Group 1 - Chinese stocks have shown solid gains for investors despite macroeconomic uncertainty [1] - X Financial (XYF) has been highlighted as a stock that performed well over recent quarters [1] Group 2 - The article emphasizes a value-focused investment strategy, targeting sectors such as chemicals, homebuilders, building materials, industrials, and metals & mining [1] - The investment horizon mentioned ranges from one quarter to two years, indicating a medium-term investment approach [1]

X Financial (XYF) Q1 2025 Earnings Call May 20, 2025 07:30 AM ET Company Participants Victoria Yu - Investor Relations ManagerKan Li - President & DirectorNoah Kauffman - Chief Financial Strategy OfficerFuya Zheng - Chief Financial Officer Conference Call Participants None - AnalystAlex Ye - Research Analyst Operator Hello and welcome to the X Financial First Quarter twenty twenty five Earnings Conference Call. All participants will be in a listen only mode. Please note this event is being recorded. I would ...

X Financial (XYF) Q1 2025 Earnings Call May 20, 2025 07:30 AM ET Company Participants Victoria Yu - Investor Relations ManagerKan Li - President & DirectorNoah Kauffman - Chief Financial Strategy OfficerFuya Zheng - Chief Financial Officer Conference Call Participants None - AnalystAlex Ye - Research Analyst Operator Hello and welcome to the X Financial First Quarter twenty twenty five Earnings Conference Call. All participants will be in a listen only mode. Please note this event is being recorded. I would ...

Financial Data and Key Metrics Changes - In Q1 2025, the company facilitated RMB 35.15 billion in loans, reflecting an 8.8% sequential increase and 63.4% year-over-year growth [6][11] - Total revenue reached RMB 1.94 billion, up 13.4% from Q4 and over 60% year-over-year [7][12] - Non-GAAP adjusted net income for Q1 was RMB 457 million, a 44.9% year-over-year increase [14] - Basic earnings per ADS improved to USD 1.5, a 45.6% year-over-year increase [14] - Return on equity increased to 25.5%, rising 1.4 percentage points year-over-year [14] Business Line Data and Key Metrics Changes - The total loan outstanding balance, excluding loans over sixty days delinquent, reached RMB 58.4 billion, growing by more than 33% from Q1 2024 [11] - The company facilitated over 3,140,000 loans with an average loan amount of approximately RMB 11,181 [11] Market Data and Key Metrics Changes - The thirty-one to sixty days delinquency rate improved to 1.25% from 1.61% a year ago, reflecting a 22% improvement [8] - The ninety-one to one hundred and eighty days delinquency rate decreased to 2.7% from 4.7% in Q1 2024, a 37% reduction [8] Company Strategy and Development Direction - The company is focused on expanding opportunities through new partnerships and enhancing its technology platform and underwriting models [6] - There is a commitment to improving borrower experience by delivering faster decisions and simplifying application processes [7] - The company has authorized a new share repurchase plan for up to USD 100 million worth of Class A shares and ADS [15] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the current macroeconomic environment, indicating it is favorable for portfolio growth [26] - The company expects total loan amounts facilitated in Q2 2025 to be between RMB 37.5 billion and RMB 39.5 billion, reflecting continued strong demand [16] - Management acknowledged potential regulatory changes but expressed confidence in compliance and the ability to adapt [43] Other Important Information - The regulatory environment in China is described as dynamic, with a focus on responsible credit assets and financial stability [16] - The company is actively engaging with regulatory authorities to ensure compliance with upcoming regulations [43] Q&A Session Summary Question: Current macroeconomic environment and loan market outlook - Management believes the current environment is still good for portfolio growth and is focused on managing growth responsibly [25][26] Question: Delinquency rate concerns - Management noted that while there may be some uptick in delinquency rates, overall portfolio health remains strong and profit will not be impacted [26][28] Question: Share repurchase program - Management indicated that no shares were repurchased in Q1 due to the open window policy but plans to utilize the remaining funds in the upcoming open window [36] Question: Loan growth guidance and credit demand - Management expects continued growth driven by customer acquisition and is confident in achieving a 30% volume growth for the year despite potential regulatory impacts [46]

Disclaimer This presentation has been prepared by X Financial (the "Company") solely for information purpose and has not been independently verified. No representations, warranties or undertakings, express or implied, are made by the Company or any of its affiliates, advisers, or representatives or the underwriters as to, and no reliance should be placed upon, the accuracy, fairness, completeness or correctness of the information or opinions presented or contained in this presentation. None of the Company o ...

