Overview and Key Disclosures [VIE Structure and Corporate Risks](index=9&type=section&id=VIE%20Structure%20and%20Corporate%20Risks) X Financial, a Cayman Islands holding company, operates in Mainland China through subsidiaries and Variable Interest Entities (VIEs), controlling and consolidating their financial results via contractual agreements without equity ownership - X Financial is a Cayman Islands holding company that operates in China through wholly-owned subsidiaries and VIEs, controlling them through contractual arrangements and consolidating their financials under U.S. GAAP[30](index=30&type=chunk) - The company is subject to risks from the uncertainty of Chinese laws, particularly regarding the validity and enforcement of its VIE agreements, which have not been judicially tested[31](index=31&type=chunk) - Potential actions by the Chinese government could disallow the VIE structure, which would likely result in a material adverse change in the company's operations and a significant decline in the value of its securities, potentially rendering them worthless[31](index=31&type=chunk) [Risks Associated with China Operations](index=11&type=section&id=Risks%20Associated%20with%20China%20Operations) The company faces significant legal and operational risks due to its Mainland China operations, where the government exercises substantial control and can intervene with little advance notice - The Chinese government has significant authority over companies operating in China, with recent regulatory actions targeting data security, cybersecurity, and anti-monopoly enforcement, which could hinder the company's ability to offer securities and may cause their value to decline[37](index=37&type=chunk)[38](index=38&type=chunk) - The company is subject to a rapidly evolving data protection framework in China, including the Cybersecurity Law, Data Security Law, and Personal Information Protection Law, which regulate the collection, use, and transfer of personal information and other data[39](index=39&type=chunk)[40](index=40&type=chunk) - The company has implemented extensive data security measures, including encryption, network architecture security, disaster recovery, and intrusion prevention, to comply with Chinese cybersecurity laws[43](index=43&type=chunk)[44](index=44&type=chunk) - New CSRC regulations (Trial Measures), effective March 31, 2023, require Chinese companies seeking overseas listings or refinancing to complete filing procedures, facing uncertainty in interpretation and implementation[49](index=49&type=chunk)[50](index=50&type=chunk) [Risks Associated with the Holding Foreign Companies Accountable Act (HFCA Act)](index=17&type=section&id=Risks%20Associated%20with%20the%20Holding%20Foreign%20Companies%20Accountable%20Act%20(HFCA%20Act)) The HFCA Act poses a delisting risk if the PCAOB is unable to inspect the company's auditor for two consecutive years, though full inspection access was gained in December 2022 - The company was identified as an SEC-identified issuer under the HFCA Act on May 26, 2022, because the PCAOB could not inspect its auditor, KPMG Huazhen[56](index=56&type=chunk) - On December 15, 2022, the PCAOB vacated its determination that it could not inspect firms in Mainland China and Hong Kong, and as a result, the company was not identified as an SEC-identified issuer in 2023[56](index=56&type=chunk) - A risk remains that if the PCAOB loses inspection access in the future, the company could be identified again for two consecutive years, leading to a trading prohibition of its securities in the U.S., which would negatively impact the stock price and capital-raising ability[57](index=57&type=chunk) [Financial Information Related to Consolidated VIEs, Trusts and Partnerships](index=19&type=section&id=Financial%20Information%20Related%20to%20Consolidated%20VIEs,%20Trusts%20and%20Partnerships) This section provides condensed consolidated financial data for the parent company, subsidiaries, and consolidated VIEs, Trusts, and Partnerships for fiscal years 2021-2023, detailing balance sheets, income statements, and cash flows Condensed Consolidated Balance Sheet Highlights (RMB) | Account | Entity Type | 2021 (RMB) | 2022 (RMB) | 2023 (RMB) | | :--- | :--- | :--- | :--- | :--- | | **Total Assets** | **Consolidated Group** | **7.34 B** | **8.84 B** | **11.65 B** | | | VIEs, Trusts & Partnerships | 11.07 B | 11.85 B | 15.06 B | | **Total Liabilities** | **Consolidated Group** | **3.37 B** | **4.08 B** | **5.80 B** | | | VIEs, Trusts & Partnerships | 9.44 B | 8.56 B | 11.56 B | Condensed Consolidated Income Statement Highlights (RMB) | Account | Entity Type | 2021 (RMB) | 2022 (RMB) | 2023 (RMB) | | :--- | :--- | :--- | :--- | :--- | | **Total Net Revenue** | **Consolidated Group** | **3.63 B** | **3.56 B** | **4.81 