X Financial Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 20, 2025

There are 7 speakers on the call.

Operator

Hello and welcome to the X Financial First Quarter twenty twenty five 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 today's call. The company's financial results were released earlier today and are available on our Investor Relations website at ir.xiaoyinggroup.com. On the call today from X Financial are Mr. Ken Li, President Mr.

Speaker 1

Frank Hu Yajeng, Chief Financial Officer and Mr. Noah Kaufman, Chief Financial Strategy Officer. Mr. Li will start with a brief overview of our business progress and financial performance. Then Mr.

Speaker 1

Kaufman will go over some key Q1 metrics and highlights. After that, Mr. Zheng will share updates on financials, regulatory insights and our 2025 outlook. Afterwards, Mr. Li, Mr.

Speaker 1

Zhen and Mr. Kaufman will be available to 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 involve known or unknown risks, uncertainties and other factors. These factors are difficult to predict and many are beyond the company's control.

Speaker 1

We may cause which may cause actual results, performance or achievements to differ materially from those described in these statements. Further information on these and other risks can be found in our SEC filings. The company undertakes no obligation to update any forward looking statements as a result of new information, future events or otherwise, except as required by law. It is now my pleasure to introduce Mr. Ken Li.

Speaker 2

Thank you, Victoria, and hello, everyone. We are pleased with how 2025 has begun. In the first quarter, we facilitated RMB35.15 billion in loans, an 8.8% sequential increase and 63.4% growth year over year. It was one of our strongest quarters for originations, reflecting solid borrower demand and continued progress in risk management. Our team remained focused on expanding opportunities through both new partnerships and existing relationships, enhancing our technology platform and underwriting models to support profitability and scalability, balancing growth and risk as we broaden access to qualified borrowers.

Speaker 2

We are also working to improve the borrower experience by delivering faster decisions, simplifying application processes and enhancing transparency. In parallel, we continue to strengthen platform reliability and support tools to help customers make informed borrowing decisions and manage repayment with confidence. Despite the typical seasonal impact from Chinese New Year, we achieved a sequential growth in both loan volume and revenue. Total revenue reached RMB1.94 billion, up 13.4% from Q4 and over 60% year over year. These results reflected steady progress in growing the platform responsibly.

Speaker 2

Operational and credit quality update. We also made a continued progress on asset quality. As of March 31, our thirty one to sixty days delinquency rate was 1.25% compared to 1.61% a year ago, reflecting a 22% improvement year over year. The ninety one to one hundred and eighty day delinquency rate was 2.7%, down from 4.7% in Q1 twenty twenty four, a 37% reduction year over year. These improvements reflect disciplined borrower screening and underwriting practices.

Speaker 2

We have also continued to enhance borrower engagement and repayment behavior through timely communication and tailored repayment assistance programs. These initiatives have contributed meaningfully to our risk management outcomes and supported further portfolio stability. Now, I will turn the call to Noah to go over some key Q1 metrics and highlights.

Speaker 3

Yes. Thank you, Kent. Hello, everyone. It's a pleasure to speak with you today. Let me share several highlights from our Q1 operational and financial performance.

Speaker 3

On the operational metrics, we facilitated approximately RMB35.15 billion in loan originations, marking a 63.4% year over year increase. Our total loan outstanding balance, excluding loans over sixty days delinquent, reached RMB58.4 billion, growing by more than 33% from Q1 twenty twenty four. We facilitated over 3,140,000 loans with an average loan amount of approximately RMB 11,181. On the financial highlights, total revenue grew to RMB 1,940,000,000.00, up 13.4 sequentially and 60.4% year over year, primarily driven by higher borrower volumes and originations. Our income from operations expanded substantially, reaching RMB573 million, up 52% year over year.

Speaker 3

This demonstrates our improved operational leverage and disciplined expense management. Our average funding costs improved year over year, supported by a more optimized funding structure and sustained commitment from our core institutional partners. This reflects the strength of our platform and deepening trust within our funding network. With these metrics, we continue to see notable gains in operational efficiency and market positioning. I'll now hand the call over to Frank to walk through the financials, discuss capital allocation priorities, provide regulatory insights and outline our growth outlook for 2025.

Speaker 4

Thank you, Noah. It's great to speak with everyone today. I will provide additional insights into our profitability metrics, liquidity and strategic plans for the capital allocation. Non GAAP adjusted net income for Q1 reached RMB457 million, increased 44.9% year over year reflecting sustained earnings strength. Basic earnings per ADS improved significantly to USD 1.5, approximately 45.6% year over year increase, underscoring enhanced profitability per share.

Speaker 4

Return on equity increased to 25.5%, rising 1.4% points year over year and 3.2 points sequentially, reflecting our sustained financial discipline and growing operational efficiency. Our liquidity remains strong, position us well to support ongoing operations, investments and capital returns. Share repurchase plan. We have recently authorized a new share repurchase plan that allow us to buy back up to US100 million worth of our Class A shares and ADS. This authorization will be effect for eighteen month period running from 01/01/2025 to 11/30/2026.

