Q4 2019 Earnings Call

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Good day everyone and welcome to the X Financial fourth quarter 2019 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please speak to a conference specialist by pressing the star key followed by zero.

For today's presentation, there will be an opportunity to ask questions, please also note today's event is being recorded at this time. I'd like to turn your conference call over to 10 you win ma'am, please go ahead and operator. Hello and one and thank you for joining us today. The company's results were released earlier today and available on the company's website and click on the call today from exponential Miss Simonson person and financial officer took a brief overview of the company business operation and highlights followed by Mister Jones will go through the financials and guidance.

Now 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 Management's current expectations and the current market and operating conditions and the relays will event that involve known or unknown risks and uncertainties and artifacts. Oh difficult to predict 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 statement for the information regarding this and other positive and Texas is included in the company's filings with the US Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements and as a result of new information future events, or otherwise affect as dead.

On the law. It is now my pleasure to introduce. Mrs. Dimension recession, please go ahead.

And ladies and gentlemen, Kevin has dropped will ask you to please stay on the line. I will attempt to reconnect Kevin's line.

Hello.

Hi.

Yeah, yes. Sorry. Yeah, the line dropped off and then we We join again. Okay. Sorry about that. Hello everyone. We close out this year with the sorry the quarter of Financial and operational results.

We remain committed to providing most user-friendly and the convenient of Financial and business services to 4 hours and made significant progress in doing so, I'm doing the quarter while ensuring we remain fully compliant with rapidly changing regulatory environment.

We rapidly made the necessary adjustments to our operation and a known product portfolio during the quarter to comply with recent regulations governing public interest rate, and they can charge but the result of the new regulations and adjustments made to our loan portfolio. Our total long facilitated decline on a sequential basis during the quarter.

Hi there.

Yoshi and showing online more maintain the regular growth moment as consumers increasingly 21 line set up phone for consumption with these Trends has the celebrated significantly since the coronavirus disease outbreak at the beginning of the 2020 consumer. Well forced you consume online and the government-mandated quarantine and we are well positioned to capitalize this opportunity.

That's Jim a we anymore Rose 2.9 Million in the fourth quarter of 2019. The increase of four hundred.

It's a hundred and 7.9%

R&B 70s seven point four million in the city court

The number of transactions increase has increased significantly to four four point nine million during the quarter from 0.2 million Europe and Asia.

December 31st 2019. The number active users of the action was the wrong forty four hundred and eight thousand representing increase from 313000 as of September 30th, 2019.

And there's a transaction volume for y'all to jump significantly to RMB to billion.

This quarter from one point four billion in the last quarter. Well, it's outstanding loan balance increased to 1 billion one point five million this off December 31st, 2019 for R&B 949 million 1st September 30th, 2019 diem Chuan. Has approved accumulative quite lying about his experience and a currently has a great graduation rate of around twenty-five twenty-six, as of December 31st, 2019. This business is rapidly contributing to a large percentage of Revenue giving his longer customer lifetime and the multiple opportunities it offers from across South

We continue to actually negotiating with our funding Partners including Muslim Bank Blue Ocean Bank.

We South Bank and the entire Bank to further lower oil pan card.

Institutional spending fifty percent of the long facilitated through our platform in the fourth quarter and increased from 35.7% in the previous quarter. The trend is continuing with the portion of family from

increase increasing to 80.9% in January 2020

December 31st, 2019 the Courtney nine provided by our institutional Partners expanded to RV 46.74 R&B 68.4 billion. September 30th, 2019.

Which I believe is their trust in the quality of the ad line access and the strength of Risk Management Systems. We are making solid progress in driving instead of spending only would loan product our platform in 2020.

There's sufficient is choosing not very nice. We are constantly to achieve one hundred percent institutional funding this year.

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Of course.

We have been tightening our risk management policies by us talking stricter requirement to evaluate borders and help reduce the quality of life, you know teaching to reinforcing our risk models.

Over the course of last year. We have focused on strengthening our with control capabilities and adopts even Street under control and evaluation of the doors at the beginning of the loan process, which is critical to reduce signal people at the latest age.

The imagine we invested in response to the covid-19 outbreak has been ready firmly rooted in to our progress for a while now have been strengthened during these trying times.

Week the macro-economic environment and remain high density outbreak of covid-19 stress oversees our business. Well be a diversity. In fact during the first quarter of 2020. We expect total loss for sleep. No 43434 certifications amount due to relying on the screen shield. Basis. We are looking for the next quarter. We are sending our Focus as acquiring more high quality people or Hispanic ready for viewing this time. We can come in West Palm technology-based risk infrastructure and a consumer acquisition that would be the foundation of our business grows and racial factor to attract additional investors interests with the underlying asset our platform.

These are our robust risk management capability. We will weather the storm of the covid-19 and the emerge stronger than before.