B** | | | VIEs, Trusts & Partnerships | 1.39 B | 1.35 B | 1.50 B | | **Net Income** | **Consolidated Group** | **825.4 M** | **812.0 M** | **1.19 B** | | | The Company | 825.4 M | 812.0 M | 1.19 B | Cash Transfers Between Entities (RMB) | Transfer Description | 2021 (RMB) | 2022 (RMB) | 2023 (RMB) | | :--- | :--- | :--- | :--- | | From VIEs, Trusts & Partnerships to Subsidiaries (Financing) | 701.5 M | 277.5 M | 1.17 B | | From Subsidiaries to VIEs, Trusts & Partnerships (Financing) | — | — | 1.46 B | | From Subsidiaries to the Company (Financing) | 4.55 M | 164.7 M | 74.7 M | - The company announced a special cash dividend of **US$0.17 per ADS** on August 28, 2023, and approved a semi-annual dividend policy in March 2024, declaring a dividend of **US$0.17 per ADS** for the second half of 2023[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) ITEM 3. KEY INFORMATION [Risk Factors](index=25&type=section&id=3.D.%20Risk%20Factors) The company faces a multitude of risks spanning its business operations, corporate structure, and the broader regulatory and economic environment in China [Risks Relating to Our Business and Industry](index=25&type=section&id=Risks%20Relating%20to%20Our%20Business%20and%20Industry) - The company has ceased its P2P operations but may still face retroactive penalties for past non-compliance with evolving online consumer finance regulations[78](index=78&type=chunk)[84](index=84&type=chunk) - The company has obtained an online microcredit license but faces uncertainty from draft regulations that could impose higher capital requirements (up to **RMB 5 billion** for cross-province operations) and other restrictions[85](index=85&type=chunk)[86](index=86&type=chunk)[88](index=88&type=chunk) - The company's flagship product, Xiaoying Card Loan, accounted for nearly **100%** of its loan facilitation amount in 2021-2023, indicating a high concentration on a single product[91](index=91&type=chunk) - The delinquency rate for outstanding loans 31-60 days past due increased from **1.02%** as of Dec 31, 2022, to **1.57%** as of Dec 31, 2023[91](index=91&type=chunk)[124](index=124&type=chunk) - Service fees are subject to pressure from competition and regulatory restrictions, with all new loans facilitated since December 7, 2017, having annualized fee rates below **36%**[94](index=94&type=chunk)[96](index=96&type=chunk)[98](index=98&type=chunk) - The company has shifted its funding model entirely away from individual P2P investors to institutional funding partners and its own capital, with **97.2%** of funding from institutional partners and **2.8%** from its own capital in 2023[110](index=110&type=chunk)[112](index=112&type=chunk) - As of December 31, 2023, **85.0%** of outstanding loans were covered by credit insurance or guarantees from third-party financial institutional cooperators, crucial for maintaining institutional funding partner confidence[113](index=113&type=chunk) [Risks Relating to Our Corporate Structure](index=66&type=section&id=Risks%20Relating%20to%20Our%20Corporate%20Structure) - The company relies on contractual VIE arrangements to operate its business in China, which may not be as effective as direct ownership and have not been tested in Chinese courts, potentially leading to severe penalties or relinquishment of interests[209](index=209&type=chunk)[211](index=211&type=chunk)[216](index=216&type=chunk) - The founder, Chairman, and CEO, Mr. Yue (Justin) Tang, beneficially owns all Class B ordinary shares, granting him **91.32%** of the aggregate voting power as of March 31, 2024, allowing control over all major corporate matters[222](index=222&type=chunk) - The PRC Foreign Investment Law, effective January 1, 2020, introduces uncertainty as future regulations could deem VIE structures a form of foreign investment, potentially subjecting the company to restrictions or prohibitions[227](index=227&type=chunk)[228](index=228&type=chunk) - Contractual arrangements with VIEs may be scrutinized by Chinese tax authorities, who could impose transfer pricing adjustments, resulting in additional tax liabilities[231](index=231&type=chunk) [Risks Relating to Doing Business in China](index=76&type=section&id=Risks%20Relating%20to%20Doing%20Business%20in%20China) - The Chinese government exercises substantial control over the economy and may intervene in the company's operations, with recent policies increasing oversight on overseas-listed companies, data security, and cross-border data flows[233](index=233&type=chunk)[234](index=234&type=chunk)[240](index=240&type=chunk) - The Chinese legal system is uncertain and evolving, which could limit legal protections, with inconsistent law enforcement and new regulations like the CSRC's Trial Measures for overseas listings creating compliance risks[237](index=237&type=chunk)[240](index=240&type=chunk) - The