Speaker 4

This new authorization comes in addition to our existing repurchase plan approved last December, which still has approximately RMB15.9 million remaining. Regulatory environment update. The regulatory environment in China remains dynamic and we remain fully committed to compliance and align with the overall policy direction. The recent notice from the National Financial Regulatory Administration affirms the current trajectory with a clear focus on responsible credit assets and financial stability. We see increased oversight as a positive step that supports long term industry development and reflects growing recognition of our role.

Speaker 4

While involving rules may introduce high compliance requirements, they also create a space for innovation and more sustainable growth. We continue to engage proactively with regulatory data and remain focused on responsible execution and the evolving framework. 2025 growth outlook. Based on current trends, X Financial expect the total loan amount facilitated and originated in the second quarter of twenty twenty five to be in the range of RMB 37.5 billion to RMB39.5 billion, reflecting continued strong demand and consistent execution following a robust first quarter. With that, I will pass the call back to our President, Ken Li for closing remarks.

Speaker 2

Thank you, Frank. As we progress through 2025, we remain confident in our strategic direction, grounded in strong underwriting discipline and risk management and ongoing operational improvements With a solid financial foundation and a clear focus on long term value creation, we are well positioned to sustainable and profitable growth. Thank you.

Speaker 1

Operator, back to you. We can go to the Q and A session.

Operator

We will now begin the question and answer session. The first question today comes from Kenning Zhao with Norton Andrews. Please go ahead.

Speaker 5

Hi, I'm Kenning from Norton Andrews. Congratulations and thank you for the great performance in the first quarter. Well, my first question is, there's a strong growth in your business, both in new loan origination and active users. And you mentioned there will be further growth. I wonder if that means you like the current macroeconomic environment and the loan market.

Speaker 5

And well, it's not big, but delinquency rate has also ticked up a little bit compared to the end of last year. If the loan volumes continue to grow, should we expect further increase in the delinquency rate? And can I have a second question?

Speaker 2

Can we get this first question first and then you can ask the next Of

Speaker 4

course. Thank you.

Speaker 2

I think you mentioned several questions in your comments. So let's get to them one by one. The first one is how we view the current environment. I think our company has never trying to grow our portfolio for the sake of growth. So we're always trying to manage our portfolio based on the current based on our assessment of the future environment.

Speaker 2

That being said, I think right now, based on our historic trend and our analytical based on our analysis that I think the overall environment is still good for the portfolio growth. That is why that we are still focused on the growth at this moment. Another thing from this is that since the second half of last year that we have been invest a lot in acquiring new customers. So as this customer mature in portfolio, we are able to offer them better lines, better products. So they stick with us longer.

Speaker 2

That is also the best foundation for our growth. In terms of the delinquency rate, I think the reason that you see an uptick from the lower level that we achieved somewhat in last year is that I would say that that probably was the bottom part of our delinquency rate. So even with this uptick, I think our delinquency rate with regard to our portfolio is still very healthy. So we are not particularly concerned about that. And going forward, we do expect that our delinquency rate will still have some uptick, but those uptick will be more than offset by our overall scale.

Speaker 2

That basically means that our profit will not be impacted by the delinquency.

Speaker 4

Let me add on a few words regarding the delinquency rate. That number is actually the risk profile situation from last quarter to Q1 actually is stable. And the number is a little bit of skew. If you take another look, if you look at our Q1 income statement under the operation expense cost and expenses, the first one is origination and service. Basically, it's operation expenses.

Speaker 4

The second one is the marketing acquisition, customer acquisition. And the third one is general and administration costs. And so that's three generally cost. But the rest of us from like a provision this way and a provision that way. If you add up together, this is all risk related cost.

Speaker 4

If you add on this quarter Q1 and you add on Q4 last quarter, all the provisions together, you will find the Q all the Q1 provision is about RMB60 million less than last quarter. But among this RMB60 million actually because this RMB57 million, almost RMB57 million is related to our own insurance business, which means is because our own insurance business, the revenue you book on one period and the cost you're booking the whole thing together in one time. Because the last quarter, Q4, they did more our guarantee company did more business, so they have more of that. So this you take out this RMB57 million, actually the cost apple to apple, the cost related, you take out all the risk related to the guarantee business, actually we have like a million, RMB4 million less cost in Q1 compared with Q4. So overall, the conclusion is the risk situation is remain basically the same, not much better, not much worse.

Speaker 4

That's the thing. But having said that, we all expect because this regulatory new development will be coming in October, we will we prepare and there will cause because of that, there will maybe some uptick cost risk situation, we have some uptick down the

Speaker 2

road, but not in

Speaker 4

the Q1, not in the Q2. We haven't find the risk situation change much at all. That's why we continue to invest a lot in customer acquisition also.

Speaker 2

Thank you.

