Q2 2025 X Financial Earnings Call
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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, everyone and thank you for joining today's call. The company's financial results were released earlier today and are available our Investor Relations website, IR, though selling group dot com on the call today from exponential or Mr. Count Lee President Mr. Frank.
Yeah, Joe Chief Financial Officer, and Mr. No, one Kaufman Chief financial strategy Officer, Mr. Li will start with a brief overview of our business progress and financial performance that Mr. Kaufman, who will go over some key Q2 metrics and highlights of Tonight. He said Jim will share updates.
On financials regulatory insights and all of our 20 to 25 outlook afterwards, Mr. Li Mr. Zhang and Mr. Kaufman there'll be available to answer your questions during the Q&A session.
And then you that this call may contain forward looking statements and near the Safe Harbor provisions of the private Securities Litigation Reform Act up 1995, such statements are based on management's current expectations and involve known or unknown risks uncertainties and other factors. Please factor.
Costs are difficult to predict and many are beyond the company's control, which may cause actual results performance and achievements to differ materially from those described in these statements.
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 it.
Introduce Mr. Kelly.
Thank you Vittorio and Hello, everyone. We are very pleased with our continued the momentum we introduced and device.
In the second quarter wafer certitude, RMB $38 99 billion in loans of 10, 4% to 9% sequential increase and a strong 71, 4% growth year over year.
This was another standout quarter for originations supported by a robust borrower demand and continue to advance and risk management.
Our team remains committed to the expanding market opportunities through both new parties.
Ownership and the deepening of existing relationships.
Further strengthening our technology platform and underwriting models to drive profitability and scalability.
Carefully balancing growth opportunities with a prudent risk management as we increase it.
We increased access to quantify the borrowers.
We also continue to improving borrower experienced by a speeding up decision, making streamline application and enhancing transparency similar.
Simultaneously, we have made meaningful enhancements to platform reliability and the borrower facing tools empowering users to make informed credit decision and managing repayments confidently.
Despite the ongoing regulatory environment and macroeconomic uncertainty, we delivered significant sequential growth in loan volume and the revenue.
Total revenue reached RMB, two 7 billion up 17, 3% sequentially and a notably higher at 6% to five 6% growth year over year.
These results were reflective of disciplined execution and ongoing expansion of our platform and our capabilities.
Operational and the credit quality update will also continue making positive strides in asset quality as of June 30.
<unk> 31 to 60 day delinquency rate improved to $1 to 106% down from $1, two 9% a year ago, reflecting the early or a 10% improvement year over year.
The 91% to 180 days delinquency delinquency rate was two point, the nine 1% substantially lower than the 43, 8% in Q2 'twenty 'twenty four.
Australia meaningful a 33% reduction year over year.
These improvements highlight our continued commitment with discipline and the borrower screening and rigorous underwriting practices.
We have also proactively improve borrowing engagements leveraging timely communication and customize the repayment the assistance programs.
These initiatives continue to drive a better borrower behavior significantly contributing to the stability and the quality of our portfolio.
With that I'll now turn it over to Noah, who will walk through additional financial and operational highlights from the second quarter.
Great. Thank you Hello, everyone. It's great to speak with you today, let me highlight key points from our Q2 operational and financial results and operational metrics, we facilitated approximately $38 99 billion RMB and loan originations up significantly by 71, 4% year over year.
Year.
Our total outstanding loan balance excluding loans delinquent more than 60 days reached $64 91 billion RMB, representing an increase of 55, 3% from Q2 2024.
Total number of loans facilitated increased substantially to approximately $372 million, reflecting a growth of 78% year over year with an average loan size of 10476 RMB.
Our active borrower base grew meaningfully reaching approximately $285 million a notable 73, 7% increase year over year.
On the financial highlights our total net revenue reached $2 $2 7 billion RMB, reflecting strong sequential growth of 17, 3% an impressive 65, 6% year over year growth driven by increased loan origination volumes and continued expansion of our loan facilitation services.
Income from operations increased meaningfully to $675 1 million RMB rising by 45, 8% year over year underscoring our continued focus on operating leverage and disciplined expense management, we reported non-GAAP adjusted net income of $593 $2 million.
RMB, reflecting robust year over year growth of 58, 3% demonstrating continued profitability momentum as we scale our business importantly, we delivered this bottom line growth, while maintaining operating margins near 30%, even as we increase borrower acquisition spending reflecting strong.
Unit economics and platform efficiency.
In addition, the weighted average number of basic shares outstanding declined approximately 14, 4% year over year contributing to meaningful growth in earnings per avs alongside strong net income performance. This.
This reflects our ongoing commitment to capital return through our share repurchase program, which Frank will speak on more in a moment.
At the same time with net income up 27% year over year and only modest growth in <unk>.
Total equity or implied return on equity expanded significantly affirming the strength and efficiency of our earnings model and our ability to generate high returns on capital, while maintaining a conservative balance sheet.
Our strong Q2 results reflect consistent execution improved operational efficiency and resilient asset quality amidst a challenging regulatory and market environment.
I'll now hand, it over to our CFO, Frank who will dive deeper into these financial results provide an update on our capital return strategy and share insights on regulation and growth outlook for the remainder of 2025. Thank you go ahead Frank.
Okay.
Thank you.
So to speak with everyone. Today, let me provide additional highlights of our profitability metrics, the creative position strategic capital allocation and the regulatory environment for the second quarter of 2025.
Financial profitability metrics non-GAAP adjusted net income for Q2 reached RMB $593 2 million.
Yes.
Gross dollars $82 8 million up significantly by 58, 3% year over year, reflecting a strong core profitability driven by prudent expense control and high quality loan growth now.
non-GAAP adjusted net income it is.
