Q2 2023 X Financial Earnings Call

August 29, 2023

[music].

Hello, and welcome to the X financial second quarter 'twenty, each forty-three earnings conference call.

All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad 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 You. Please go ahead.

Thank you operator, Hello, I ever wine I think he's joining us today. The company's results were released earlier today and are available on the company's IR website at IR they'll show you Dot com.

On the call today from X gene that show our Mr. Kelly, President and Mr. Brett true Yeah. She's finish officer, you believe you'll give a brief overview of the coffee business operations and highlights followed by Mr. Zhang who will go through the financials, you're all available to answer your questions during the Q.

N a session I remind you that that's all may constitute forward looking statements and the safe Harbor provisions of private Securities Litigation Reform Act of 1995.

Such statements are based on management's current expectations and current market and operating foundation and relate to events like in well known or unknown risks uncertainties and other factors all of which are difficult to predict and many of which are beyond the companys pit shell, which make up the call.

<unk> actual results performance or two minutes to differ materially from those seem to forward looking statements.

So I think information regarding a lease or and are there risks.

Six 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 statements as a result of new information future events or otherwise except as required under law.

It is now my pleasure to introduce Mr. Kelly Mr. Li Yu. Please go ahead.

Hello, everyone.

Are they likely to go into the first class all this.

This outstanding operational and financial performance.

Second quarter.

We continue to execute our proven strategy and maintain our growth momentum in.

In the first half of the year, the total loan facilitation than origination amount reached RMB 15 million 50 billion.

Chris is an increase of over 50% to 55% year over year.

Our top line improve the buys 30% bottom line nearly doubled in the first half underpinned by our proven business model consistent asset quality and optimize operational efficiency.

Furthermore, our net income per basic ads for the first half of the year.

With more than 130% year over year, driven by our robust profitability and dedication to rewarding shareholders through our share repurchase program.

During the second quarter, our total amount of associated I know originated increased by 53% year over year, and 7% quarter over quarter to RMB 26 billion.

In line with our expectations.

The total outstanding loan balance reached RMB.

45 pm and other jewelry.

Sure.

We continue to strengthen our risk management system to maintain healthy asset quality with it.

Delinquency rates for all outstanding loans past due for 31 to 60 days remained stable at 96% at the end of June 23.

And the delinquency rates for all outstanding loans pass due to 491 to 180 days at two 5% so.

Significantly improved from a year ago.

We are proud of our consistent high quality risk control and Stapleton bottler space, which have been well received and recognized a borrower's institutional funding partners.

We will continue to work together to meet the financing needs of consumers and Smes in support of China's economic recovery.

On the regulatory side with the recent settlement Delphi has imposed on some large financial platforms by the government. The market believes that there's industry wide as it typically is expected to come to an end.

And the more stable regulatory environment.

Fixed it.

Financial regulatory authority with all of them.

Now shifting their focus towards regular supervision.

So highly.

Comparable company, we always operate in full compliance with regulations and the laws and we'll continue to prioritize financial consumer protection.

Looking ahead to the second half long tenured industry, we are confident in our ability to achieve sustainable growth.

Shareholder value the normally the retail environment that provides a solid foundation of our continued growth and success.

We remain committed to executing our share repurchase and dividend program to reward our value shareholders.

Now I will turn to the quoting Frank would you will go through our financials.

Thank you, Ken and Hello, everyone.

We are pleased with our strong financial results for the second quarter total net revenue increased by 48% year over year, and 21% quarter over quarter to RMB.

One 1000 220 billion.

The lenders focus on cost.

Cost control and the improving operational efficiency enable us to deliver revenue growth that outpaced.

Outpaced cost and expenses gross.

As a result net income for Q2 search by 19, 7% year over year and 29% quarter over quarter.

Uh huh.

We at least for me.

Amy took they literally delivering substantial topics the positive impact.

Oh, even share repurchase program sort of contributes.

Central Bank our achievements.

Resulting notable notably.

The improvement.

Income per share and yes rising bias.

27% from RMB.

3.36.

In the same period last year to RMB 762.

To maximize shareholder value our board of directors.

As I'll also improve especially given.

Hello.

17th MTS, garlic, and yes, which is accepted we expect it to be paid on October this year.

Given the stabilized regulatory environments, we expect to achieve a steady growth in both operational and financial performance in the second half of the year.

So how do you define our position in the market now I would like to brief some financial performance.

Please note that all numbers stated.

And a lot of it.

Total net revenue increased by 48%.