Core Viewpoint - X Financial reported strong financial results for Q1 2025, with significant growth in loan facilitation, active borrowers, and net income, reflecting robust demand and effective risk management strategies [1][9]. Operational Highlights - Total loan amount facilitated and originated in Q1 2025 was RMB 35,149 million, up 63.4% year-over-year from RMB 21,505 million in Q1 2024 [3][7]. - The number of active borrowers reached 2,425,504, representing a 77.1% increase from 1,369,410 in the same period last year [3][7]. - Total outstanding loan balance at the end of Q1 2025 was RMB 58,403 million, a 33.3% increase from RMB 43,812 million in Q1 2024 [3][7]. - The company facilitated approximately 3.14 million loans in Q1 2025, a 75.6% increase year-over-year [7]. Financial Highlights - Total net revenue for Q1 2025 was RMB 1,937.5 million (US$ 267.0 million), a 60.4% increase from RMB 1,208.0 million in Q1 2024 [8][11]. - Net income for Q1 2025 was RMB 458.1 million (US$ 63.1 million), compared to RMB 363.1 million in Q1 2024, marking a 26.2% year-over-year increase [8][11]. - Non-GAAP adjusted net income for Q1 2025 was RMB 466.8 million (US$ 64.3 million), up 44.9% from RMB 322.2 million in the same period last year [8][11]. - Net income per basic ADS was RMB 10.92, a 46.8% increase from RMB 7.44 in Q1 2024 [8][11]. Asset Quality - Delinquency rates for loans past due for 31-60 days improved to 1.25% in Q1 2025 from 1.61% in Q1 2024, while delinquency rates for loans past due for 91-180 days decreased to 2.73% from 4.37% [3][12]. - The company maintained stable provisions for loans receivable at RMB 62.2 million, while provisions for contingent guarantee liabilities increased to RMB 63.7 million from RMB 47.9 million [12]. Funding and Liquidity - Cash and cash equivalents increased to RMB 1,389.5 million (US$ 191.5 million) as of March 31, 2025, up from RMB 984.6 million at year-end 2024 [14]. - Total restricted cash was RMB 712.3 million (US$ 98.2 million), bringing total cash (including restricted) to over RMB 2.1 billion [14]. - Shareholders' equity grew to RMB 7,435.4 million (US$ 1.02 billion), reflecting the growth of retained earnings [14]. Business Outlook - X Financial expects the total loan amount facilitated and originated in Q2 2025 to be in the range of RMB 37.5 billion to RMB 39.5 billion, indicating continued strong demand [18]. - The company has approved a new share repurchase program of up to US$ 100 million, effective from June 1, 2025, through November 30, 2026, reflecting confidence in long-term growth [18].

Group 1 - X Financial will release its unaudited financial results for Q1 2025 on May 20, 2025, before U.S. market opens [1] - The earnings conference call is scheduled for 7:30 AM U.S. Eastern Time on the same day [1] - Dial-in details for the conference call have been provided for various regions, including the U.S., Hong Kong, and Mainland China [2] Group 2 - X Financial is a leading online personal finance company in China, focusing on connecting borrowers with institutional funding partners [3] - The company utilizes proprietary big data-driven technology to establish strategic partnerships with financial institutions [3] - X Financial has a robust risk assessment and control system to facilitate loans to prime borrowers [3]

Core Viewpoint - X Financial, a leading online personal finance company in China, filed its annual report on Form 20-F for the fiscal year ended December 31, 2024, with the SEC on April 25, 2025 [1]. Company Overview - X Financial is committed to connecting borrowers with institutional funding partners through its platform [3]. - The company utilizes proprietary big data-driven technology to establish strategic partnerships with financial institutions, facilitating and originating loans to prime borrowers under a risk assessment and control system [3]. Annual Report Availability - The company will provide a hard copy of its annual report containing audited consolidated financial statements free of charge to shareholders upon request [2].