company's ADSs may be delisted from U.S. exchanges under the HFCA Act if the PCAOB is unable to inspect its China-based auditor for two consecutive years, a risk that could re-emerge despite recent access[274](index=274&type=chunk)[276](index=276&type=chunk) - The company is subject to strict controls on currency conversion in China, which may restrict its ability to transfer funds from its Chinese subsidiaries to the offshore holding company to pay dividends or service debt[266](index=266&type=chunk) [Risks Relating to Our Ordinary Shares and ADSs](index=93&type=section&id=Risks%20Relating%20to%20Our%20Ordinary%20Shares%20and%20ADSs) - The trading price of the ADSs is likely to be volatile due to market factors, industry performance, regulatory developments in China, and perceptions of Chinese companies listed in the U.S[281](index=281&type=chunk) - As a foreign private issuer, the company is exempt from certain SEC reporting and corporate governance requirements applicable to U.S. domestic companies, potentially affording less protection to shareholders[304](index=304&type=chunk)[305](index=305&type=chunk) - There is a significant risk that the company was a Passive Foreign Investment Company (PFIC) for 2020 and may be a PFIC in current or future years, which could result in adverse U.S. federal income tax consequences for U.S. investors[308](index=308&type=chunk)[309](index=309&type=chunk) - Holders of ADSs have limited voting rights and must rely on the depositary to vote the underlying shares, which may not always be possible or effective[288](index=288&type=chunk) [Risks Relating to Our Investment](index=104&type=section&id=Risks%20Relating%20to%20Our%20Investment) - The company makes strategic investments using its own capital, including in limited partnerships focused on the blockchain industry and digital assets, which are subject to high volatility, liquidity risks, and potential losses[313](index=313&type=chunk)[314](index=314&type=chunk) - As a limited partner in these investments, the company has no control over the management or business of the partnerships, exposing it to risks from poor performance or misconduct by the general partners[315](index=315&type=chunk) - The price volatility of digital assets could cause significant fluctuations in the value of the company's investments, with market volatility in 2022 leading to impairment losses[321](index=321&type=chunk) ITEM 4. INFORMATION ON THE COMPANY [History and Development of the Company](index=106&type=section&id=4.A.%20History%20and%20Development%20of%20the%20Company) X Financial was founded in 2014, began loan facilitation in 2015, and completed its IPO on the NYSE in September 2018, subsequently establishing its VIE structure and obtaining key licenses - The company was founded in 2014, began loan facilitation in 2015, and completed its IPO on the NYSE in September 2018[323](index=323&type=chunk)[326](index=326&type=chunk) - In May 2021, the company obtained an online microcredit license through its subsidiary Xiaoying Microcredit (VIE) and completed a capital contribution of **RMB 1 billion** by November 2021[326](index=326&type=chunk)[327](index=327&type=chunk) - In May 2022, the company established Tianjin Yuexin with a financing guarantee license, increasing its registered capital to **RMB 1 billion** in December 2023[328](index=328&type=chunk)[331](index=331&type=chunk) [Business Overview](index=108&type=section&id=4.B.%20Business%20Overview) X Financial is a leading online personal finance company in China, connecting prime borrowers with institutional funding partners through its flagship Xiaoying Card Loan and proprietary WinSAFE risk management system [Overview](index=108&type=section&id=Overview) - X Financial connects prime borrowers with institutional funding partners, with its main product being Xiaoying Credit Loan, particularly the flagship Xiaoying Card Loan[333](index=333&type=chunk)[334](index=334&type=chunk) - The company has fully transitioned from P2P lending to institutional funding, with **97.2%** of funding from institutional partners and **2.8%** from its own capital in 2023, and the overall funding cost decreased to **7.75%** in 2023 from **8.38%** in 2022[335](index=335&type=chunk) Key Financial Performance (2021-2023) | Metric | 2021 (RMB) | 2022 (RMB) | 2023 (RMB) | 2023 (USD) | | :--- | :--- | :--- | :--- | :--- | | **Total Net Revenue** | 3,626.5 M | 3,563.0 M | 4,814.9 M | 678.2 M | | **Net Income** | 825.4 M | 812.0 M | 1,186.8 M | 167.2 M | | **Total Loans Facilitated** | 51,859 M | 73,655 M | 105,557 M | N/A | [Our Borrowers and Loan Products](index=112&type=section&id=Our%20Borrowers%20and%20Loan%20Products) - The company targets prime borrowers underserved by traditional financial institutions, with the number