1002 to the $20 million.

820 formulas in the same periods of 2022.

Primary due to a increase in the total loan amount.

In Oregon, I think this quarter compared with the same periods of 2022.

Origination and the southern thing.

This increased by 26% to RMB 670 million from RMB 533, and the same to 'twenty to 'twenty two.

Larry due to the following factors one.

Our increase in commission fee, resulting from the increase in total about seven P. M.

Although this quarter compared with the same thing.

Me too.

An increase in interest expenses as a result.

Oh and increase in payable to the institutional funding partners and investors.

Provision for the loan receivable and 55 million compared with RMB 33, 32 million in the same period.

2022.

Due to it.

An increase in loans receivable held by the company as a result of that.

The increase in total loan facility.

And we can hit this quarter compared with the same period.

2022.

Income from operations was RMB 445 million compared with RMB 194 million in the same period of 2022.

Net income was RMB 356 million compared with RMB 186 million in the same period of.

2022.

non-GAAP adjusted net income was RMB 365 million compared with RMB 211 million in the same period.

2022.

But what other financial information please refer to the earnings.

Our web site.

Website.

Regarding our share repurchase plan in Q2.

Approximately 400.

6008, yes.

For a total consideration of USD, one 6 million.

In the U.

You have 30 million share repurchase plan announced last November we have approximately seven 3 million remaining for the potential purchase.

Yesterday, our board approved the extension of the existing share repurchase program. That's an additional 12 months until the end of September 2024.

Now our business outlook.

So closely you'll see it we expect the total amount that facilitates an order today will be between RMB.

28.

Hi, Julien and RMB 29 5 million.

Fiscal year 'twenty to 'twenty, three we expect the total loan amount facilitated and Oregon.

To be between RMB 100.

Oh five billing.

When you can't really.

This concludes our prepared remarks, and we'd like to open the call to your questions operator. Please.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad, if youre 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.

The first question comes from Boyd Hines with Equinox capital.

Please go ahead.

Hi, I wanted to ask some.

Some questions about the current trends that you're seeing among your active borrowers.

Can you just talk a little bit about what the average loan size.

Is and what the loan tenure is like among your active group and in the second quarter.

Yeah.

Sure Okay. Okay I'll take that question our average ticket size is roughly about RMB 10.

Telling them until they can fall I'm walking around that.

The average tenure is.

Because we offer them up to 12 months and the majority of the Cosmo consumers choose to have them all.

After the application so our average.

It actually is very close to fill them up.

Okay. So if I'm, if I'm borrowing that amount.

I expect it to have repaid that loan fully at the end of that 12 month term.

That is correct.

Okay, and so if I'm a repeat borrower I'm not just rolling over our principal balance.

Because I couldn't pay the full amount.

Oh no you can actually if you got an England to that so if.

If you are doing continues or not.

Are you on that.

Okay.

Yeah.

So in terms of the current state of the economy and.

Possible.

Pressures on your.

On your borrowers have you started to adjust your loan provision rates at all are you seeing any signs of a.

Pullback among your your your.

Your consumer base in terms of.

The amount of loans that they might be wanting to take on.

Absolutely the demand so has it been really has.

Has it been fairly high for a long time.

That's why I was kind of a momentum a phone.

Of growth.

Some of the provision that you just mentioned about it.

It is our company policy and always review, our policing and make sure that we are pretty.

They are a position he has come in line with our with our risks.

So I can't say exactly how much that will adjust the amount of provision volatile our provision has been Sidoti Oh has it been fairly robust for the.

Several years.

Okay.

I appreciate that the dividend has been put in place and that you are continuing at a fairly aggressive.

Jeremy purchase I think those are things that should absolutely continue.

Especially given where the.

Where the stock is trading.

And I I hope that Ah I wish you all the best for the rest of the year. Thank you.

Yeah.

Okay.

Again, if you have a question. Please press Star then one.

Okay.

Okay seeing that there are no further questions.

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

Okay. Thank you everyone for Johnny I saw them on the call today, if you haven't got the chance to raise your questions you'll be pleased to answer that in theory, a lot contact it look forward to speaking with you know a game then jansky okay. Thank you.

Operator: Hello and welcome to the X Financial Second Quarter 2023 earnings conference call. Our participants will be in listen only mode. Should you need assistance, please signally conference specialist by pressing star than zero on your telephone keypad.

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

Yeah.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star than one on your telephone keypad. To withdraw your question, please press star than two. Please note, this event is being recorded.

[music].