Regulatory Environment - The evolving regulatory environment poses uncertainties that may materially and adversely affect the company's business operations and financial condition[84]. - The Interim Measures for Microcredit Companies impose a range of requirements for microcredit companies, which must achieve full compliance within a transition period not exceeding two years[84]. - Regulatory restrictions on service fees may arise from changes in laws regarding private lending, potentially impacting the company's operations[93]. - The company may face regulatory risks due to the evolving regulatory environment for online consumer finance, which could impact its ability to obtain necessary licenses[127]. - The company is required to reapply for ICP licenses as foreign-invested telecommunications enterprises due to changes in shareholder nationality[130]. - The company must comply with evolving Chinese regulations, and failure to do so could result in significant operational disruptions and a decline in the value of its American Depositary Shares (ADSs)[209]. - New regulations may impose additional requirements on the company's corporate structure, potentially affecting its business operations and financial condition[207]. - The most updated negative list issued on September 6, 2024, may impose restrictions on the company's operations and require pre-approval for certain business activities[224]. - The company is classified as a foreign enterprise under Chinese laws, which imposes restrictions on foreign ownership and may require reapplication for licenses[204]. - The PRC Foreign Investment Law, effective January 1, 2020, may materially affect the company's business and financial condition due to uncertainties in its interpretation and implementation[221]. Financial Performance - Positive cash flow from operating activities was reported at RMB626.8 million, RMB1,391.4 million, and RMB1,523.4 million (US$208.7 million) for the years 2022, 2023, and 2024 respectively[150]. - The amount of loans facilitated through the platform was RMB 73,655 million in 2022, RMB 105,557 million in 2023, and RMB 104,889 million in 2024[102]. - The service fees collected from borrowers are critical to financial performance, and any material decrease could substantially impact revenues and profitability[90]. - The company has adjusted annualized fee rates not to exceed 36% to comply with regulatory requirements[102]. - The company may require additional capital for business objectives and may engage in equity or debt financings, which could lead to dilution for existing shareholders[151]. - Labor costs in the Chinese Mainland are projected to continue increasing, impacting the company's financial condition if not managed effectively[190]. - The company may be treated as a resident enterprise for tax purposes, subjecting it to Chinese Mainland income tax on global income[252]. - The company may be subject to a 25% Chinese Mainland enterprise income tax on global income if deemed a Chinese Mainland resident enterprise[253]. - Dividends paid to foreign investors may incur a 10% withholding tax if derived from sources within the Chinese Mainland[254]. Operational Risks - The company relies on third-party collection agencies for loan repayments, which may lack adequate resources to effectively collect payments[146]. - The company faces risks related to IT system errors and disruptions, which could adversely affect service delivery and user retention[155]. - Cybersecurity risks are present, with potential vulnerabilities to attacks that could compromise user data[160]. - The company may face significant legal and financial repercussions if found in violation of intellectual property rights held by other parties[172]. - The company is subject to liabilities if it fails to verify borrower information and detect fraud adequately[139]. - Misconduct or errors by employees or third-party service providers could lead to significant reputational and financial harm[158]. - The company may face administrative penalties if its business practices regarding service fees are deemed non-compliant with regulations[140]. Market Competition - The online consumer finance industry in Chinese Mainland is highly competitive, with significant competition from other sizable online lending marketplaces[97]. - Marketing efforts are essential for attracting borrowers and institutional funding partners, and any inefficiencies in these efforts could harm financial results[153]. - Approximately 80.4% and 79.8% of active borrowers for Xiaoying Card Loan were engaged through channel partners in 2023 and 2024, respectively[103]. - The company collaborates with 58 partners to obtain borrowers for various loan products as of December 31, 2024[103]. Compliance and Legal Issues - The company has implemented internal controls and "know-your-customer" procedures to prevent money laundering and terrorist financing[179]. - The company has not been subject to fines or penalties related to money laundering or terrorist financing activities as of December 31, 2024[180]. - The company faces ongoing risks from geopolitical tensions and economic downturns, which may adversely affect borrower credit profiles and increase default rates[193]. - The company has not been able to assure compliance with future anti-money laundering implementation rules[181]. - The company may incur additional costs and liabilities if unable to comply with evolving personal information protection laws in the Chinese Mainland[164]. Corporate Governance - Mr. Yue (Justin) Tang controls 42.91% of the total outstanding share capital and 93.14% of the voting power, which may limit other shareholders' influence over corporate matters[215]. - The company has not established arrangements to address potential conflicts of interest among shareholders of its consolidated VIEs[214]. - The company relies on legal documents executed with chops or seals, and any misuse of these assets could disrupt its business operations[217]. VIE Structure and Risks - The company does not have direct ownership of its operating entities in Mainland China but exercises control through Variable Interest Entities (VIEs) via contractual arrangements[202]. - A significant portion of the company's revenue is derived from these VIEs, and any deficiencies in the VIE agreements could lead to a loss of control and significant financial impact[202]. - The company faces uncertainties in the Chinese Mainland legal system, which could limit its ability to enforce contractual arrangements and adversely affect its financial condition[212]. - The company’s operations rely on the shareholders of its consolidated VIEs, whose interests may not align with those of the company, leading to potential conflicts of interest[213]. - If the VIE agreements are deemed illegal, the company may face severe penalties, including loss of control over its VIEs and potential fines[208]. Technology and Infrastructure - The company has implemented technology infrastructure enhancements to support business growth and maintain system security[92]. - The quality of user experience is critical, with most transactions completed through the mobile application as of December 31, 2024[147]. - The company’s proprietary credit analysis and risk management system may not be continuously effective as loan facilitation increases[112]. Currency and Economic Factors - Fluctuations in the Renminbi against the U.S. dollar may materially affect the value of investments and reported financial results[258]. - The company relies on dividends from operating subsidiaries in Chinese Mainland for cash needs, making it vulnerable to Renminbi revaluation[259]. - All net income is denominated in Renminbi, which is convertible under the "current account" but faces restrictions under the "capital account"[257]. Reporting and Compliance - The company has fully remediated previously identified material weaknesses in internal control over financial reporting, specifically regarding U.S. GAAP knowledge and financial statement presentation[167]. - As of December 31, 2024, the company's internal control over financial reporting was deemed effective, as confirmed by independent registered public accounting firm KPMG Huazhen LLP[167]. - The company is subject to stringent reporting obligations under the Cybersecurity Law of the PRC, which may adversely impact business operations and user confidence[165]. - The company faces potential penalties ranging from approximately RMB10,000 to RMB1 million for violations of the Cybersecurity Law, Data Security Law, and related regulations[164].

