X Financial

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 on our investor relations website at .xiaoyinggroup.com. On the call today from X Financial are Mr. Ken Lee, President, Mr. Frank Huya Zheng, Chief Financial Officer, and Mr. Noah Kaufman, Chief Financial Strategy Officer. Mr. Lee will start with a brief overview of our business progress and financial performance. Then Mr. Kaufman will go over some TQ-1 metrics and highlights. After that, Mr. Zheng will share updates on financials, regulatory insights, and our 2025 outlook. Afterwards, Mr. Lee, Mr. Zheng, and Mr. Kaufman will be available to answer your questions during the Q&A session. I remind you that this call may contain forward-looking statements under the SIPP Harbor provisions of Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and involve known or unknown risks, uncertainties, and other factors. These factors are difficult to predict, and money are beyond the company's control, which may cause actual results, performance, or achievements to differ materially from those described in these statements. Further information on these and other risks can be found in our IPC 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 introduce Mr. Ken Lee.

Thank you, Victoria, and hello everyone. We are pleased with how 2025 has begun. In the first quarter, we facilitated RMB 35.15 million in loans and .8% sequential increase and .4% growth year over year. It was one of our strongest quarters for origination. We have been working on this for the past few years, reflecting solid borrower demand and continued progress in risk management. Our team remained focused on expanding opportunities through both new partnerships and existing relationships, enhancing our technology platform and underwriting models to support profitability and scalability, balancing growth and risk as we broaden access to qualified borrowers. We are also working to improve the borrow experience by delivering faster decisions, simplifying application processes, and enhancing transparency. In parallel, we continue to strengthen platform reliability and support tools to help customers make informed borrowing decisions and manage repayment with confidence. Despite the typical seasonal impact from Chinese New Year, we achieved sequential growth in both loan volume and revenue, so the revenue reached RMB 1.94 per billion, up .4% from Q4 and over 60% year over year. These results reflected steady progress in growing the platform responsibly. Operational and credit quality updates. We also made a continual progress on asset quality. As of March 31, our 31 to 60-day delinquency rate was .25% compared to .61% a year ago, reflecting a 22% improvement year over year. The 91 to 180-day delinquency rate was 2.7%, down from .7% in Q1 2024, a 37% reduction year over year. These improvements reflect disciplined borrow screening and underwriting practices. We have also continued to enhance borrow engagement and repayment behavior through timely communication and tailored repayment assistance programs. These initiatives have contributed meaningfully to our risk management outcomes and supported further portfolio stability. Now, I will turn the call to Noah to go over some key Q1 metrics and highlights.

Noah Baumbach Yeah, thank you, Kent. Hello, everyone. It's a pleasure to speak with you today. Let me share several highlights from our Q1 operational and financial performance. On the operational metrics, we facilitated approximately 35.15 billion RMB in loan originations, marking a .4% year over year increase. Our total loan outstanding balance, excluding loans over 60 days delinquent, reached 58.4 billion RMB, growing by more than 33% from Q1 2024. We facilitated over 3.14 million loans with an average loan amount of approximately 11,181 RMB. On the financial highlights, total revenue grew to 1.94 billion RMB, up .4% sequentially, and .4% year over year, primarily driven by higher borrow volumes and originations. Our income from operations expanded substantially, reaching 573 million RMB, up 52% year over year. This demonstrates our improved operational leverage and disciplined expense management. Our average funding cost improved year over year, supported by a more optimized funding structure, and sustained commitment from our core institutional partners. This reflects the strength of our platform and deepening trust within our funding network. With these metrics, we continue to see notable gains in financials, and operational efficiency, and market positioning. I'll now hand the call over to Frank to walk through the financials, discuss capital allocation, priorities, provide regulatory insights, and outline our growth outlook for 2025.

