X Financial (XYF) 25 May 232023 Q1 Earnings call transcript

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.

I'd now like to turn the conference over to Victoria Yu. ahead. go Please

Hello, today. operator. and thank for at you available Thank company's everyone, results us ir.xiaoyinggroup. website IR The the today were joining on you, company's and released are earlier

all X from Zheng will followed a to by and Q&A Mr. Financial available brief today call of Chief They through the Financial Mr. the company's President; Fuya, will Kan Li session. Mr. questions who highlights the your Mr. go during are financials. Officer. overview Zheng, and Li, give are answer operations On business the

and remind contain of control, the to other events I unknown which beyond operating you to Act are statements the those that in known Litigation expectations to involve predict all - may Securities forward-looking many that results, management's statements. materially may this are from or of which provisions the and forward-looking actual cause difficult of and are risks, harbor of company's performance on and Such market which statements call based and conditions and safe relate company's differ Reform XXXX. factors under uncertainties Private achievements current the current

otherwise, other a the result and company of new U.S. as risks, as these is future included undertake under factors except any or in required not does Further regarding and Exchange information any update company's statements forward-looking and the with law. The filings uncertainties Securities Commission. obligation events to information,

It is Mr. Kan Li. Li, please now pleasure go ahead. Mr. my to introduce

everyone. Hello,

loan net year-over-year grew operational the and start a to our in be pleased XXXX. in We first facilitation and and revenue to the line was performance solid range very with financial are both good amount guidance in steadily quarter-over-quarter. off quarter. The We delivered a

also a our improvement saw line. bottom decent in We

of signs China, with seen in economic growth QX. consumer in spending better-than-expected and recovery GDP have increased We

solid acquisition. this yet. the personal is with remains foundation in competition economic We demand to first business not and the by in our prominent quarter of saw resilience Statistics, finance National for Against stated borrower recovery backdrop, as impressive the performance and and is increased strong However, Bureau industry execution. thanks inadequate our encouraging domestic very challenges

total XX% RMBXX.X and facilitated originated XX% reached QX, quarter-over-quarter. year-over-year and our premium competition, by to we grow increased Despite billion, amount loan intense In borrower base. our continued

more the During million. to of number grew XX.X% than quarter, borrowers by the active X.X

our addition, remained quality sequentially significantly asset improved year-over-year. In stable and

X.XX% performance for decreased delinquency remainder Our of significantly due the XX all do X.XX% year expect year. our not a risk days from We to loans rate for XX the end for as outstanding past ago. XXXX of the March to fluctuate of to

place, future. partners lines funding with addition, near in and positive with funding impact costs a we in sufficient In the our expect to negotiate credit see to institutional continue

levels holiday, Week' 'Golden pre-pandemic reached May recent tourist the the During spending first to Chinese for time, according has figures. government

demand economic the as in various growth still cautiously the concerns growth. domestic its and and the about business early is stages the are recovery this remain we accelerate measures to sustainability Although of optimistic steady economic year releases growth, government stimulate the there about

side work could which to updated out scheduled Chinese on do work rectification rectification new the will the released, be and industry XXXX. have possibility be further the rule not or but the To-date, Meanwhile, implementation keeping completed on details our we June business. the been regulatory impact on an eye has of no by we a released and government that industry-wide consistently government, close are the interpretations with previously been cooperating by the guidance have

Now through I who will go turn the call will Frank, financials. to our

the first net million, and XX% solid performance were increased in pleased We quarter-over-quarter. revenue was deliver financial X% by everyone. hello, and Kan, you, Total year-over-year RMBX,XXX quarter. Thank to

the same ongoing last share enhance in ADS basic value. per profitability year, the from of our strong reflecting improved to to period Our shareholder program and our income of net buyback significantly RMBX.XX impact RMBX.XX

continue Going to risk more profitable core. to channels at forward, its management we of diversify with reach maintaining our will growth - credit our borrowers, strategy while

deliver bottom To lines and taking future. improvement able to steps quarterly the in in value dividends both are steady more our our expect create to we pay We to top year. shareholders, be for throughout the

for up. Now, that and I numbers brief financial are QX. stated to some like in rounded would note all RMB performance Please

the XXXX revenue total loan due net to XXXX. from primary of an RMBX,XXX same compared facilitated increased Total with in of to the amount and million increase RMBXXX by period in same this quarter XX% million period originated

to million XXXX. commission of period in fees one, Origination increased increase compared period the XX% by and total service from from RMBXXX the same same to Primarily facilitated factors: originated due the increase resulting an XXXX. in of RMBXXX million amount and loan quarter with this expense in the following

in third, partially interest increase partners fee to insurance in a expenses as increase the company. investors and and insurance an paid by Second, offset of in funding institutional for a decrease result payable

