X Financial

Q1 2024 Earnings Conference Call

5/31/2024

spk02: Hello and welcome to the ex-financial first quarter 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. 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 Yu. Please go ahead.
spk03: 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.xiaoyinggroup.com. On the call today from X Financial is Mr. Frank Fu Yajun, Chief Financial Officer. Ms. Zheng will give a brief overview of the company's business operations and highlights, go through the financials, and then answer your questions during the Q&A session. I remind you that this call may contain 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 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 risks 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 statement as a result of the new information, future events, or otherwise, except as required in the law. It is now my pleasure to introduce Mr. Frank Fu Yajun. Mr. Jun, please go ahead.
spk01: Hello, everyone. We are pleased to start 2024 with a solid financial performance in the first quarter. We continued to implement our strategy of proactively and dynamically adjusting loan volumes based on close monitoring of asset quality dynamics and this again proved effective in securing our probability. As a result, despite a year-over-year and a quarter-over-quarter decline in the loan volume, both top and bottom lines increased on a yearly and quarterly basis. with notable improvements in profits. In the first quarter, the total loan amount facilitated and originally decreased by 11% year-over-year and 18% quarter-over-quarter to INB 22 billion, in line with our guidance. Our total outstanding loan balance was INB 44 billion at the end of March 2024. Delinquency rates For the outstanding loans, past due for 31 to 60 days and 91 to 180 days were 1.61% and 4.37%, respectively, at the end of the quarter, compared with 1.05% and 2.4% a year ago. The increase in overdue loans as a percentage of the total outstanding loans is primarily due to lower outstanding loan balances at this quarter end as a result of proactive control of the loan facilitating and originating that we initiated in the first quarter of last year. Excluding the impact of the reduced loan volume, asset quality began to stabilize during this quarter. We remain committed to closing monitoring borrowers through the entire credit cycle continuing straining our risk control system and taking all necessary measures to mitigate risks. In the first quarter, total net revenue was R&D 1.2 billion, up 20% year-over-year and 1% quarter-over-quarter, despite decline in the loan volumes. Thanks to our strict risk controls and improved operational efficiency, Net income increased by 28% year-over-year and 92% quarter-over-quarter to RMB $363 million. This once again demonstrates the effectiveness of our strategy, strong execution, and the commitment to ensuring long-term profitability. Beginning this quarter, we combined the broader acquisition costs from origination and the service expenses. indirect expenses from the borrower acquisitions, from the general and administration expenses, and the sales and marketing expense into the borrower acquisitions and marketing expense with total operation cost and up expenses to provide a clear breakdown of the company expenses for the investor. Going forward, we will continue to implement asset corrugate while opening up borrower acquisition costs to drive sustainable profitability. We are confident in our future profitable goals will stabilize asset quality. We have clear visibility on the loan volume for 2024 and our current strategy and expected total loan amount facility and originate for the full year to be around RMB 100 billion. Our commitment to sustainable profitability and shareholder value creation is unwavering. Our Board of Directors has authorized a new program to repurchase up to 20 million worth of our shares, which will be effective from January 1, 2024, to November 30, 2025. We are confident in our position as a public company and will drive long-term returns for our shareholders. Now, I would like to brief some financial performance for the Q1. Please note that all the numbers stated are in IMB and rounded up. Total net revenue increased by 20% to IMB $1,208 million from IMB $1,005 million in the same period of 2023, primarily due to growth in various this aggregate revenue compared with the same period of 2023. Please refer to the analysis of this aggregation of the revenue. Origination and servicing expenses increased by 15% to only 427 million from 371 million in the same period of 2023, primarily due to the increase in the collection expenses resulting from the cumulative effect of increased volume of loan facility and provided in the previous quarters compared with the same period of 2023. Borrow acquisitions and marketing expenses increased by 9% to RMB 248 million from RMB $272 million in the same period of 2023, primarily due to the decrease in the borrow-acquisition cost compared with the same period of 2023. Provision for the loan receivable was RMB $62 million compared with the RMB $20 million in the same period of 2023. Primarily due to an increase in loan receivable hold by the company as a result of the accumulated effects of increased volume of loan facility under-provided in the previous quarters compared with the same period of 2023. Income from the operations was RMB 377 million compared with the RMB 328 million in the same period of 2023. Net income was RMB 363 million compared with the RMB 284 million in the same period of 2023. Non-GAAP adjusted net income with RMB $322 million compared with RMB $307 million in the same period of 2023. For further financial information, please refer to the earnings release on our website. Now on our business outlook. For Q2 this year, we expect the total loan amount to facilitate and originate to be between RMB $23 billion and RMB $24.5 billion. For the full year of 2024, we expect the total loan amount facilitated and originated to be between RMB $90 billion to RMB $110 billion. This concludes our prepared remarks and we would like to open the call to questions. Operator, please.
spk02: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are 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 2. At this time, we will pause momentarily to assemble our roster. Once again, if you would like to ask a question, please press star then 1 to enter the question queue. That's star then 1 to enter the question queue. The first question today comes from Mason Bourne with AWH Capital. Please go ahead.
spk00: Hi, thanks for taking the question. I hope you could talk about what you're seeing in the Chinese economy and how it's related to loan volumes and your outlook for the rest of the year.
spk01: Overall, the Chinese economy is still facing a lot of challenges. Contrast to the U.S., the inflation environment, we are sort of in the deflation environment. So overall, generally, overall for the loan demand is stable or a little bit declining. I think if you look at all the first quarter financial reports from all the Chinese major banks, their loan volume and their income and the profit are all down a little bit. So we are living in that kind of environment. But for our demand, I think mainly it's risk factor. Our overall loan portfolio is still at an elevated risk level. But in the first quarter, we kind of stabilized that situation. Technically, there's a little bit of improvement compared with the fourth quarter last year, but it's still on an elevated level. That, I think, is the main factor. Instead of an economic environment to give everybody in our sector a cautious to expand loan volume in a more aggressive way. We are all under some kind of pressure for the loan quality. That's the main factor, I believe.
spk00: Okay, thanks. And then I was hoping you could also talk about the regulatory environment and how you view that going forward.
spk01: Regularly, there's not much new development in this quarter, and just basically this stable situation, there's not much news coming out from the regulatory side.
spk00: Thank you.
spk01: Thanks.
spk02: As a reminder, if you would like to ask a question, please press star then 1 to join the question queue. That's star then 1 to ask a question. It appears there are no further questions at this time. I'd like to turn the call back over to Victoria Yu for any closing remarks.
spk03: Thank you, everyone, for joining us on the call today. If you haven't got a 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.
spk02: Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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