Frank Wang Thank you, Noah. It's great to speak with everyone today. I will provide additional insights into our probability metrics, security, and strategic plans for capital allocation. Non-GAP adjusted net income for Q1 reached RMB 467 million, increased .9% year over year, reflecting sustained earnings strength. Basic earnings per 8 years improved significantly to USD 1.50, approximately .6% year over year increase, and this volume enhanced the probability per share. Return on equity increased to 25.5%, rising .4% points year over year, and a 3.2 points sequentially, reflecting our sustained financial discipline and the growing operational efficiency. Our liquidity remains strong, positioned as well to support ongoing operations, investments, and capital allocation. Share repurchase plan. We have recently authorized a new share repurchase plan that allows us to buy back up to USD 100 million worth of our class-age shares and ADS. This authorization will be in effect for an 18-month period running from January 1, 2025 to November 30, 2026. This new authorization comes in addition to our existing repurchase plan approved last December, which still has approximately 15.9 million remaining. Regulatory environment update. The regulatory environment in China remains dynamic, and we remain fully committed to compliance and align with the overall policy direction. The recent notice from the National Financial Regulatory Administration affirms the current trajectory with a clear focus on responsible credit assets and financial stability. We see increased oversight as a positive step that supports long-term industry development and reflects growing recognition of our role. While involving rules may introduce high compliance requirements, they also create space for innovation and more sustainable growth. We continue to engage proactively with regulatory phases and remain focused on responsible execution under the evolving framework. 2025 growth outlook. Based on current trends, ex-financial expects a total loan amount facilitated and originally in the second quarter of 2025 to be in the range of IMB 37.5 billion to IMB 39.5 billion, reflecting continued strong demand and consistent execution following a robust first quarter. With that, I will pass the call back to our President, Ken Lee, for closing remarks.

Thank you, Frank. As we progress through 2025, we remain confident in our strategic direction grounded in strong underwriting, discipline and risk management, and ongoing operational improvements. With a solid financial foundation and a clear focus on long-term value creation, we are well positioned to sustainable and profitable growth. Thank you.

Operator, back to you. We can go to the Q&A session.

We will now begin the question and answer session. To ask a question, you may press star, then one, on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. 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 Q&A session. The first question today comes from Kenning Zhao with Norton Andrews. Please go ahead.

Hi, I'm Kenning from Norton Andrews. Congratulations and thank you for the great performance in the first quarter. My first question is, there's a strong growth in your business, both in new loan origination and active users. You mentioned there will be further growth. I wonder if that means you like the current macroeconomic environment and the loan market. It's not big, but the delinquency rate has also ticked up a little bit compared to the end of last year. If the delinquency rate is high, then the loan market will be a little bit more delinquency rate. Can I have a second question?

Can we get this first question first and then you can ask the next one? Sure. Thank you. I think you mentioned several questions in your comments. Let's get to them one by one. The first one is how we view the current environment. I think our company has never tried to grow our portfolio for the sake of growth. We're always trying to manage our portfolio based on our assessment of the future environment. That being said, I think right now, based on our historic trend and our analytical, based on our analysis, that we think the overall environment is still good for the portfolio growth. That is why we are still for the portfolio growth at this moment. Another thing from this is that since the second half of last year, that we have been investing a lot in acquiring new customers. As this customer matures in our portfolio, we are able to offer them better lines, better products, so they can stick with us longer. That is also the best foundation for our growth. In terms of the delinquency rate, I think the reason that you see an uptick from the lower level that we achieved somewhat last year is that I would say that that probably was the bottom of our delinquency rate. Even with this uptick, I think our delinquency rate with regard to our portfolio is still very healthy. We are not particularly concerned about that. Going forward, we do expect that our delinquency rate will still have some uptick, but those upticks will be more than offset by our overall scale. That basically means that our profit will not be impacted by the delinquency.

Let me add a few words regarding the delinquency rate. That number is actually the most profit situation from last quarter to Q1 is stable. The number is a little bit skewed. If you take another look, if you look at our Q1 income statement under the operating expenses and cost expenses, the first one is the operation and services. Basically, it is operation and expenses. The second one is the marketing acquisition, customer acquisition. The third one is general administration costs. That is three general costs. The rest of it is from like a provision this one and provision that one. If you add up together, this is all risk-related costs. If you add up this quarter, Q1, and you add up Q1, and you add Q2, Q4 last quarter, all the provisions together, you will find that all the Q1 provision is about $60 million RMB less than last quarter. But among these $60 million, actually because this $57 million is related to our own insurance business, which means that because our own insurance business, the revenue you book on one period and the cost you book the whole thing together in one time. Because the last quarter, Q4, they did more, our guarantee company did more business, so they have more of that. So you take out this $57 million, actually the cost, Apple to Apple, the cost related, you take out all the risk related to the guarantee business, actually we have like a three, four million less cost than Q1 compared with Q4. So overall, the conclusion is the risk situation is to remain basically the same, not much better, not much worse. That's the thing. But having said that, we all expect because this is a regular, regular new development will be coming in October, we will prepare and there will be, because of that, there will maybe be some uptake, you know, cost and risk situation, with an uptake down the road, but not in the Q1, not in the Q2. We haven't found up, you know, the risk situation, you know, situation change much at all. That's why we continue to invest a lot in customer acquisition also. Thank you. Well, thank you for