Operator: Please note, this event is being recorded.

Victoria Yu: I would now like to turn the conference over to Victoria Yu. Please go ahead. Thank you, operator. Hello everyone and thank you for joining us today. The company's results were released earlier today and available on the company's AR website at ir.shallingroup.com.

Victoria Yu: 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 great 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.

Victoria Yu: On the call today from X Financial are Mr. Kan Li, president and Mr. Frank Fuya Zheng, chief financial officer.

Victoria Yu: Mr. Li will give a great 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.

Victoria Yu: I remind you that this call may contain follow-aloking statements and their safe harbor provisions of private securities litigation reform act of 1995. Such statements are based on management's current expectations and current market and operating conditions and relate to events that involve known risks on certainties and other factors. All of which are difficult to predict and many of which are beyond the company's potential which may cause the company's actual results, performance or achievements to defer material release from those in the follow-aloking statements.

Victoria Yu: 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 and allowed.

Victoria Yu: So the information regarding these are and other risks on certainties 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 statements as a result of new information, future events or otherwise, except as required and allowed.

Kan Li: It is now my pleasure to introduce Mr. County, Mr. Li, please go ahead. Hello everyone, we are delighted to enter the first class of 2016 this outstanding operational and financial performance in the second quarter. We continue to exit our proven strategy and maintain our growth momentum. In the first half of the year, the total known facilitation and origination amount reached the nearly R&B 50 million, 50 billion and impressive increase of over 55% year over year.

Kan Li: Our top nine improved by 30%, while our bottom nine nearly doubled in the first half. Underpinned by our proven business model, consistent asset quality and optimized operational efficiency. Furthermore, our net income per basic ABS for the first half of the year grew more than 130% year over year, given by our robust profitability and dedication to rewarding tier holders through our shear repurchase program. During the second quarter, our total normal amount of facilitated and originated increased by 53% year-over-year and the 7% quarter-over-quarter to RMB 26 building, in line with our expectations with the total outstanding non-dynamic region RMB 45 building and the end of June 2020.

Kan Li: In the first half of the year, the total known facilitation and origination amount reached the nearly R&B 50 million, 50 billion and impressive increase of over 55% year over year. Our top nine improved by 30%, while our bottom nine nearly doubled in the first half. Underpinned by our proven business model, consistent asset quality and optimized operational efficiency. Furthermore, our net income per basic ABS for the first half of the year grew more than 130% year over year, given by our robust profitability and dedication to rewarding tier holders through our shear repurchase program.

Kan Li: During the second quarter, our total normal amount of facilitated and originated increased by 53% year-over-year and the 7% quarter-over-quarter to RMB 26 building, in line with our expectations with the total outstanding non-dynamic region RMB 45 building and the end of June 2020. We continue to strengthen our risk management system to maintain healthy asset quality. We are building a new configuration rate for all outstanding non-dynamic past due for 31 to 60 days remaining stable at 0.96% at the end of June 2020.

Kan Li: We continue to strengthen our risk management system to maintain healthy asset quality. We are building a new configuration rate for all outstanding non-dynamic past due for 31 to 60 days remaining stable at 0.96% at the end of June 2020. And we are building a new configuration rate for all outstanding non-dynamic past due for 91 to 180 days at 2.5%. So, significantly improved from a year ago. We are proud of our consistent high quality is control and stable fund borrowers space, which have been well-received and recognized by our institutional funding partners.

Kan Li: And we are building a new configuration rate for all outstanding non-dynamic past due for 91 to 180 days at 2.5%. So, significantly improved from a year ago. We are proud of our consistent high quality is control and stable fund borrowers space, which have been well-received and recognized by our institutional funding partners. We will continue to work together to meet the financing needs of consumers and SMEs in support of China's economic recovery.

Kan Li: We will continue to work together to meet the financing needs of consumers and SMEs in support of China's economic recovery. On the regulatory side, with the recent settlement of finance in Pro-Zellers on large financial platforms by the government, the market believes that the industry-righted certification is expected to come to an end. And the more stable regulatory environment is expected. Financial regulatory authorities are now shifting their focus towards regular supervision. As a highly responsible company, we always operate in full compliance with regulations and laws and we will continue to prioritize financial consumer protection.

Kan Li: On the regulatory side, with the recent settlement of finance in Pro-Zellers on large financial platforms by the government, the market believes that the industry-righted certification is expected to come to an end. And the more stable regulatory environment is expected. Financial regulatory authorities are now shifting their focus towards regular supervision. As a highly responsible company, we always operate in full compliance with regulations and laws and we will continue to prioritize financial consumer protection.

