X Financial (XYF) 6-KX Financial Reports Fourth Quarter and Fiscal Year 2023 Unaudited Financial Results

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

¹ Represents the total amount of loans that the Company facilitated and originated during the relevant period.

² Represents borrowers who made at least one transaction on the Company’s platform during the relevant period.

³ Represents the total amount of loans outstanding for loans that the Company facilitated and originated at the end of the relevant period. Loans that are delinquent for more than 60 days are charged-off and are excluded in the outstanding loan balance, except for Xiaoying Housing Loan. As Xiaoying Housing Loan is a secured loan product and the Company is entitled to payment by exercising its rights to the collateral, the Company does not exclude Xiaoying Housing Loan delinquent for more than 60 days in the outstanding loan balance.

⁴ Represents the balance of the outstanding principal and accrued outstanding interest for loans that were 31 to 60 days past due as a percentage of the total balance of outstanding principal and accrued outstanding interest for loans that the Company facilitated and originated as of a specific date. Loans that are delinquent for more than 60 days are charged-off and excluded in the calculation of delinquency rate by balance. Xiaoying Housing Loan was launched in 2015 and ceased in 2019, and all the outstanding loan balance of housing loan as of December 31, 2022, September 30, 2023 and December 31, 2023 were overdue more than 60 days. To make the delinquency rate by balance comparable, the Company excludes Xiaoying Housing Loan in the calculation of delinquency rate.

⁵ To make the delinquency rate by balance comparable to the peers, the Company also defines the delinquency rate as the balance of the outstanding principal and accrued outstanding interest for loans that were 91 to 180 days past due as a percentage of the total balance of outstanding principal and accrued outstanding interest for the loans that the Company facilitated and originated as of a specific date. Loans that are delinquent for more than 180 days are excluded in the calculation of delinquency rate by balance, except for Xiaoying Housing Loan. All the outstanding loan balance of housing loan as of December 31, 2022, September 30, 2023 and December 31, 2023 were overdue more than 180 days. To make the delinquency rate by balance comparable, the Company excludes Xiaoying Housing Loan in the calculation of delinquency rate.

Fourth Quarter 2023 Financial Highlights

⁶ The Company uses in this press release the following non-GAAP financial measures: (i) adjusted net income (loss), (ii) adjusted net income (loss) per basic ADS, and (iii) adjusted net income (loss) per diluted ADS, each of which excludes share-based compensation expense, impairment losses on financial investments, income (loss) from financial investments and impairment losses on long-term investments. For more information on non-GAAP financial measure, please see the section of “Use of Non-GAAP Financial Measures Statement” and the table captioned “Unaudited Reconciliations of GAAP and Non-GAAP Results” set forth at the end of this press release.

⁷ Each American depositary share (“ADS”) represents six Class A ordinary shares.

Fiscal Year 2023 Financial Highlights

Mr. Justin Tang, the Founder, Chief Executive Officer and Chairman of the Company, commented, “We are pleased to conclude the year with solid operational and financial results, emphasizing our commitment to sustained growth. In 2023, we facilitated and originated 43% more loans than in 2022 and delivered notable year-over-year growth in both revenue and profit. Total net revenue increased 35% on an annual basis, while income from operations increased 33%, and net income improved by 46%. However, as we entered the second half of 2023, particularly in the fourth quarter, we experienced increased risk levels in asset quality. While we strengthened our risk control system and implemented various measures to manage delinquency rates, we also made the strategic decision to proactively reduce loan volumes in the fourth quarter, prioritizing profitability over sheer volume growth.”

“For fiscal year 2024, our strategic approach will remain consistent and somewhat conservative, aligning with current market conditions in China. We believe the regulatory environment has become stable, and the government is committed to promoting economic recovery. However, we recognize that challenges and uncertainties exist as the country undergoes a transformative shift in its economic growth model away from the rapid expansion of the past, and structural adjustments are imperative. All of this has far-reaching impacts on various sectors, including our targeted market. Despite these challenges, we remain committed to executing our strategy and prioritizing profitable growth. Our commitment to delivering value to shareholders is unwavering, and we intend to pay dividends as and when profitability and smooth operations allow. This overall approach reflects our dedication to navigating the evolving economic landscape while ensuring the sustainable success of our business and returning value to our shareholders.”

Mr. Kent Li, President of the Company, added, “During the fourth quarter of 2023, our total loan amount facilitated and originated was RMB26 billion, a 20% year-over-year increase but an 11% quarter-over-quarter decline. Delinquency rates for loans past due for 31-60 days and 91-180 days were 1.57% and 3.12%, respectively, at the end of the quarter, compared with 1.02% and 1.93%, respectively, a year ago. Our team remains vigilant in monitoring asset dynamics and has taken further steps to mitigate risk by reducing our exposure to higher risk areas and adjusting our business approach to ensure sustainable profitability. We aim for continued gradual improvement over the course of 2024, and these measures have begun to have a positive impact on our risk indicators.”

