Q2 2021 X Financial Earnings Call
Hello, and welcome to the X financial second quarter, 2020, 1 earnings conference call on.
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Thank you operator.
Hello, everyone and thank you for its on Earth day. The company's results were released earlier today and are available on the company's IR website, and I am telling cooktop com.
On the corporate day for financial Mr. Mckenzie.
And Mr offensive and just the opposite.
Mr. Lee will give a brief overview of the company's business operations and highlights followed by Mr. Jin.
For the financial.
They're all available to answer your question and the 2 and sector.
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They moved out based on the company's current expectations and current market and operating conditions and they reduce what events are involved no on known risks.
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It is now my pitch and that's what you said it for Candy and Italy. Please go ahead.
Hello, everyone.
Okay.
We are very pleased to deliver another strong quarter on operational and financial results.
And the second quarter total loan facilitation and amounts at a historical high and since our inception and ARPA.
And continue to enhance our growth momentum on both on year over year and quarter over quarter basis in line with arc items.
During the quarter, we reduced for the piece, we charge for our known for fabrication and service, which matches institutional funding partners, where the borrowers as well as a lower weighted average total borrowing costs for our non product towards.
10 borrowers.
With the effective management of our cost control policy, we continue to maintain strong momentum.
And profitable growth.
On the regulatory front in April for the National People's Congress Standing Committee and released our second draft of the personal information protection law for public comment demonstrating.
Demonstrating that the Chinese government is determined to strength and user data security and privacy protection. We have always placed for high value on user data protection and continue to improve our sale for regulator and turn on the calendar.
We are continuing to closely monitor regulatory development and the adjusted our strategy and our services and compliance with government policy and 17 evolving market trends.
During the second quarter, our total loan facilitation amount and reached RMB, 2 <unk> billion and increase of 108, 6% year over year, and 18, 2% quarter over quarter. This was mainly driven by the strong growth in the non facilities and the amount of China Shelley and Cardinal.
Which increased to 181% to 1% year over year, and 18, 2% quarter over quarter.
Selling car loan has contributed over 100% of our total loan facilitation and a month since for the first quarter of 2000 and compete with as of June 30th.
2010 day, 1 the total outstanding loan balance out with Xiaomi and Cardinal and reached RMB 24 billion and increase of 24 for.
9% compared with the previous quarter.
Recently, the Chinese Guy and has been gradually introducing guidance guiding principle for lower for lower and leading rate lending rates to the market to stimulate economic growth, which is expected to for some pressure on revenue.
For the second half of the year, we will continue to be fully compliant, but it will mitigate and policy pressures by device and feasible solution with our institutional funding partners.
At the same time, we remain active and negotiations with existing funding partners to reduce funding costs and our team continues to improve our risk management capability and have taken proactive measures and Costco.
Sure.
In conclusion, we are encouraged by the solid progress we made during the first half of the year and we'll continue to execute on our proven strategy to drive and sustainable long term growth.
We expect to come in and operation of our.
And I called credit and business in the third quarter Albert on <unk>.
And then taking tier 1 consumer confidence in China, and China's economy continues to trend upward and we see rising demand for consumer finance solution. We are confident of leveraging our technology and our service capabilities to capture the vast opportunity itself, Heather and bring more value but returns are careful.
Yes.
Now I will turn the call to Frank who will go through our financial and.
Ken and Hello, everyone and we continue to deliver strong financial performance during the second quarter for total.
Total net revenue increased 144% year over year to RMB $932.4 million what is it some combination of effective cost controls and the increase and economics of scale, our net income and further improved to RMB 223 point too.
From a net loss of.
And 343.6 million and a second tailing off the last year and on net income of RMB $192.8 million in the previous quarter.
We continue to experience.
Steady and cool night, and our asset quality as of June 32021, the delinquency rate for.
And Oh, I'll stand and loans that are past due for 32, 660 days, well 0.6, and 7.7 per cent and decreased from 82% as of March 31, 2021 and the 1.8 per cent for June 30.
2020.
A clear demonstration of what our risk management capabilities and the Premier borrow base. We also continued to strength our corporation with a third party financial Guaranty company stood in the quarter with everybody at the proportion of a long month for therapy.
That was covered by those financial guarantee companies increased to 49.8 per cent from 48, 1% and the previous quarter.
Moving forward, we will continue to invest in the development.
Technology capabilities for.
And to improve operational efficiency and expand our cooperation with more and you shouldn't founding partners, we expect to maintain debt gross momentum in our operational performance in the third quarter.
Now I would like the briefs and financial performance. Please note that all numbers stated are in on.
And the total net revenue in the second quarter of 2021 increased by 144% to RMB $932.4 million from RMB $387.9 million in the same tier.
Got it.
<unk>, primarily due to our increasing the total loan facility patient amount on the show and Carlo this quarter compared with the same period of 2020.
Oh regulation and the servicing expenses in the zone.
The second quarter of 2021 increased by 1.7 per cent to RMB 520 point I'm feeling.
2 from RMB 512 point Formula and the same tier 2020, primarily due to the increase in commission fees, resulting from the increased total loan book.
For the retention amount and this quarter compared with the same period of 2020 and partially offset by debt further decline and the collection expenses, resulting from the decrease in the delinquency rate.
Provision for accounts receivable and contract assets.
In the second quarter was RMB $25.2 million compared with RMB $28.3 million and the same tier of 2020, primarily to the decrease in the average estimates for rate compared with the same period of 2020 and partially offset by the increase in the amounts receivable for them.
For the facilitation services and.