Financial Data and Key Metrics Changes - Total loan volumes in Q4 reached RMB32 billion, a 24% year-over-year increase, while full-year loan volumes were RMB104.9 billion, reflecting stable performance compared to 2023 [8][9] - Q4 net income more than doubled year-over-year to RMB386 million, with total net revenue increasing 43% year-over-year to RMB1.7 billion [11][18] - Full-year total net revenue reached a record RMB5.9 billion, and full-year net income was RMB1.5 billion, with total shareholder equity increasing by 19% year-over-year [18][19] Business Line Data and Key Metrics Changes - The delinquency rate for loans overdue by 31 to 60 days improved to 1.17% from 1.57% a year ago, and the 91 to 108 days overdue delinquency rate declined to 2.48% from 3.12% last year, indicating strengthened asset quality [11][12] Market Data and Key Metrics Changes - The Chinese government implemented monetary and fiscal stimulus measures in the second half of 2024, which lowered funding costs and fostered healthy borrower demand in the personal finance market [10][12] Company Strategy and Development Direction - The company aims to leverage technology, particularly AI, to enhance financial services efficiency, focusing on risk analytics, automated underwriting, and fintech solutions [13][15] - A forecasted 30% increase in total loan volumes for 2025 is expected, driven by organic demand and a stable regulatory environment [14][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth trajectory for 2025, citing improved risk management and lower funding costs as key factors for profitability [46][47] - The company remains committed to enhancing shareholder value through disciplined capital allocation and strategic investments in AI [23][54] Other Important Information - The Board of Directors approved a semiannual dividend of USD0.25 per ADS, reinforcing the commitment to shareholder value [19][20] - The company repurchased 38.4 million Class A ordinary shares in Q4, totaling USD49 million, with a total repurchase of 52.2 million shares for USD59.4 million in 2024 [20][21] Q&A Session Summary Question: Clarification on share repurchase accounting - Management clarified that the share count calculation is based on a weighted average, which is why the reduction is not fully reflected in the year-end report [29] Question: New hire's role in the company - The new hire, Noah Kauffman, will focus on deepening engagement with U.S. capital markets and enhancing investor relations [38] Question: Drivers behind expected loan volume growth for 2025 - Management indicated that improved customer acquisition and partnerships with more platforms are key drivers for the anticipated 30% increase in loan volume [40][41] Question: Impact of loan volume growth on profitability - While specific profitability forecasts were not provided, management expressed confidence that profit will increase at a similar pace to loan volume growth [44][46] Question: Capital allocation priorities going forward - Management indicated a preference for share buybacks over dividends, emphasizing the stock's value and potential for appreciation [52][54]