of active borrowers growing from **2.4 million** in 2021 to **4.5 million** in 2023[343](index=343&type=chunk)[345](index=345&type=chunk) Loan Facilitation Amount by Product (RMB in millions) | Loan Product | 2021 (RMB) | 2022 (RMB) | 2023 (RMB) | | :--- | :--- | :--- | :--- | | Xiaoying Credit Loan | 51.86 B | 73.53 B | 105.55 B | | Others | — | 129 M | 7 M | | **Total** | **51.86 B** | **73.66 B** | **105.56 B** | Outstanding Loan Balance by Product (RMB in millions) | Loan Product | As of Dec 31, 2021 (RMB) | As of Dec 31, 2022 (RMB) | As of Dec 31, 2023 (RMB) | | :--- | :--- | :--- | :--- | | Xiaoying Credit Loan | 24.86 B | 37.89 B | 48.81 B | | Xiaoying Housing Loan | 48 M | 40 M | 34 M | | Others | — | 60 M | 0 | | **Total** | **24.91 B** | **37.99 B** | **48.85 B** | - The flagship product, Xiaoying Card Loan, offers amounts from **RMB 500** to **RMB 50,000**, with the average loan amount per transaction increasing from **RMB 10,526** in 2021 to **RMB 12,658** in 2023[354](index=354&type=chunk)[355](index=355&type=chunk) [Risk Management](index=118&type=section&id=Risk%20Management) - The company's risk management is centered around its proprietary system, WinSAFE, which uses data, technology, and management to assess credit risk[376](index=376&type=chunk)[377](index=377&type=chunk) - WinSAFE analyzes over **10,000** variables for each user profile, combining traditional financial data with social and behavioral data from mobile internet sources[379](index=379&type=chunk) - The system employs over **20** models, including logistics regression and machine learning, to evaluate a borrower's value, repayment capability, and attitude, processing over **90%** of Xiaoying Card Loan applications within ten minutes[381](index=381&type=chunk)[382](index=382&type=chunk) - Fraud detection utilizes multiple authentication technologies (face scanning, OCR) and cross-checks applications against a blacklist of over **1 million** fraud data points[383](index=383&type=chunk)[385](index=385&type=chunk) [Regulation](index=124&type=section&id=Regulation) - The PRC Foreign Investment Law and its Negative List restrict foreign ownership in value-added telecommunications services to **50%**, which is relevant to the company's VIE structure[412](index=412&type=chunk)[415](index=415&type=chunk) - The company has ceased its P2P operations as of December 2020, so regulations like the Interim Measures for P2P platforms are no longer directly applicable, though risks of retroactive penalties remain[423](index=423&type=chunk)[526](index=526&type=chunk) - The company operates a microcredit business under license but faces uncertainty from draft regulations that propose stricter capital requirements and operational restrictions for online microcredit companies[427](index=427&type=chunk)[428](index=428&type=chunk)[429](index=429&type=chunk) - The company is subject to extensive data security and privacy laws, including the Cybersecurity Law, Data Security Law, and Personal Information Protection Law, which impose strict obligations on data collection, storage, and cross-border transfers[454](index=454&type=chunk)[456](index=456&type=chunk)[465](index=465&type=chunk) - New CSRC rules effective March 31, 2023, require Chinese domestic companies to file with the CSRC for overseas securities offerings and listings, adding a new layer of regulatory oversight[505](index=505&type=chunk) [Organizational Structure](index=158&type=section&id=4.C.%20Organizational%20Structure) X Financial is a Cayman Islands holding company operating in China through its wholly-owned subsidiary, Beijing WFOE, and a series of VIEs, exercising control and consolidating financial results via contractual arrangements without direct equity ownership - The company uses a VIE structure to operate in China due to legal restrictions on foreign ownership in value-added telecommunications[532](index=532&type=chunk) - Key contractual arrangements that provide control include: Shareholders' Voting Rights Proxy Agreements (giving Beijing WFOE voting control), Equity Pledge Agreements (securing obligations), Exclusive Business Cooperation Agreements (transferring economic benefits), and Exclusive Call Option Agreements (allowing purchase of VIE equity)[536](index=536&type=chunk)[538](index=538&type=chunk)[540](index=540&type=chunk)[541](index=541&type=chunk) - As a result of these contracts, X Financial is the primary beneficiary of the VIEs and consolidates their financial results[534](index=534&type=chunk) ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS [Operating Results](index=162&type=section&id=5.A.