Kan Li: Looking ahead to the second half of 2020, we are confident in our ability to achieve sustainable growth and enhance shareholder value. The normal regulatory environment provides a solid foundation of our continued growth and success. We are then committed to executing our share repurchase and dividend program to reward our value shareholders.

Fuya Zheng: Now, I will return to the court of France, which we will go through our financials. Thank you, Ken. And hello, everyone.

Fuya Zheng: Now, I will return to the court of France, which we will go through our financials. Thank you, Ken. And hello, everyone. We are very pleased with our strong financial results for the second quarter. To the net revenue increased by 48% year-over-year, and the 21% quarter-over-quarter. To IMB, 1,220 billion, our relentless focus on tightening cost control and the improving operational efficiency enable us to deliver revenue growth that are placed cost and expensive growth.

Fuya Zheng: We are very pleased with our strong financial results for the second quarter. To the net revenue increased by 48% year-over-year, and the 21% quarter-over-quarter. To IMB, 1,220 billion, our relentless focus on tightening cost control and the improving operational efficiency enable us to deliver revenue growth that are placed cost and expensive growth. As a result, net income for the key to search by 97% year-over-year, and the 29% quarter-over-quarter. We are transforming our commitment to delivering substantial profits.

Fuya Zheng: As a result, net income for the key to search by 97% year-over-year, and the 29% quarter-over-quarter. We are transforming our commitment to delivering substantial profits. The positive impact of the pound growing share repurchase program further contributes our achievements. Result in notable worth improvement in net income per share areas rising by. 137% from INB 3.36 INB in the same period last year to INB 7.62. To maximize shareholder value our board of directors has also improved a special given about 17 cents a year dollar per visitary environment. We expect to achieve a steady growth in both operational and financial performance in the second half of the year. For the thought, 35 are positioned in the market.

Fuya Zheng: The positive impact of the pound growing share repurchase program further contributes our achievements. Result in notable worth improvement in net income per share areas rising by. 137% from INB 3.36 INB in the same period last year to INB 7.62. To maximize shareholder value our board of directors has also improved a special given about 17 cents a year dollar per visitary environment. We expect to achieve a steady growth in both operational and financial performance in the second half of the year.

Fuya Zheng: For the thought, 35 are positioned in the market. Now I would like to read some financial performance for Q2. Please note that all numbers stated in INB and wronged up. Total net revenue increased by 48% to INB 1220 million from INB 824 million in the same period of 2022. Primary due to an increase in the total loan amount facility and originating this quarter compared with the same period of 2022. Origination and the serving thing expenses increased by 26% to INB 670 million from INB 533 million in the same period of 2022.

Fuya Zheng: Now I would like to read some financial performance for Q2. Please note that all numbers stated in INB and wronged up. Total net revenue increased by 48% to INB 1220 million from INB 824 million in the same period of 2022.

Fuya Zheng: Primary due to an increase in the total loan amount facility and originating this quarter compared with the same period of 2022. Origination and the serving thing expenses increased by 26% to INB 670 million from INB 533 million in the same period of 2022.

Fuya Zheng: Primary due to the following factors. One, an increase in commission fee resulting from the increase in total loan amount facility and originating this quarter compared with the same period of 2022. Second, an increase in interest expenses as a result of an increase in payable to the expansion of foreign partners and investors. Provision for the loans received by INB 55 million compared with INB 33. 32 million in the same period of 2022.

Fuya Zheng: Primary due to an increase in loans receivables held by the company as a result of the increase in total loan amount facility and originating this quarter compared with the same period of 2022. In-term form operations was INB 445 million compared with INB 194 million in the same period of 2022. Net income was INB 366 million compared with INB 186 million in the same period of 2022. Net income was INB 366 million compared with INB 211 million in the same period of 2022.

Fuya Zheng: For further financial information please refer to the earning release of our website, our website. Regarding our share repurchased plan in Q2, we purchased a possibly 400 or 6,000 ADS for a total consideration of US 1.6 million. Under US 30 million share repurchased plan announced last November we have approximately US 7.3 million remaining for the potential repurchase. Yes, the day our broader approved extension of the existing share, the purchase program for actually additional 12 months until the end of September 2024.

Fuya Zheng: For further financial information please refer to the earning release of our website, our website.