the detailed answer. Well, my second question is about the repurchase. You haven't repurchased any shares in the first quarter, but you have approved another share repurchase program. Just wondering if you repurchase any, like during the April's market volatility and should we expect you continue the aggressive stock buybacks as you did last year? Thank you.

Yes. Yes. Because Q1 does not open windows, so we usually do the buyback during the open window from the old shareholders. Right now, I mean, the incoming open window, we pretty much sure, you know, the remaining almost 60 million will be used up in the coming open window and we will very likely to kick in to the buyback during the, you know, non-window period also. So that's why we have this newly authorized 100 million to cover that. I hope that answers your question.

Yes, certainly. Thank you very much and thank you again for the wonderful culture.

As a reminder, if you would like to ask a question, please press star and 1 to be joined into the question queue. The next question comes from Alex Yee with UBS. Please go ahead.

Hi, good evening. Thanks for taking my question. This is Alex from UBS. So I have two questions, if I may. So first one is regarding your loan growth guidance for the next quarter. It seems there's still going to be a bit of a good growth. So just wondering what's driving the growth behind and how do you see the underlying loan application or credit demand in the last two months, in April or May? Have you seen any suffering trend given a lot of the noise on the microphone? And the second question is a bit on your funding supplies. So given the new regulatory announcements in April, I'm wondering how have you heard any feedback from your funding partners with regard to their attitude towards this loan pricing, which is going above 24 percent? And then do you see anything we need to adjust our current practice in order to ensure that we're more compliant? Thank you.

Okay, I'll first answer the first question about the growth. As I mentioned in the last investor, that our growth has always been based on our assessment for the upcoming risk environment. So at this moment, I think that the way that we grow our portfolio has always been acquiring new customers and get the customer on board and graduate them into a better product, which largely means the lower fees and the higher line. And our growth has largely grown from this strategy. So you ask about April or May or June, that our growth path will always be like that. In terms of our funding institutional partners, right now we are in very close conversation with them about the upcoming changes. And at this moment, what I can say is that we expect there will be changes and we are going to make some adjustments, but I don't see our company has always been confident that we will be fully compliant with the new regulation before the October 1st deadline. So we are not particularly concerned about that. That being said, any new regulation will always bring some small shocks to the industry. So we do expect there will be some shocks in our industry. It's just that I think our company are in a very good position to take those shocks. So I think our growth prospect will not be changed based on whatever that we are providing for the investors.

Hi Alex. First of all, welcome to our only call. Welcome. Regarding the, let me just briefly ask the same question again. And I think we really took advantage of the risk environment, the good risk environment since the second half of last year. So our run rate is, you know, at the end of last year it's already pretty high and you see that we are at the end of the second quarter. So we are ahead of the Q1 and we will keep the same pace in terms of acquisition effort in the second quarter. So if based on our current forecast of Q2 this year, we are ahead of the 30%, the volume goes for this year. But we are not, you know, have no intention to increase the forecast anytime soon because we will see when in the Q3, you know, what's the effect on the regulatory policy impact on the industry. So the white card, you know, a little bit uncertain regarding Q4 volume. And that's what I'm trying to say. And so overall I think we are confident to achieve 30% volume goals for this year. But other than, but maybe not more, it's all because Q4 volume is kind of in the limbo right now. Regarding the prepare for the new regulatory, possible regulatory impact, we do some, you know, talking to the people and talking to the regular, mostly our institution partners and some regulatory authorities. And we are prepared some, you know, technology wise, you know, if there's no new policy can come down and we can accommodate it to the industry very quickly, efficiently, you know, from technology, operation wise. Other than that, we, you know, like anybody else, we don't know much of what's going to come down. Thank you.

Alistair, thank you very much.

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 reach out to our investor relations team directly. We appreciate your interest and look forward to speaking with you again soon. Alistair, back to you. Thank you. The conference is now concluded.

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