%20Operating%20Results) The company's operating results are influenced by China's economic conditions, regulatory environment, borrower base, loan pricing, risk management, and funding access, with increased delinquency rates in 2023 due to macroeconomic factors and competition - Key factors affecting performance include China's economy, regulatory changes, borrower base growth (from **3.3 million** active borrowers in 2022 to **4.5 million** in 2023), loan pricing, risk management, and funding sources[546](index=546&type=chunk)[547](index=547&type=chunk)[548](index=548&type=chunk) Delinquency Rate by Balance (Xiaoying Credit Loan) | Delinquency Period | Dec 31, 2021 | Dec 31, 2022 | Dec 31, 2023 | | :--- | :--- | :--- | :--- | | **31-60 days** | 1.48% | 1.02% | 1.57% | | **31-90 days** | 2.65% | 1.79% | 2.81% | | **91-180 days** | 2.62% | 1.94% | 3.12% | Consolidated Results of Operations (RMB in millions) | Metric | 2022 (RMB) | 2023 (RMB) | | :--- | :--- | :--- | | **Total Net Revenue** | 3,563.0 M | 4,814.9 M | | Loan facilitation service | 2,044.3 M | 2,741.0 M | | Post-origination service | 372.5 M | 596.6 M | | Financing income | 966.3 M | 1,137.3 M | | **Total Operating Expenses** | 2,480.7 M | 3,377.2 M | | **Income from Operations** | 1,082.3 M | 1,437.7 M | | **Net Income** | 812.0 M | 1,186.8 M | - The increase in net income for 2023 was primarily driven by higher revenues from increased loan volume and a decrease in income tax expense due to changes in the valuation allowance for deferred tax assets[584](index=584&type=chunk)[585](index=585&type=chunk) [Liquidity and Capital Resources](index=179&type=section&id=5.B.%20Liquidity%20and%20Capital%20Resources) The company has financed operations primarily through cash from operations and equity issuance, with cash and cash equivalents increasing significantly to **RMB 1.20 billion** in 2023, though cash transfers from Chinese subsidiaries are restricted Cash and Cash Equivalents | Date | Amount (RMB) | Amount (USD) | | :--- | :--- | :--- | | Dec 31, 2021 | 584.8 M | N/A | | Dec 31, 2022 | 602.3 M | N/A | | Dec 31, 2023 | 1.20 B | 168.4 M | Summary of Cash Flows (RMB in thousands) | Cash Flow Activity | 2021 (RMB) | 2022 (RMB) | 2023 (RMB) | | :--- | :--- | :--- | :--- | | **Operating Activities** | 449.17 M | 322.70 M | 814.14 M | | **Investing Activities** | (2.35 B) | (913.39 M) | (1.11 B) | | **Financing Activities** | 1.30 B | 576.35 M | 1.23 B | - As a holding company, X Financial's ability to pay dividends depends on distributions from its Chinese subsidiaries, which are subject to Chinese regulations on retained earnings and statutory reserves[640](index=640&type=chunk) [Critical Accounting Estimates](index=183&type=section&id=5.E.%20Critical%20Accounting%20Estimates) The company's financial statements rely on critical accounting estimates for revenue recognition and allowance for credit losses, requiring significant judgment in forecasting loss and prepayment rates under the CECL methodology - Revenue recognition involves estimating variable consideration by using an expected value methodology, adjusting for expected vintage-based loss rates and prepayment rates, where a **0.5%** change in these rates would have impacted 2023 revenue by approximately **RMB 69 million**[644](index=644&type=chunk)[645](index=645&type=chunk)[647](index=647&type=chunk) - The allowance for credit losses is calculated using a CECL methodology, based on past events, current conditions, and reasonable forecasts, involving models like vintage-based loss rates and probability of default, adjusted for macroeconomic scenarios[648](index=648&type=chunk) - The allowance calculation is sensitive to estimates, with a **0.5%** change in the expected loss rate for Xiaoying Microcredit loans having a pre-tax impact of approximately **RMB 7 million** on 2023 results[649](index=649&type=chunk) ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES [Directors and Senior Management](index=186&type=section&id=6.A.%20Directors%20and%20Senior%20Management) The company is led by its founder, CEO, and Chairman, Mr. Yue (Justin) Tang, supported by a senior management team including the President, CFO, and Chief Risk Officer, and a board with independent directors - Mr. Yue (Justin) Tang is the founder, CEO, and Chairman, responsible for overall business strategy[654](index=654&type=chunk) - The senior management team includes Kan (Kent) Li (President), Frank Fuya Zheng (CFO), and Yufan (Jason) Jiang (CRO)[653](index=653&type=chunk)[655](index=655&type=chunk)[656](index=656&type=chunk)[657](index=657&type=chunk) - The board consists of six directors, including three independent directors: Shengwen Rong, Zheng Xue, and Longgen Zhang[653](index=653&type=chunk)[687](index=687&type=chunk) [Compensation](index=188&type=section&id=6.B.