Provision in same RMBXX partially loan same facilitated the compared XXXX. and quarter offset in period to for compared this loans decrease by Primarily the the with by of of receivable with XXXX, period an the receivable in company amount as increase and RMBXX result increase loan originated million with a a in of total estimated same of average the compared XXXX. due the held to period was rate million default

million same of million operations RMBXXX income with million RMBXXX Net the period period was million RMBXXX from of XXXX. with XXXX. was Income the same compared compared in in RMBXXX

XXXX. the same Non-GAAP adjusted of million compared was net RMBXXX million income RMBXXX with in period

refer to For further please the our website. financial on earnings release information,

and total originated billion. to amount for a this between RMBXX be RMBXX for expect outlook, business to year, our billion loan facilitated we QX and Now

like Now this prepared concludes, our call we to the would and remarks, please. to questions. Operator, open

Vincadia. first comes from ahead. question go Our Instructions] [Operator [Matthew from you. Thank Larson] Please

what is Thanks no makes for that to just sense frustrating And valuation Good out. trade for do fintech as quarter. shareholder, company any great at is I your what it you place else? a in, evening, call, relative year long-term mean quarter, really my year a everybody. would every taking me, guys

the earnings at quarter, earnings. were for than I annualize mean trading times first if I one your you're to less

You're into outstanding, What's trading How are by of fraction XXX see fully please? I ADS? diluted. conversion me this and the a value Can you shares the way, question book value. at that first, many cash million for ADS answer technical

one about It's plus shares shares. eight area - equal six

So - that's the our conversion yes. ratio and

ADS I outstanding have million. that's about - RMBXX We total million about outstanding, RMBXX think

and outstanding float ADS is? million RMBXX the

equivalent - ADS to been is yes. but RMBXX about RMBXX Yes, Well, million has total, tradable million. converted only

on available float? So that's what's the

Yes.

grow so, divided of stock yes, shares. the questions, XXX a okay, $XX XX couple if this six, shares only by mean just at going the share be you're should line earnings least, would be potential? and still $X But and million valuation, every that's as in the rest million for you're I And floats bottom your - XX-some top that's and odd at a a year, revenues, it this looking of quarter if to the

back way, in up million this just The came buying stock, a knows was back as bit who has shares hold a is volume, if traded this you're buy - ago, any about quarter? But narrow the shares, the will you know I in didn't right down. by which, heavy there and some which it it in first X range. a reason it stuck been morning back a that little month did

Class open - there's of share, far, open the we and which quarter, no A Because a only so buyback window we which through so actually whole Most for window about is XX get by the our that. flow it for million buyback, not only affect And through do much. first was far.

we year, I only - the don't XXX,XXX Our about shares bought last ADS that's it maybe for over know, total like it.

which to on to - flow, as a avoid the mass - buybacks try less the is So share, A also we a which all I not stated - impact buyback before. is have big majority Class

only can't a buy Sure. ADS? A the the It's But for shares, okay? I U.S. investor,

Yes.

you've even though share count just reduced of it - And valuation the shares A the make sense. just doesn't your

all similar Stanley, that that? capital-light but models and are they like some you symbols for to same, saying initially lenders migrated exactly peer-to-peer just are underwritten okay, there have companies which example, even I'm I'll that where FINV, not were they are and other things in QFIN using YRD by give they Morgan were your reported the lenders the are. you space, know Now companies

cap But is of frustration the that are Hong or every small owned XX either news. day, I them, companies there's if domiciled Kong, in one - China or some fold no there's be worked. And a up great lot - five it would on go that

