X Financial - Q3 2023

Transcript

Operator (participant)

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. Now, I'd like to turn the conference over to Victoria Yu. Please go ahead.

Victoria Yu (Investor Relations)

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. 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.

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. 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. Kan Li. Mr. Li, please go ahead.

Kan Li (President)

Hello. Hello, everyone. We are pleased to see that our established strategy continued to deliver strong results in the third quarter. 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. Our loan delinquencies fluctuated within their historic low to middle range. During the third quarter, our total loan amount facilitated and originated increased by 49% year-over-year and 14% quarter over quarter to RMB 29 billion, with the total outstanding loan balance reaching nearly RMB 50 billion at the end of September 2023.

Our delinquency rates for all outstanding loans past due for 31-60-days, and 91-180 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 delinquency 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 the borrower base. Going forward, we will continue to execute, 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.

Frank Fuya Zheng (CFO)

Thank you, Kan, and hello, everyone. We are very pleased with our solid financial results in the third quarter. Total net revenue increased by 56% year-over-year, and 14.5% quarter-over-quarter to RMB 1,397 million, while our net income saw a remarkable 64% year-over-year increase to RMB 347 million. There was a slight decline in, decline of quarter-over-quarter. This decrease was primarily attributed to the rising cost of borrower acquisition and management asset quality risks. We remain dedicated to achieving balanced growth in revenue and earnings in the, in the long run, 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 risk control based on a close monitoring of the 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 all the numbers stated are in RMB and rounded up. Total net revenue increased by 56% to CNY 1,397 million, from CNY 895 million in the same period 2022, primarily due to an increase in the total loan amount facilitated and originated this quarter compared with the same period of 2022. Origination and servicing expenses increased by 50% to CNY 811 million from the CNY 549.5 million

0.5 million in the same period of 2022, primarily due to the increase in borrower acquisition costs and the collection expenses, resulting from the increase in total loan amount facilitated and originated this quarter compared with the same period of 2022. Provision for the loans receivable was RMB 54 million, compared with RMB 17 million 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 RMB 435 million, compared with RMB 300 million in the same period of 2022.

Net income was RMB 347 million, compared with RMB 212 million in the same period of 2022. Non-GAAP adjusted net income was RMB 375 million, compared with RMB 231 million in the same period of 2022. For further financial information, please refer to the earnings release on our website. Regarding our share repurchase plan, in Q3, we repurchased approximately 396,000 ADSs for a total consideration of $1.7 million. Since the beginning of 2023, we have repurchased an aggregate of approximately 802,000 ADSs for a total consideration of $3.3 million. We have approximately $5.6 million remaining for the potential repurchase under our current plan. Now, on our business outlook.

For Q4 this year, we expect the total loan amount facilitated and originated to be between RMB 26.5 billion and RMB 28 billion. For fiscal year 2023, we expect the total loan amount facilitated and originated to be between RMB 105.9 billion and RMB 107.4 billion. This concludes our prepared remarks, and we'd like to open the call to questions. Operator, please? Operator?

Operator (participant)

Yes. We'll now begin the question and answer session. If you'd like to ask a question, please press star then one on your touchtone phone. If you want to withdraw your question, please press star then two. If you're using a speakerphone, please pick up your handset before pressing the keys. We'll pause momentarily to assemble the roster. Again, if you have a question, please press star, then one. At this time, we have no questions. Let's return the call back to Miss Victoria Yu for closing remarks.

Victoria Yu (Investor Relations)

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 (participant)

Conference is now concluded. Thank you for attending today's call.