%20Compensation) For fiscal year 2023, aggregate cash compensation for directors and executive officers was approximately **RMB 10.7 million (US$1.5 million)**, with the company also maintaining a global share incentive plan and a clawback policy for incentive compensation - Aggregate cash compensation for directors and executive officers in FY2023 was **RMB 10.7 million (US$1.5 million)**[663](index=663&type=chunk) - The company's 2015 Global Share Incentive Plan allows for the issuance of up to **95,849,500** ordinary shares through awards like stock options and RSUs[668](index=668&type=chunk)[669](index=669&type=chunk) - In 2023, the Board of Directors granted **180,000** restricted stock units to certain directors, vesting over three years[682](index=682&type=chunk) - A clawback policy was adopted in November 2023, allowing the company to recoup incentive compensation from executives if there is an accounting restatement[686](index=686&type=chunk) [Board Practices](index=195&type=section&id=6.C.%20Board%20Practices) The board of directors consists of six members, and as a foreign private issuer, the company follows Cayman Islands governance practices, exempting it from certain NYSE rules like the majority independent director requirement, while maintaining three independent committees - The board has six directors, and the company follows home country (Cayman Islands) governance practices, not requiring a majority of independent directors[687](index=687&type=chunk) - The company has established an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, each composed of three independent directors[690](index=690&type=chunk)[691](index=691&type=chunk)[694](index=694&type=chunk)[695](index=695&type=chunk) - Directors have a fiduciary duty to act honestly and in the best interests of the company under Cayman Islands law[700](index=700&type=chunk) [Employees](index=200&type=section&id=6.D.%20Employees) As of December 31, 2023, the company had a total of **521 employees** based in China, with Technology Development (**45%**) and Financial Products (**30%**) being the largest functions Employee Breakdown by Function (as of Dec 31, 2023) | Function | Number of Employees | % of Total | | :--- | :--- | :--- | | Technology Development | **234** | **45%** | | Financial Products | **155** | **30%** | | Risk Management | **47** | **9%** | | General Management | **80** | **15%** | | Marketing | **5** | **1%** | | **Total** | **521** | **100%** | [Share Ownership](index=200&type=section&id=6.E.%20Share%20Ownership) As of March 31, 2024, the company had **295,132,135** ordinary shares outstanding, with CEO Mr. Yue (Justin) Tang as the controlling shareholder, beneficially owning all Class B shares and holding **91.32%** of the total voting power - As of March 31, 2024, the company had **197,532,135** Class A ordinary shares and **97,600,000** Class B ordinary shares outstanding[705](index=705&type=chunk) - Mr. Yue (Justin) Tang beneficially owns all Class B shares, giving him **91.32%** of the aggregate voting power and effective control over the company[708](index=708&type=chunk)[709](index=709&type=chunk) ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS [Related Party Transactions](index=203&type=section&id=7.B.%20Related%20Party%20Transactions) The company has engaged in several related party transactions, including purchasing loan earnings rights from a company controlled by its CEO, and service agreements with a financing guarantee company and Newup Bank of Liaoning - The company purchased loan earnings rights from Jiangxi Ruijing and had dividend receivables from its nominal shareholder, who is controlled by CEO Mr. Yue (Justin) Tang[711](index=711&type=chunk)[714](index=714&type=chunk) - In 2021 and 2022, the company had a service agreement with a financing guarantee company that was a subsidiary of a former equity investee, recognizing net revenues of **RMB 78.8 million** and **RMB 542.7 million**, respectively, from this arrangement[712](index=712&type=chunk)[713](index=713&type=chunk) - The company provides intermediary services to Newup Bank of Liaoning, an entity in which it holds an indirect interest, recognizing net revenues of **RMB 13.1 million** in 2022 and **RMB 11.4 million** in 2023 from this relationship[716](index=716&type=chunk)[717](index=717&type=chunk) ITEM 8. FINANCIAL INFORMATION [Consolidated Statements and Other Financial Information](index=204&type=section&id=8.A.