X Financial (NYSE:XYF) Q3 2023 Earnings Call Transcript

X Financial (NYSE:XYF) Q3 2023 Earnings Call Transcript November 23, 2023

Operator: Hello, and welcome to the X Financial Third Quarter 2023 Earnings Conference Call. All participants will be in a 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: 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 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 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 the law. It is now my pleasure to introduce Mr. Kan Li. Mr. Li, please go ahead.

A finance executive tapping away on a digital tablet, demonstrating the company’s digital innovation.

Kan Li: 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 cost increased quarter-over-quarter. Our loan delinquencies fluctuated within the 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 RMB29 billion.

With the total outstanding loan balance reaching nearly RMB50 billion at the end of September 2023, our delinquency rates for all outstanding loans past due for 31 to 60 days and 91 to 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 cutting-edge risk management system and focusing more on asset quality than on expanding the borrower base. Going forward, we will continue to execute our proven strategy and enhance our ability to drive long-term growth and returns for our shareholders.

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Q&A Session

Now I will turn the call to Frank, who will go through our financials.

Frank Fuya Zheng: 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 RMB1,397 million. While our net income saw a remarkable 64% year-over-year increase to RMB347 million, there was a slight decline quarter-over-quarter. This decrease was primarily attributed to the rising cost of borrowing acquisition and management asset quality risks. We remain dedicated to achieving balanced growth in revenue and earnings 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 cost and risk control based on a close monitoring of 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 that all the numbers stated are in RMBand is rounded up. Total net revenue increased by 56% to RMB1,397 million from RMB895 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 service expenses increased by 50% to RMB811 million from RMB540.5 million in the same period of 2022, primarily due to the increase in borrowing acquisition cost and the collection expenses resulting from the increase in total loan amount facilitated and originated this quarter compared with the same period of 2022. Provisions for the loans receivable was RMB54 million compared with RMB17 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 RMB435 million compared with RMB300 million in the same period of 2022. Net income was RMB347 million compared with RMB212 million in the same period of 2022. Non-GAAP adjusted net income was RMB375 million compared with RMB231 million in the same period of 2022. For further financial information, please refer to the earnings release on our IR website. Regarding our share repurchase plan. In Q3, we repurchased approximately 396,000 ADS for a total consideration of USD 1.7 million. Since the beginning of 2023, we had repurchased an aggregate of approximately 802,000 ADS for a total consolidation of USD 3.3 million. We have approximately USD 5.6 million remaining for the potential repurchase at our current plan.

Now on our business outlook. For Q4 this year, we expect the total loan amount facilitated and originated to be between RMB26.5 billion and RMB28 billion. For fiscal year 2023, we expect a total loan amount facilitated and originated to be between RMB105.9 billion and RMB107.4 billion. This concludes our prepared remarks, and we’d like to open the call to questions. Operator, please. Operator?

Operator:

Victoria Yu: 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: Conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

Victoria Yu: Thank you.