Mr. Frank Fuya Zheng, Chief Financial Officer of the Company, added, “We are pleased to deliver solid financial results in 2023. Total net revenue increased by 35% year-over-year to RMB4.8 billion, and net income rose by 46% to approximately RMB1.2 billion. In response to heightened asset quality risks in the fourth quarter, we proactively reduced loan volumes to safeguard profitability, resulting in a 15% sequential decline in total net revenue for the quarter. We recognized RMB26.9 million and RMB46.8 million of impairment losses on long-term investments related to our indirect investment in Newup Bank of Liaoning in 2022 and 2023, respectively, mainly due to the depreciation in the market valuation of the Chinese banking sector. However, the bank's loan portfolio and operations remain healthy, and we believe it continues to be a good investment for us. Looking ahead, we will not pursue pure loan volume growth at the expense of profitability, which is always our strategic focus to ensure long-term growth and returns to shareholders. We will continue to strengthen our risk management system to improve asset quality and balance our revenue and profitability growth.”

Fourth Quarter 2023 Financial Results

Total net revenue in the fourth quarter of 2023 increased by 24.8% to RMB1,192.7 million (US$168.0 million) from RMB955.6 million in the same period of 2022, primarily due to an increase in the total loan amount facilitated and originated this quarter compared with the same period of 2022.

Loan facilitation service fees in the fourth quarter of 2023 increased by 9.5% to RMB615.5 million (US$86.7 million) from RMB562.1 million in the same period of 2022, primarily due to an increase in the total loan amount facilitated this quarter compared with the same period of 2022.

Post-origination service fees in the fourth quarter of 2023 increased by 56.2% to RMB166.8 million (US$23.5 million) from RMB106.8 million in the same period of 2022, primarily due to the cumulative effect of increased volume of loans facilitated in the previous quarters. Revenues from post-origination services are recognized on a straight-line basis over the term of the underlying loans as the services are being provided.

Financing income in the fourth quarter of 2023 increased by 23.8% to RMB307.7 million (US$43.3 million) from RMB248.6 million in the same period of 2022, primarily due to an increase in average loan balances compared with the same period of 2022.

Other revenue in the fourth quarter of 2023 increased by 169.6% to RMB102.7 million (US$14.5 million), compared with RMB38.1 million in the same period of 2022, primarily due to an increase in referral service fee for introducing borrowers to other platforms and increase in guarantee income generated from financing guarantee business operated by a subsidiary which holds the financing guarantee license and commenced the financing guarantee business in 2023.

Origination and servicing expenses in the fourth quarter of 2023 increased by 28.3% to RMB755.2 million (US$106.4 million) from RMB588.7 million in the same period of 2022, primarily due to the increase in commission fees and collection expenses resulting from the increase in total loan amount facilitated and originated this quarter compared with the same period of 2022.

Provision for loans receivable in the fourth quarter of 2023 was RMB99.4 million (US$14.0 million), compared with RMB75.4 million in the same period of 2022, primarily due to an increase both in loans receivable held by the Company as a result of the increase in total loan amount facilitated and originated this quarter and in estimated default rate compared with the same period of 2022.

Income from operations in the fourth quarter of 2023 was RMB254.2 million (US$35.8 million), compared with RMB274.0 million in the same period of 2022.

Income before income taxes and gain (loss) from equity in affiliates in the fourth quarter of 2023 was RMB211.1 million (US$29.7 million), compared with RMB382.5 million in the same period of 2022.

Income tax expense in the fourth quarter of 2023 was RMB35.7 million (US$5.0 million), compared with RMB75.0 million in the same period of 2022.

Net income in the fourth quarter of 2023 was RMB189.0 million (US$26.6 million), compared with RMB274.6 million in the same period of 2022.

Non-GAAP adjusted net income in the fourth quarter of 2023 was RMB230.8 million (US$32.5 million), compared with RMB277.9 million in the same period of 2022.

Net income per basic and diluted ADS in the fourth quarter of 2023 was RMB3.90 (US$0.55), and RMB3.84 (US$0.54), compared with RMB5.28 and RMB5.16, respectively, in the same period of 2022.

Non-GAAP adjusted net income per basic and diluted ADS in the fourth quarter of 2023 was RMB4.74 (US$0.67), and RMB4.68 (US$0.66), compared with RMB5.34 and RMB5.22 respectively, in the same period of 2022.

Cash and cash equivalents was RMB1,195.4 million (US$168.4 million) as of December 31, 2023, compared with RMB1,427.9 million as of September 30, 2023.