%20Consolidated%20Statements%20and%20Other%20Financial%20Information) This section confirms the inclusion of the company's consolidated financial statements, notes routine legal proceedings are not expected to have a material adverse effect, and highlights the approval of a semi-annual cash dividend policy - The company is subject to legal proceedings in the ordinary course of business but does not expect them to have a material adverse effect[723](index=723&type=chunk) - On March 26, 2024, the board of directors approved a semi-annual cash dividend policy, with dividend payments dependent on the company's earnings, cash flow, and financial condition[724](index=724&type=chunk) - As a holding company, its ability to pay dividends is dependent on receiving distributions from its Chinese subsidiary, Beijing WFOE, which is subject to Chinese regulations[726](index=726&type=chunk) ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK [Market Risk Disclosures](index=222&type=section&id=Market%20Risk%20Disclosures) The company's primary market risks are foreign exchange risk, due to RMB-denominated business and USD-traded ADSs, and interest rate risk, which is currently considered immaterial, while inflation has not had a material effect - The company's main foreign exchange risk is the fluctuation between the RMB (operating currency) and the U.S. dollar (ADS trading currency), which affects the value of investments in ADSs[797](index=797&type=chunk) - Interest rate risk is currently considered immaterial, as fluctuations may affect loan demand and funding partner appetite but have not had a significant impact on financial conditions so far[800](index=800&type=chunk)[801](index=801&type=chunk) - Inflation in China has not materially affected the company's results of operations[802](index=802&type=chunk) PART II [ITEM 15. CONTROLS AND PROCEDURES](index=227&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, having successfully remediated all previously identified material weaknesses, including those related to U.S. GAAP knowledge - Management concluded that both disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2023[817](index=817&type=chunk)[821](index=821&type=chunk) - The company has fully remediated previously identified material weaknesses, with the final remaining weakness related to insufficient U.S. GAAP and SEC reporting knowledge addressed in 2023 through hiring, training, and formalizing procedures[823](index=823&type=chunk)[824](index=824&type=chunk) - The independent registered public accounting firm, KPMG Huazhen LLP, has audited and attested to the effectiveness of the company's internal control over financial reporting as of December 31, 2023[822](index=822&type=chunk) [ITEM 16. Other Disclosures](index=228&type=section&id=ITEM%2016.%20Other%20Disclosures) This section covers various governance and compliance topics, including the audit committee financial expert, code of ethics, share repurchase program, foreign private issuer status, and cybersecurity risk management framework - The company's board has an audit committee financial expert, Mr. Shengwen Rong[826](index=826&type=chunk) - As of December 31, 2023, the company had repurchased an aggregate of **8,852,490** ADSs for a total of **US$24.5 million** under its share repurchase program[833](index=833&type=chunk) - As a foreign private issuer, the company follows certain Cayman Islands corporate governance practices in lieu of NYSE standards, such as not requiring a majority-independent board[838](index=838&type=chunk)[839](index=839&type=chunk) - The company has established a cybersecurity risk management program overseen by the board and an Information Security Officer, which includes annual risk assessments, safeguards, and employee training[843](index=843&type=chunk)[845](index=845&type=chunk)[851](index=851&type=chunk) ITEM 18. FINANCIAL STATEMENTS [Report of Independent Registered Public Accounting Firm](index=243&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG Huazhen LLP issued an unqualified opinion on X Financial's consolidated financial statements and the effectiveness of its internal control over financial reporting for the period ended December 31, 2023, identifying critical audit matters related to revenue recognition and credit loss allowance - KPMG Huazhen LLP issued an unqualified opinion, stating the financial statements are fairly presented in accordance with U.S. GAAP and that internal controls over financial reporting were effective as of December 31, 2023[870](index=870&type=chunk) - A critical audit matter was the assessment of variable consideration for loan facilitation and post-origination services revenue, due to complex and subjective judgments involved in estimating loss rates, prepayment rates, and macroeconomic forecasts[877](index=877&type=chunk)[879](index=879&type=chunk) - Another critical audit matter was the assessment of the allowance for credit losses, which required significant auditor judgment to evaluate the methodology and models used to estimate expected credit losses on loans[881](index=881&type=chunk)[882](index=882&type=chunk) [Consolidated Financial Statements](index=249&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements for 2021-2023 show consistent growth in assets and liabilities, with net income rising to **RMB 1.19 billion** in 