank Fuya Zheng, CFO at X Financial]

Delinquency rates for the outstanding loans past due for 31-60 days and 91-180 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 loans facilitated and originated 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 closely monitoring borrowers through the entire credit cycle, continuing strengthening our risk control system and taking all necessary measures to mitigate risks.

[Frank Fuya Zheng, CFO at X Financial]

In the Q1, total net revenue was CNY 1.2 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 CNY 363 million. 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 cost from origination and the service expenses, indirect expenses from the borrower acquisition from the general and administration expenses and the sales and marketing expense into the borrower acquisition and marketing expense, with total operating cost and OpEx expenses to provide a clear breakdown of the company expenses for the investor.

[Frank Fuya Zheng, CFO at X Financial]

Going forward, we will continue to implement asset quality by optimizing borrower acquisition costs to drive a sustainable profitability. We are confident in our future profitable goals with stabilized asset quality. We have clear visibility on the loan volume for 2024 under our current strategy and expect the total loan amount facilitated and originated for the full year to be around CNY 100 billion. 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 million 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.

[Frank Fuya Zheng, CFO at X Financial]

Now, I would like to read 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% to CNY 1,208 million, from CNY 1,005 million in the same period of 2023. Primarily due to growth in various, disaggregated revenue compared with the same period of 2023. Please refer the analysis of disaggregation of the revenue. Origination and servicing expenses increased by 15% to CNY 427 million, from 371 million in the same period of 2023.

[Frank Fuya Zheng, CFO at X Financial]

Primarily due to the increase in the collection expenses, resulting from the cumulative effect of increased volume of loan facilitation and provision in the previous quarters, compared with the same period of 2023. Borrower acquisition and marketing expenses decreased by 9% to RMB 248 million, from RMB 272 million 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 RMB 62 million, compared with the RMB 20 million in the same period of 2023.

[Frank Fuya Zheng, CFO at X Financial]

Primarily due to an increase in loan receivable held by the company as a result of the accumulated effect of increased volume of loan facilitation provided in the previous quarters, compared with the same period of 2023. Income from the operations was RMB 377 million, compared with the RMB 328 million in the same period of 2023. Net income was RMB 363 million, compared with the RMB 284 million in the same period of 2023. Non-GAAP adjusted net income was RMB 322 million, compared with the RMB 307 million in the same period of 2023. For further financial information, please refer to the earnings release on our website. Now, on our business outlook. For Q2 this year, we expect the total loan amount facilitated and originated to be between RMB 23 billion and RMB 24.5 billion. For the full year of 2024, we expect the total loan amount facilitated and originated to be between RMB 90 billion to RMB 110 billion. This concludes our prepared remarks, and we would like to open the floor to questions. Operator, please.

[Operator]

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. Once again, if you would like to ask a question, please press star then one to enter the question queue. That's star, then one to enter the question queue. The first question today comes from Mason Bourne with AWH Capital. Please go ahead.

[Mason Bourne, Long and Short Equity Analyst at AWH Capital]

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.

[Frank Fuya Zheng, CFO at X Financial]

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

[Frank Fuya Zheng, CFO at X Financial]

But for our demand, I think it mainly is a risk factor. And we are, as you know, still stay, you know, our overall loan portfolio is still at a elevated risk level, you know, but we kind of, you know, in the Q1, we kind of stabilized that situation. You know, but technically, there's a little bit of improvement compared with the Q4 last year, but it is still on elevated level. So that is, I think is the main factor that instead of the economic environment to the extreme, you know, give everybody, you know, in our sector, cautious to expand loan, you know, volume in a more aggressive way. We are all under some kind of pressure, you know, for the loan quality. That's the main factor, I believe.

[Mason Bourne, Long and Short Equity Analyst at AWH Capital]

Good, thanks. Then I was hoping you could also talk about the regulatory environment and how you view that going forward.

[Frank Fuya Zheng, CFO at X Financial]

Regulatory environment, there's not much new development in this quarter. And as is, you know, we just, you know, basically, it's stable situation. There's not much news coming out from the regulatory side.

[Mason Bourne, Long and Short Equity Analyst at AWH Capital]

Thank you.

[Frank Fuya Zheng, CFO at X Financial]

Thanks.

[Operator]

As a reminder, if you would like to ask a question, please press star, then one to join the question queue. That's star, then one to ask a question. 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.

[Victoria Yu, Investor Relations Manager at X Financial]

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.

Participants

Executives

• Frank Fuya Zheng, CFO
• Victoria Yu, Investor Relations Manager

Analysts

• Mason Bourne, Long and Short Equity Analyst at AWH Capital