Speaker 5

Well, thank you for the detail, Answer. Well, my second question is about the repurchase. You haven't repurchased any shares in the first quarter, but you have approved another share repurchase program. Just wondering if you repurchase any like during the April's market volatility? And should we expect you continue the aggressive stock buybacks as you did last year?

Speaker 5

Thank you.

Speaker 2

Yes.

Speaker 4

Because Q1 there's no open window, so we usually do the buyback during the open window from the old shareholders. Right now, I mean the incoming open window, we pretty much show the remaining almost $60,000,000 is now it will be used up in the coming open window and we will very likely to kick in to the buyback during the downwindow period also. So that's why we have this newly authorized RMB100 million to cover that. I hope I answered your question.

Speaker 5

Yes, certainly. Thank you very much. And thank you again for the wonderful quarter.

Operator

The next question comes from Alex Yee with UBS. Please go ahead.

Speaker 6

Hi, good evening, management. Thanks for taking my question. This is Alex from UBS. So I have two questions, if I may. So first one is regarding your loan growth guidance for the next quarter.

Speaker 6

It seems it's still going to be a bit of a good growth. So just wondering what's driving the growth behind and how do you see the underlying loan application or credit demand in the last two months in April or May? Have you seen any softening trend given a lot of the noise on the macro front? Yes. And second question is a little bit on your funding price.

Speaker 6

So given there has been this new regulatory announcement since April, so I'm wondering how have you heard any feedback from your funding partners with regard to your attitude towards this loan pricing, which is going above 24%? And then do you see anything we need to adjust our current practice in order to ensure that we're more compliant? Thank you.

Speaker 2

I'll first answer the first question about the growth. As I mentioned in last investor that our growth has always been based on our assessment for the upcoming risk environment. So at this moment, I think that our the way that we grow our portfolio has always been acquiring new customer and get the customer on board and gradually them into a better product, which largely means a lower fees and the higher line. And our growth has largely growing from this strategy. So you asked about April or May or June that our growth path will always be like that.

Speaker 2

In terms of our funding institutional partners, right now we are in very close conversation with them about the upcoming changes. And at this moment, what I can say is that we expect there will be changes and we are going to make some adjustments. But I don't see our company has always been confident that we will be fully compliant with the new regulation before the October 1 deadline. So we are not particular concerned about that. But that being said, any new regulation will always bring some small shocks to the industry.

Speaker 2

So we do expect that there will be some shocks in our industry. It's just that I think our company are in a very good position to take those shocks. So our growth I think our growth prospect will not be changed based on whatever that we are providing to the company for the investor.

Speaker 4

Hi, Alex. First of all, I will come to our earning call. Welcome. Regarding the let me just basically ask the same question again. And I think we really took advantage of the risk environment good risk environment since the last second half of the last year.

Speaker 4

So our run rate is the end of last year is already pretty high and we are you see that we spend very aggressively in some acquisition in the Q1 and we will keep the same pace into the acquisition effort in the second quarter. So based on our current forecast for Q2 this year, ahead of the 30%, gross volume growth for this year. And but we are not have no intention to increase the forecast anytime soon because we will see when in the what's the effect on the regulatory policy impact on the industry. So the white car, it's little bit uncertain regarding Q4 volume. That's what I'm trying to say.

Speaker 4

And so overall, I think we are confident to achieve 30% volume growth for this year. But other than but maybe not more, it's all because Q4 volume is kind of in the limbo right now. Regarding the prepare for the new regulatory possible regulatory impact, we do some talking to the people and talking to the regular mostly our institution partners and some regulatory authorities and we have prepared some technology wise, if there's no new policy can come down and we can accommodate very quickly, efficiently from technology operation wise. Other than that, we like anybody else, don't know much what's coming down. Thank you.

Speaker 6

Understood. Thank you very much.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Victoria Yu for any closing remarks.

Speaker 1

Thank you, everyone, for joining us today. If you have additional questions, please reach out to our Investor Relations team directly. We appreciate your interest and look forward to speaking with you again soon. Operator, back to you. Thank you.

Operator

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

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Key Takeaways

  • Loan originations reached RMB35.15 billion in Q1, up 63.4% year-over-year and 8.8% sequentially, marking one of the company’s strongest quarters.
  • Total revenue grew to RMB1.94 billion, up 60.4% year-over-year and 13.4% sequentially, while income from operations rose 52% to RMB573 million, reflecting improved operational leverage.
  • Credit quality improved significantly, with 31–60 day delinquency down to 1.25% (−22% YoY) and 91–180 day delinquency at 2.7% (−37% YoY) due to disciplined underwriting and borrower engagement.
  • Non-GAAP adjusted net income was RMB457 million (+44.9% YoY), EPS was USD 1.50 (+45.6% YoY), ROE reached 25.5%, and management authorized a new US$100 million share repurchase plan.
  • The company expects Q2 loan originations of RMB37.5–39.5 billion, continues optimizing funding costs with core institutional partners, and is preparing for evolving regulatory requirements.
A.I. generated. May contain errors.
Earnings Conference Call
X Financial Q1 2025
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