Fiscal Year 2023 Financial Results

Total net revenue in 2023 increased by 35.1% to RMB4,814.9 million (US$678.2 million) from RMB3,563.0 million in 2022, primarily due to an increase in the total loan amount facilitated and originated this year compared with 2022.

Loan facilitation service fees in 2023 increased by 34.1% to RMB2,741.0 million (US$386.1 million) from RMB2,044.3 million in 2022, primarily due to an increase in the total loan amount facilitated this year compared with 2022.

Post-origination service fees in 2023 increased by 60.2% to RMB596.6 million (US$84.0 million) from RMB372.5 million in 2022, primarily due to the cumulative effect of increased volume of loans facilitated during the year. Revenues from post-origination services are recognized on a straight-line basis over the term of the underlying loans as the services are being provided.

Financing income in 2023 increased by 17.7% to RMB1,137.3 million (US$160.2 million) from RMB966.3 million in 2022, primarily due to an increase in average loan balances compared with 2022.

Other revenue in 2023 increased by 89.0% to RMB340.0 million (US$47.9 million), compared with RMB179.9 million in 2022, primarily due to an increase in referral service fee for introducing borrowers to other platforms and increase in guarantee income generated from financing guarantee business operated by a subsidiary which holds the financing guarantee license and commenced the financing guarantee business in 2023.

Origination and servicing expenses in 2023 increased by 34.9% to RMB2,869.8 million (US$404.2 million) from RMB2,126.7 million in 2022, primarily due to the following factors: (i) an increase in commission fees and collection expenses resulting from the increase in total loan amount facilitated and originated this year, and (ii) an increase in interest expenses as a result of an increase in payable to institutional funding partners and investors.

Provision for loans receivable in 2023 was RMB229.1 million (US$32.3 million), compared with RMB158.6 million in 2022, primarily due to an increase in loans receivable held by the Company as a result of the increase in the total loan amount facilitated and originated this year and in estimated default rate compared with 2022.

Provision for contingent guarantee liabilities in 2023 was RMB67.5 million (US$ 9.5 million) due to increase in guarantee liability arising from financing guarantee business operated by a subsidiary which holds the financing guarantee license and commenced the financing guarantee business in 2023.

Income from operations in 2023 was RMB1,437.7 million (US$202.5 million), compared with RMB1,082.3 million in 2022.

Income before income taxes and gain (loss) from equity in affiliates in 2023 was RMB1,403.1 million (US$197.6 million), compared with RMB1,223.5 million in 2022.

Income tax expense in 2023 was RMB249.4 million (US$35.1 million), compared with RMB389.4 million in 2022.

Net income in 2023 was RMB1,186.8 million (US$167.2 million), compared with RMB812.0 million in 2022.

Non-GAAP adjusted net income in 2023 was RMB1,276.7 million (US$179.8 million), compared with RMB873.7 million in 2022.

Net income per basic and diluted ADS in 2023 was RMB24.72 (US$3.48), and RMB24.48 (US$3.45), compared with RMB15.42 and RMB15.12, respectively, in 2022.

Non-GAAP adjusted net income per basic and diluted ADS in 2023 was RMB26.58 (US$3.74), and RMB26.34 (US$3.71), compared with RMB16.56 and RMB16.26 respectively, in 2022.

Cash and cash equivalents was RMB1,195.4 million (US$168.4 million) as of December 31, 2023, compared with RMB602.3 million as of December 31, 2022.

Recent Development

Share Repurchase Plan

In the fourth quarter of 2023, the Company repurchased an aggregate of 35,922 ADSs for a total consideration of US$143,400. Since the beginning of 2023, the Company had repurchased an aggregate of 837,729 ADSs for a total consideration of US$3.46 million. The Company has approximately US$5.5 million remaining for potential repurchases under our current share repurchase plan.

Declaration of Semi-Annual Dividend

The Company today announced that the Company’s board of directors (the “Board”) has approved a semi-annual dividend policy. Under this policy, the determination to declare and pay such semi-annual dividend and the amount of dividend in any particular half year will be made at the discretion of the Board and will be based upon the Company’s operations and earnings, cash flow, financial condition and other relevant factors that the Board may deem appropriate.

Pursuant to the semi-annual dividend policy, the Board has approved the declaration and payment of a semi-annual dividend of US$0.17 per ADS (approximately US$0.028 per ordinary share) for the second half of 2023. The holders of the Company’s ordinary shares shown on the Company’s record at the close of trading on May 10, 2024 (U.S. Eastern Daylight Time) will be entitled to these dividends. These shareholders, including the Bank of New York Mellon, the depositary of our ADS program (the “Depositary”), will receive the payments of dividends on or about May 31, 2024. Dividends to the Company’s ADS holders will be paid through the Depositary on or after May 31, 2024, and the precise timing of receipt will vary based on the processing efficiency of the respective holding brokerage.