Improved significantly.
Significantly to RMB 14 point.
$6 15.
<unk> U S dollar.
$1 98, representing 85, 8% increase year over year underscoring.
This operational leverage in the interim.
Has profitability per share.
Return on equity further improved to approximately 27, 9% in Q2 increased both sequentially and year over year as <unk> mentioned I will improve.
Flex both earnings growth and capital efficiency supported by disciplined equity manager.
The investments this demonstrates our continued financial discipline.
Kris operation efficiency as we scale.
Our liquidity remains robust, giving us the flexibility.
To fund strategic growth initiatives.
It's in technology.
Arrow acquisition and return capital to shareholders, primarily through our ongoing share repurchase program.
Share repurchase plan from January one 2025.
August 15, 2025 excellent actual purchase.
<unk> of approximately $16 7 million class a ordinary shares including approximately three.
Three nearly eight years.
For a total consideration about a possible U S.
47 7 million.
Sure the purchase plans.
The company's previous U S. Dollar 50 million repurchase authorization has been fully utilized the company now has approximately U S $68 2 million remaining under its new U S 100 billion share repurchase programs.
Which was effective through November 32026, this ongoing share repurchase activity underscores our confidence in the company's long term growth perspective, prospectus and demonstrates our continued commitment to enhance shareholder value further.
With purchase and this program remains subject to market conditions and regulatory guidelines and our.
His question regarding capital allocation.
Priority.
Dividend update as part of our semi annual dividend policy. The board has approved a cash dividend of the U S.
2000 <unk> push.
Yes, which is equivalent to approximately U S.
<unk>.
467 ordinary shares.
Sure.
Shareholders of record as of September 26, 2025 will be entitled to receive the dividend and the payments.
We expect to be distributed all around.
Around October 15th 2025, <unk>, we received dividend payments.
Through our.
Depository.
The bank of New York Mellon.
Shortly thereafter with.
Was the timing subject to brokerage processing.
Yes.
Regulatory environment uptake the regulatory environment in China continues and we remain.
We're fully committed to compliance and alignment with the government's policy goes.
The regulatory guidance from the National Finance financial regulatory and administration emphasize.
Most of all the ethylene practice consumer protection and the financial stability areas, we remain fully aligned.
Why involving regulations may introduce incremental compliance obligations for industry participants we view these changes positively as they support a sustainable industry landscape.
Encourage responsible innovation, we will continue to proactively engage.
Thirties, ensuring our operations.
Strictly moving standards and we believe our platform is well positioned to navigate those changes while continue to create long term value.
2025 gross outlook based on current trends ex.
<unk> financial expects.
The total amount of the facility and originally in the third quarter of 2012 to be the range of RMB 32 billion to RMB 34 billion.
It's a deliberate moderation from a record Q2 levels as a management place great emphasis on asset quality and the probability we'll appeal volume growth.
The company remains.
To the challenge and uncertainty pace from the evolving regulatory environment.
Maintaining confidence.
The drilling borrow demand and disciplined execution.
With that I will hand, the call back to our president Kennedy for closing remarks.
Yes.
Thank you Frank.
As we move further into 2025, we remain confident in our strategic path relatively robust underwriting practices prudent risk controls and the continued operational enhancements.
Our strong financial position and unwavering commitment to long term value creation gave us confidence in our ability to deliver sustained and profitable growth.
This concludes our prepared remarks, we will now open the call for questions. Operator. Please go ahead.
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The first question comes from Randy Wellington with NPS trading.
Please go ahead.
Hi, there.
Gratulation on a good quarter and thank you for the call.
I do have two questions. The first one is can you guys provide some light on the pivot that you've made on providing a loan growth at the beginning of the year to switching to asset quality and then the second question is.
Did you guys see opportunity to run the company leaner through artificial intelligence.
Sorry, I didn't I didn't hear your first Chris Collier tangle repeated that please yes, yes.
Can you provide some information or some color on the pivot that you guys have had from.
Providing the loan growth are going from loan growth to at the beginning of the year and switching over to asset quality as your prioritization.
Okay, I think assets asset quality has always been our priority no matter no matter, what so I think at the beginning of the year that it will provide a roughly a 30% increase in our.
In our scale.
I think we maintain our expectation on that I don't see any significant change from our original expectation that being said that asset quality. Our various that has always been our top priority. So based on the environment that we are seeing right. Now I think we are we are paying even more attention.
Two making sure that we.
We are not growing our portfolio just for the sake of growth, but that being said I still don't see.
We still maintain our expectation that we will we will likely finish the whole year.
Buy a finished by reaching that goal I think thats. Your first question.
The second wave of AI applications.
Have we are really being leverage AI in <unk>.
<unk> in our client management.
<unk>.
Likewise, our collections.
The customer.
Customer service. So we have already been utilizing AI to replace some of the <unk>.
Some of the live agents before this is this will be our continued growth and I don't see that we will sort of original and <unk>.
Under stage and this will be our ongoing development for from our side.
Obviously, we are very interested in developing our.
Capability in order to reduce the future cost.
There is certainly aligned with our with our profitability goal.
I see.
Thank you thank you Barry.
Just add one thing Randy.
Yes.
After deck Thats been released.
Alright that highlights all the AI.
If that were testing internally.
It may be helpful.
Okay. Thank you.
Again, if you have a question. Please press Star then one.
This concludes our question and answer session I would like to turn the conference back over to Victoria Yu for any closing remarks.
Thank you everyone for joining us today, if you have additional questions. Please be sure to all of our Investor Relations team directly. We appreciate your interest and look forward to speaking with you again soon operator back to you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
With regard.