In conclusion, we are confident that our growth strategy has laid a solid foundation to adapt to Changing Times where we transition from a pure financial service provider to a more comprehensive business service provider. We are ideally positioned that you continue benefited from it most enormous growth opportunity in China's personal financial industry. We're committed to providing a most Lucifer entity convenient and a comprehensive Financial between service and the Battle-Dome service to our customers.

No, I'll take the call to Kevin where it goes through financial and other work of challenges bath including changing Recreation requirement traditional funding salt some people view to open the impact of covid-19 in the past six months, which took some strong points in the first quarter end of 2019.

Hold on for today in 2019 and increase of 6.8% year-over-year the total on Thursday. The 4th quarter of 2019 was 8.9 million appointment today at the higher end of our previous guidance range. The total number of showing terminal in the fourth quarter decreased year-over-year. The average low amount per transaction was only fourteen fourteen point six months solid and increase of 64%. Of 2018 and an increase of 13.7% sequential.

Do you ever do?

Amount per use of shiny rewarding law also increase 49% in the fourth quarter to remain be $8,026 plus 6/8 compared to be five thousand six thousand in the third quarter of 2019.

The number the number five boroughs during the quarter decreased by 29% because your existing borders are not qualified to borrow money our platform anymore after week implemented almost more stringent than there are to devalue explorers in October nineteen twenty nothing together with some more money to our parts and model. We believe that the transformation would make us finally survival.

and the current volatile environment

the percentage of lost productivity facility that was covered by July and insurance the credit for the to 73% during the quarter as we continue to reduce life insurance coverage rates to lower our customers boring calls. We expect that the intent intent a the percentage of loan products covered by Joanne would be less than five fifty percent such a what a minimize the risk of high concentration to join for the purpose of creating investment and increase the flexibility and diversity when we playing Our Song sucks.

It is our mission to create a more value for our customers in a shareholder. We recover from high and lows of 2019 and navigate The Challenge of marketing 20/20. We remaining. Which car in the regulation Anna, damaging our ability to Stand Out Among our peers and pick up a long page of Market consolidation and will reduce costs further by improving operational.

No, I'd like to bring in financial performance. I will not go go through every detail lines. You can refer to normal details in in one month and that's in the fall the fourth quarter of 2019 decreased by 22.9%. Maybe six, six hundred and sixty five million from 863 million in the same paragraph eighteen around you in 2019 decreased by 12.58% or maybe three thousand and eight eight million four thousand and five hundred forty million in 2018 primary primary due to phone not a tragedy in order to meet with the original account for a lot of proportion of transaction volumes and the second and increase in the proportion of Revenue in generated by the loan facility.

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Chut which was recorded over the life of the line financing using the the effective interested more.

organization origination and it's going to cost you can sit in the fourth quarter of 2019 increased by

I'm sorry.

increase 530318000

If it wasn't for me to go to the following factors first increasing increasing status, which were in line with the growth our company's business and second increase in customer in Costco launched revolving credit product and in the field and increasing interest expense related to long-term facilities through the conservation Trust.

Did you any expenses and and sales and marketing expenses all decreased in the first quarter of 2019 for the expenses? I ask what this is created by 23% or going to be sixty three million for the 69 million in the same period of 2018 for the sales office expenses decreased by 62% wouldn't be twenty million for maybe fifty two million in the same period of 2018 which reflects the fact that we are. We adopting a series of measures of cost controls.

reservation for sir

for wishing for conditions are quite a liability in 2019 or any be some point seven million compared with German be 260 million in 2018. That's because there was no disrespect the automated as default rates for loans subject to guarantee liabilities facility in private. Provision for a comfortable and a contractor in the fourth quarter of 2019 decreased by 52% to remove it at least you pretend to be 52400011 billion in the same period of eighteen primarily through the quitting are comfortable and a contract asset which was in love with an increase in the proportion of net revenue off by the loan facility through the concern since it is Trust.

Nothing comes to financial shareholders in the fourth quarter of 2019 was 130 million compared the way through 280 million in the center of 2018.

But I want to catch a coolant still rest wrong if it was maybe twenty thousand and then the Six Million as of December 31st 2019 compared with Jermaine be 930.

Consider considering the impact all the covid-19 out working in Santa twenty the companies photo long position amount for the first quarter of 2020 has been negatively impacted them know that the car has been partially offset by the growth in the audience and online more financially compared to a first-quarter loss with drop in Revenue. The company explained to prep update in the first in the first quarter 2018 release in this forecast reflect the company's current and the preliminary views, which are subject to change now. This concludes our prepared remarks and with like to over the call to classroom operator, please ladies and gentlemen at this time will be getting a question-and-answer session to ask a question. You may press star and then one if you are using a speakerphone we do ask you please pick up the handset.

Before pressing the key to a charger question. You may press star and to once again that is star and then one to ask a question at this time. We will pause momentarily to assemble the wrong.

And our first question today comes from John side from Morgan Stanley, please go ahead with your question wage. Hi, Joe.

Hi, can you hear me?