2023, confirming the company's VIE structure and detailing accounting policies for revenue and credit losses Consolidated Balance Sheet Highlights (RMB) | Account | As of Dec 31, 2022 (RMB) | As of Dec 31, 2023 (RMB) | | :--- | :--- | :--- | | **Total Assets** | 8.84 B | 11.65 B | | Loans receivable, net | 3.81 B | 4.95 B | | **Total Liabilities** | 4.08 B | 5.80 B | | Payable to investors and institutional funding partners | 2.63 B | 3.58 B | | **Total Equity** | 4.75 B | 5.85 B | Consolidated Statement of Comprehensive Income Highlights (RMB) | Account | 2021 (RMB) | 2022 (RMB) | 2023 (RMB) | | :--- | :--- | :--- | :--- | | **Total Net Revenue** | 3.63 B | 3.56 B | 4.81 B | | **Income from Operations** | 1.31 B | 1.08 B | 1.44 B | | **Net Income** | 825.4 M | 812.0 M | 1.19 B | - The company adopted the CECL methodology (ASC 326) for credit losses, which requires estimating lifetime expected losses based on historical data, current conditions, and reasonable forecasts[1053](index=1053&type=chunk)[1054](index=1054&type=chunk) - The company's Chinese subsidiaries are required to allocate at least **10%** of after-tax profits to a statutory reserve until it reaches **50%** of registered capital, with restricted net assets amounting to **RMB 5.52 billion** as of Dec 31, 2023[1167](index=1167&type=chunk)[1168](index=1168&type=chunk)

X Financial (NYSE:XYF) Q4 2023 Results Earnings Conference Call March 27, 2024 7:00 AM ET Company Participants Victoria Yu - Investor Relations Kan Li - President Frank Fuya Zheng - Chief Financial Officer Conference Call Participants Boyd Hinds - Equinox Capital Mason Bourne - AWH Capital Matt Larson - Fincadia Capital Markets Operator Hello, and welcome to the X Financial Fourth Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please note this ...

Exhibit 99.1 X Financial Reports Fourth Quarter and Fiscal Year 2023 Unaudited Financial Results SHENZHEN, China, March 26, 2024 /PRNewswire/ -- X Financial (NYSE: XYF) (the "Company" or "we"), a leading online personal finance company in China, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2023. Fourth Quarter and Fiscal Year 2023 Operational Highlights | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |-------------------------------- ...

SHENZHEN, China, March 21, 2024 /PRNewswire/ -- X Financial (NYSE: XYF) (the "Company"), a leading online personal finance company in China, today announced that it will release its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2023, before the open of U.S. markets on Wednesday, March 27, 2024. X Financial's management team will host an earnings conference call at 7:00 AM U.S. Eastern Time on Wednesday, March 27, 2024 (7:00 PM Beijing / Hong Kong Time on the same day) ...

X Financial (NYSE:XYF) Q3 2023 Results Conference Call November 22, 2023 9:00 PM ET Company Participants Victoria Yu - Investor Relations Kan Li - President, Chief Risk Officer & Director Frank Fuya Zheng - Chief Financial Officer 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 tur ...

X Financial (NYSE:XYF) Q2 2023 Results Conference Call August 29, 2023 7:00 AM ET Company Participants Victoria Yu - Investor Relations Kan Li - President, Chief Risk Officer & Director Fuya Zheng - Chief Financial Officer Operator Hello, and welcome to the X Financial Second Quarter 2023 Earnings Conference Call. All participants are in a listen-only mode. [Operator Instruction]After today’s presentation there will opportunity to ask questions. [Operator Instructions] Please note this event is being record ...

Exhibit 99.1 X Financial Reports Second Quarter 2023 Unaudited Financial Results SHENZHEN, China, August 28, 2023 /PRNewswire/ -- X Financial (NYSE: XYF) (the "Company" or "we"), a leading online personal finance company in China, today announced its unaudited financial results for the second quarter ended June 30, 2023. Second Quarter 2023 Operational Highlights | --- | --- | --- | --- | --- | --- | |-----------------------------------------------------------------------------|----------------------------- ...

X Financial (NYSE:XYF) Q1 2023 Earnings Conference Call May 25, 2023 7:00 AM ET Company Participants Victoria Yu - IR Kan Li - President Frank Fuya Zheng - Chief Financial Officer Conference Call Participants Operator Hello, and welcome to the X Financial First Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) FORM 20-F ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ...

X Financial (NYSE:XYF) Q4 2022 Results Conference Call March 31, 2023 7:00 AM ET Company Participants Kan Li - President Frank Fuya Zheng - Chief Financial Officer Conference Call Participants Mason Bourne - AWH Capital Operator Good day, and welcome to the X Financial Fourth Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Victoria Yu. Please go ahead. Unid ...