Business Outlook

The Company expects the total loan amount facilitated and originated for the first quarter of 2024 to be between RMB21.0 billion and RMB22.5 billion.

This forecast reflects the Company’s current and preliminary views, which are subject to changes.

Conference Call

X Financial’s management team will host an earnings conference call at 7:00 AM U.S. Eastern Time on March 27, 2024 (7:00 PM Beijing / Hong Kong Time on March 27, 2024).

Dial-in details for the earnings conference call are as follows:

Please dial in ten minutes before the call is scheduled to begin and provide the passcode to join the call.

A replay of the conference call may be accessed by phone at the following numbers until April 3, 2024:

Additionally, a live and archived webcast of the conference call will be available at http://ir.xiaoyinggroup.com.

About X Financial

X Financial (NYSE: XYF) (the "Company") is a leading online personal finance company in China. The Company is committed to connecting borrowers on its platform with its institutional funding partners. With its proprietary big data-driven technology, the Company has established strategic partnerships with financial institutions across multiple areas of its business operations, enabling it to facilitate and originate loans to prime borrowers under a risk assessment and control system.

For more information, please visit: http://ir.xiaoyinggroup.com.

Use of Non-GAAP Financial Measures Statement

In evaluating our business, we consider and use non-GAAP measures as supplemental measures to review and assess our operating performance. We present the non-GAAP financial measures because they are used by our management to evaluate our operating performance and formulate business plans. We believe that the use of the non-GAAP financial measures facilitates investors’ assessment of our operating performance and help investors to identify underlying trends in our business that could otherwise be distorted by the effect of certain income or expenses that we include in income (loss) from operations and net income (loss). We also believe that the non-GAAP measures provide useful information about our core operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.

We use in this press release the following non-GAAP financial measures: (i) adjusted net income, (ii) adjusted net income per basic ADS, and (iii) adjusted net income per diluted ADS, each of which excludes share-based compensation expense, impairment losses on financial investments, income (loss) from financial investments and impairment losses on long-term investments. These non-GAAP financial measures have limitations as analytical tools, and when assessing our operating performance, investors should not consider them in isolation, or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP.

We mitigate these limitations by reconciling the non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures, which should be considered when evaluating our performance. We encourage you to review our financial information in its entirety and not rely on a single financial measure.

For more information on these non-GAAP financial measures, please see the table captioned “Reconciliations of GAAP and Non-GAAP results” set forth at the end of this press release.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB7.0999 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System as of December 29, 2023.

Disclaimer

Safe Harbor Statement

This announcement contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "potential," "continue," "ongoing," "targets," "guidance" and similar statements. The Company may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements that involve factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include, but not limited to the followings: the Company’s goals and strategies; its future business development, financial condition and results of operations; the expected growth of the credit industry, and marketplace lending in particular, in China; the demand for and market acceptance of its marketplace’s products and services; its ability to attract and retain borrowers and investors on its marketplace; its relationships with its strategic cooperation partners; competition in its industry; and relevant government policies and regulations relating to the corporate structure, business and industry. Further information regarding these and other risks, uncertainties or factors is included in the Company’s filings with the SEC. All information provided in this announcement is current as of the date of this announcement, and the Company does not undertake any obligation to update such information, except as required under applicable law.

Use of Projections

This announcement also contains certain financial forecasts (or guidance) with respect to the Company’s projected financial results. The Company’s independent auditors have not audited, reviewed, compiled or performed any procedures with respect to the projections or guidance for the purpose of their inclusion in this announcement, and accordingly, they did not express an opinion or provide any other form assurance with respect thereto for the purpose of this announcement. This guidance should not be relied upon as being necessarily indicative of future results. The assumptions and estimates underlying the prospective financial information are inherently uncertain and are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could actual results to differ materially from those contained in the prospective financial information. Accordingly, there can be no assurance that the prospective results are indicative of the future performance of the Company, or that actual results will not diff materially from those set forth in the prospective financial information. Inclusion of the prospective financial information in this announcement should not be regarded as a representation by any person that the results contained in the prospective financial information will actually be achieved. You should review this information together with the Company’s historical information.

For more information, please contact:

X Financial

Mr. Frank Fuya Zheng

E-mail: ir@xiaoying.com

Christensen IR

In China

Mr. Rene Vanguestaine

Phone: +86-178-1749 0483

E-mail: rene.vanguestaine@christensencomms.com

In US

Ms. Linda Bergkamp

Phone: +1-480-614-3004

Email: linda.bergkamp@christensencomms.com