Hi. Yes. Sure. Thank you for taking my question. Sorry. I joined a little bit late. So I guess I missed some some parts on the prepared remarks. So just wonder how long is there any more Colorado's on on the the risk the trend? We see basically on a month-on-month spaces. How does stay recover any any Carlos Condit ATIV metres that we can share Ur So related to that is we have an assessment of Los Angeles related to talk to the outbreak as of this moment. And the second question is on the volume basis. So just wonder um on a month-to-month basis with April March. Do we see any pickup of the sequential grows? And and the final questions is on the income tax. I think it's a credit. So just wonder yep.

The reason behind that and and and how is raising of the techs re uh in this year. Thank you.

Okay, thank you. Thank you John this excitement. I think your question is regarding the outbreak Thursday the 19th. And what's the impact of our business? Absolutely. The there is a big impact in our business because people are not not not allowed to to go out to work. So some some some our customers have have have losing their jobs. We we we saw an increase in delinquency in in February and March. However in April were pretty money back on hold in Quincy situation is pretty much back to what works before the the outbreak so it's going to be a one time.

One time shocked. Well what I'm shocked so it needs we we we we we we have some loss but if you just one time and then it's the size is it is it is it is still manageable to our business so long that was regarding that loss and second question. Second question is regarding the trend if we if we we we bought the sun rose. I hope we still see a fugitive mom this time March April, however, because of this macroeconomic investment this uncertainty around the future economic situation as well as the the the income employment and income birth.

Of the of our customers we we we we are very cautious at this time. Actually, we see the defunct by the hour for the policy is is down right tight. I just a moment. So so that's why we we will see our business loan volume but visitation well line that is a few one mm parties and regarding the income taxes, I think and explain the audio cuts off off the income tax. Okay, but I would like to do to get into a whole year. For example, you mean you can get a number for the whole year. We have an income before taxes that song Long sorry, that's wrong. 6683 3 a.m.

And now actually our if our actual tax rate is about 15% and that means for the six hundred thousand six hundred million property that we have. We should have a 19 million of income tax expense. But finally, we you know work life income tax benefit of of ninety-three million in that because we have a total income tax benefits of 180 million, you know, which includes about 100 and I want you to tell me of tactics of tax exemption for a major subsidiary, which was actually a qualifying price on you and Enterprise and and and and pricing and that means we have attached and

Exit the benefit from from did something that's a total exemption of and the techs also the subsidiary in 2018. And then that would be about 180 and the remaining of the million it was consists of two parts. First. We have we have a withdrawal of them over your bus of the withholding tax of around forty forty seven million and they were told in Texas in respect to the and the the previous month accrual or of the prophet and the beginnings and I was uncertain their identities, but interesting Lansing some of the month extra what you going to last so the previous first accrued withholding tax was not robust and the remaining twenty three million a million for 4 a.m.

For the for the additional tax reduction in 2019, for example the cost of such a conversation with the shack in the fourth quarter of 2019.

So I hope that you all your questions.

Yeah, thank you. So just one quick follow-up. Hi. Yes, can you hear me now? Hello, Absolutely. We can look at how are you? Okay, thank you follow up on the I saw in the paper that this call may be addressed to comply with the latest NPR cap. So just wonder how would that impact our Tech gray going forward? Is there any guidance on at a gray? Uh, and and and even the the covid-19? Ummm. Ummm. Ummm. What's the um further pressures from the dead on our tenth grade? And so yeah, just take guidance in short. Thank you very much.

Okay. Well like we previous communicate. And we actually have some changes in June eleventh November nineteen. That means we we we try to foolish apply the grid regulation requirement that we change our change our wage. I'll put that back to get the total boring calls from APR Thirty thirty six 2:30 to the IR 36 and after a serious reduction for Thursday hold a the impact of risk and other other cut off the the tax on and so we for for the for the fuel for that are directed at 6:13, and decreased about 10% and 10% And we believe that in in the first quarter of dead.

20/20 it will keep the security because that that the change the world.

I'll talk to you in November 3019 that only about nineteen. So actually we believe that I really will keep in the Cuisines and second is we we we actually increase the increased our life insurance premium and the the the current apartment which was you know another way to to to create our take away. So so actually we found that met and in in the last balance of sorts in March 10th, the secret for our business was will be very low wage. It might be under around went to 22% and I'm being sexually attacked why we actually foresee a lot in in in Cuba.

2020

Okay. Thank you very much.

Once again, if you would like to ask a question, please press and one to withdraw your questions. You may press star into that is star and then one to ask a question.

And ladies and gentlemen at this time and showing no additional questions. I'd like to turn the conference call back over to Miss win for any closing remarks.

Okay. Thank you for joining us on the call today. If you haven't got the chance to raise your question will be pleased to answer them for our contact. We look forward to speaking with you again. Thank you.

Ladies and gentlemen that does conclude today's presentation we do. Thank you for joining. You may now disconnect your lines.

Thank you. Thank you, bye-bye.