Fuya Zheng: Regarding our share repurchased plan in Q2, we purchased a possibly 400 or 6,000 ADS for a total consideration of US 1.6 million. Under US 30 million share repurchased plan announced last November we have approximately US 7.3 million remaining for the potential repurchase. Yes, the day our broader approved extension of the existing share, the purchase program for actually additional 12 months until the end of September 2024.

Fuya Zheng: Now our business are worked for Q3 this year. We expect the total loan amount of facilities and originates to be between R&D 28.5 billion and R&D 29.5 billion. For the digital year 2023, we expect the total loan amount of facilities and originates to be between R&D 100.05 billion and R&D 110 billion.

Fuya Zheng: This continues our fairly marks and we would like to open the call to the questions. Operator, please.

Operator: This continues our fairly marks and we would like to open the call to the questions. Operator, please. We will now begin the question and answer session. To ask a question you may press star than one on your telephone keypad. If you are using a speaker phone, 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 than two. At this time, we will pause momentarily to assemble our roster.

Operator: We will now begin the question and answer session. To ask a question you may press star than one on your telephone keypad. If you are using a speaker phone, 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 than two. At this time, we will pause momentarily to assemble our roster.

Boyd Heinz: The first question comes from Boyd Heinz with Equinox Capital.

Boyd Heinz: The first question comes from Boyd Heinz with Equinox Capital. Please go ahead. I wanted to ask some questions about the current trends that you are seeing among your active borrowers. Can you just talk a little bit about what the average loan size is and what the loan canter is like among your active group in the second quarter?

Kan Li: Please go ahead. I wanted to ask some questions about the current trends that you are seeing among your active borrowers. Can you just talk a little bit about what the average loan size is and what the loan canter is like among your active group in the second quarter? Okay, I can answer that question. Our average loan and particular size is roughly about R&D 10,000 to the 15,000. It's roughly around that. The average tenure right now is because we offer the loan up to 12 months and the majority of the customers choose 12 months as their active unit.

Kan Li: Okay, I can answer that question. Our average loan and particular size is roughly about R&D 10,000 to the 15,000. It's roughly around that. The average tenure right now is because we offer the loan up to 12 months and the majority of the customers choose 12 months as their active unit. Our average tenure will have to be very close to till now. Okay, so if I am borrowing that amount, am I expected to have repaid that loan fully at the end of that 12 month term?

Kan Li: Our average tenure will have to be very close to till now. Okay, so if I am borrowing that amount, am I expected to have repaid that loan fully at the end of that 12 month term? That is correct. Okay, and so if I am a repaid borrower, I am not just rolling over a principal balance because I couldn't pay the full amount. Well, you can't. Actually, if you are doing good to that, if you are doing good to you, you are not a member you are not.

Kan Li: That is correct. Okay, and so if I am a repaid borrower, I am not just rolling over a principal balance because I couldn't pay the full amount. Well, you can't. Actually, if you are doing good to that, if you are doing good to you, you are not a member you are not.

Kan Li: Okay, so in terms of the current state of the economy and possible pressures on your borrower. Have you started to adjust your loan provision rates at all? Are you seeing any signs of pullback among your consumer base in terms of the metal loans that they might be wanting to take on? Actually, the demand has been fairly high for a long time. I think that's why we can keep a momentum of growth.

Kan Li: In terms of the provision that you just mentioned, that it is our company policy that always review our provision and to make sure that our provision is coming in line with our risks. So I can't say exactly how much that we are adjusting our provision, but our provision has been fairly robust for the past several years. Okay.

Boyd Heinz: I appreciate that the dividend has been put in place and that you're continuing fairly aggressive, fairly purchase. I think those are things that should absolutely continue, especially given where the stock is trading, and I hope that I wish you all the best for the rest of the year. Thank you.

Operator: Again, if you have a question, please press star than one. Okay.

Operator: Seeing that there are no further questions, this concludes our question and answer session.

Victoria Yu: I would like to turn the conference back over to Victoria U for any closing remarks. Okay. Thank you everyone for joining us on the count today. If you haven't got a chance to raise your questions, you will be pleased to answer them through a follow-up contact. It looks forward to speaking with you again in the near future. Thank you.

Victoria Yu: I would like to turn the conference back over to Victoria U for any closing remarks. Okay. Thank you everyone for joining us on the count today.

Victoria Yu: If you haven't got a chance to raise your questions, you will be pleased to answer them through a follow-up contact. It looks 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. In the next episode, we'll see you in the next episode.

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

Operator: In the next episode, we'll see you in the next episode.

Q2 2023 X Financial Earnings Call

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