As a result of the increase in total.
Total loans and interest amounts and the second quarter of 'twenty 'twenty 1.
And most of our provision for the loan receivable and the second quarter of 'twenty time, and web was RMB, 1.1 billion compared with a provision for the loan receivable of RMB 110.5 million and the same period over 2020.
Primarily due to increase and the average estimate default rates compared with the same tailwind of 2020.
The income from operations and a Sim in the second quarter of 'twenty and.
'twenty, 1 was RMB $337.7 million compared with losses from the operation of RMB 341, 5 million and the same period of 2020.
Net income attributable to X financial shareholders and the second quarter on 2021 was RMB $223.2.
$2 million compared with a net loss attributable X financial care for those of RMB $343.7 million.
And the same period of 2020.
Non-GAAP adjusted net income attributable to X financial shareholders in the second and the second quarter over 20 times, what it was.
RMB 241, 9 million compared with non-GAAP adjusted net loss attributed attributable to the X financial share for those.
And 325.9 million and the same period of 'twenty 'twenty cash.
Cash and cash equivalent was RMB.
1 trillion.
And $83 million 9 billion as of June 32021, compared with RMB 799.8 million and March 30 foot 'twenty 'twenty 1.
For all of our business outlook for the third quarter of 'twenty or 'twenty..1 we expect total loan facilitation amount to be in the Rancho RMB for.
$14.5 billion to RMB, 15, 5 billion and a net income attributable to the X financial shareholders totally and no less than 230 minute. This forecast reflects our current and for.
Eliminate views, which are subject to changes now this concludes our prepared remarks, and we would like to open the call for the question on.
Operator please.
We will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
Yeah.
Okay.
And our first question comes from Nathan born with AWH Capital. Please go ahead.
Good morning, Thanks for taking questions you mentioned.
That you plan to start using your new credit micro credit license and.
For Q3 could you describe the steps that you took to obtain that license and then maybe.
And what opportunities that opens up for you.
Okay.
Sure absolutely this is on.
This is a very long pole and progress and.
Yeah.
I think at least for some of our our application in the late 2019 and over a problem and it has it been fairly OPEC and but a final week on it and it's because there really are no fix the guy and I and and so how do I have attended on island, but we are the first batch.
<unk> was able to successfully repay all our people be investors Oh for their investment and the cause of the license.
You asked about opportunities and I think at this moment the opportunity fairly difficult to evaluate and the management team is still ingo already profit already process and determine what is the best strategy also utilizing that license.
As of now we just began to use it.
And we just began to offer nowhere for through the license.
Okay. Thanks, and then.
I guess the follow up on that your total loan facilitation volume.
And it was up over 100 per cent year over year, and now appears to be growing and kind of high teens Oh from Q1, and then also based on your guidance going forward. So with that how large do you view your market opportunity and kind of what are the.
And I guess, what's driving that growth.
I think I think it's difficult to compare our growth.
Compared to the last year because of the COVID-19 for issues in China, which is very different from the other countries around the world, but last year. It was the worst in terms of COVID-19, and sensors and we are basically in the recovery and stage and as a result that last year, our non volume of exiting severity.
Withheld and.
Largely due to our Oh and choices so right now because of the COVID-19 has and I.
I wouldn't say it has.
Long past for China.
So the economy and the Chinese.
Chinese market and has been fairly.
Fairly benefit to our business that is why we are able to maintain such a.
Strong growth, it's very difficult to forecast for what the growth in the future will be but if you are following the Chinese market closely.
You will notice for that.
Super and all.
And the supervision and the committee that they have been gradually per.
Weighted and those people who are not qualified to exited the market and.
And so.
As the leading company in the and the Chinese market is that are we basically that we are able to maintain our continuous operation. So I think and he had the opportunity is good.
It really depends on the management team to take it and take advantage of the opportunity.
Great and then the last thing I had.
So by my math, now and book value per a D S and it's roughly 975.
Hmm shares are trading up a little bit this morning.
But you have 3.
$3.27 for a D S and cash now and then on annual run rate of earnings.
And based on your guidance is roughly $2.50 per ADR so with.
With that and mind, how do you think about capital allocation.
And potentially.
On returning capital to shareholders or for buying back shares.
Yeah.
I think to I think you know we are still in the gross carry and are.
And you'll know on the.
The micro license either at this stage and and act.
And in November we need to put them on net debt.
Oh 5 billion, a 500 million and sorry 500 million into the capital and I think we are but that is still lower than that yeah and do you know.
And it does requirement and you know the the ruling it.
I was and kind of issues on the powerful about no.
On Slide 5 billion you know so for that license and so we we will you know you'll use the you know are used up.
You know put aside some capital for for the case and in case, they are and they need the other another funding funding for those for the license of purpose and that also.
So we have a.
So Joe I don't have a no.
Stock buyback or something like that kind of thing.
For the near future to answer your question directly.
So that would be going from.
I guess that would just be allocated at the restricted cash balance that I I was just speaking more to the the cash and equivalents, but you're saying that more of that cash will be tied up due to this new license and I understanding that correctly.
Yes, yes.
Alright, well, that's all I had thanks for taking my questions and I'll pass it on.
Okay.
As a reminder, if you have a question please press star and 1 to be joined into the queue.
This concludes our question and answer session I would like to turn the conference back over to Tom you went for any closing remarks.
Thank you and everyone for joining us today on the call. If you haven't got a chance to raise so cushing it'll be pleased to answer them through for our contacts and they look for what to speaking with you again in the new fish and thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.