So let me you this. ask

information. You years be or as all artificial concerned could intelligence? putting mean, as variation of some been I - on for I'm AI should more far using you've

on app from understand, the credit they immediate use tap You want their who based ZIP card all - they these of to like that make kind much borrow phone, on a on is, an small it credit assessment have and history, what people make the credit their your making loans. code, assessments algorithm in and I it's how to from the you human not but decision whatever an

news you that? So why don't some put saying out

in that company. sure example, with artificial look as for intelligence you're just mean, I I'm NVIDIA, familiar thing. involved United at It's the high-growth such that a States just stocks are - in

but it assume not? came stock be more was it's you a I I could why out your putting mean, all want extraordinarily it where well? higher, of performed because You public, news, you fraction when

out your rethink relations, your price outstanding. many - releases, I news news was didn't on I what you're asking trading to release, So you you figure at. how that the be public you why might should book mention even want I shares because mean are couldn't that's - to

So besides though market here, float guys of shares which, big bought out your you there's the just frankly, million buyback, X is a even there here? isn't if - share

frustrated, follows of me you stock least be but U.S. your other falls company, small people get benefit the because would cracks, even that can I helping. there's investors where times between What it's it. your analyst there's at, put efforts because to about few and a several kind higher? market the price the it, It to at tell guess bid for know about because from float I'm stock the in it no isn't a should

Let first your you. question. of to me with completely And I answer try all, agree

on the our have stocks, are all business. now cannot large the is undervalued severely Our our cash I dollar. I than just right in support And peer my my market TVs, I bank $X.XX have and RMBXX.X our cap, do to - not ordered by for to in KPMG I like extent. See anything stock stock order more undervalued. a financing, cash is deposits million sure,

not balance sheet. just, you, including the on So cash my

peers, value all a below all they So you the you you mentioned, bit undervalue. book, better value than little how we me. they like the whatever name our book figure somewhat much out But just - see

And show. regulatory we road see marketing some do there - right so We'll advice. is now, June you deadline a your XX. take will on we So, are

So let's get that pass.

So survivability have we we are valuation. in prospect some kind the we first that's in our in why future question. our in we have we are that's not why is believe - - But sense, industry definitely doubt, the so - of - future get I of - now, this

will your We advice. take

will this you much stuff year. still do we which is some additional But in not our starting did reduce of PR - but half which second the lot, mentioned accounted by we which enough. We total just share XX%, last buyback - year, a the

- I to work buyback that but whoever stock else Help the or that, the I don't either. terms also of did price, answer in way know did - how think not much

not I'm company is our shareholder so we that for I pay will - and dividends on category will will year, and other industry - our we'll compared tell definitely, you pay value will our higher definitely on. But we starting in - shares what so relative this far So be - - - with will we also. alone

next - So Board intention on. few that will do and our That's we that's far and attention consistent so our the so for that's years.

see Let's will out. how that work

this there's and right people usually a little many not time. call so take in conference All more let me

for by scrutiny mean, business the June. peer-to-peer there Since regulatory public, response, various okay? lot lending and have government. of talked reasons, which again, was in companies under come due regulatory been bad review about they've that the was some your a much pretty or model was actors, And I that was, there is companies outlawed. You a

at But be where structure to consumers. that loose in might the go your lead our disappointment can you We to provide - among same the country, mean financial of thing I the to all be financial even in it PRC, allowing credit. industry survivability you discussed an you're service important through them consumers risk. seems

you're where very the bunch syndicating fashion a of of type in capital-light You're so doing by business-like loans structures through banks? a

for the the part the banks because review grow understand, and PRC. export-based the interest loan economy providing the there's money to what the credit credit and the economy, I customers in that's may just versus good You're economy base check, for the an most and the from consumer

So be even mean I risk go service, why a of survivability the the would your at world providing around. It you're industry greases credit of if wheels makes commerce.

understand Yes, what mean. yes. I you

answer I question. that think I can

industry has very tumultuous and company. - And for PXP our through the like few playing been last order think I called a actors been our most going the peers bad has so claimed by years.

most also, side I U.S. that and comply comply will the agree on Chinese government much, much and industry government but in report - is true. survival respect is with of all - on every healthy definitely everyone, on - think also including rule this both this regulation much everything

But strongly our not model for a small provide a it's very small don't the that government and owner the provide on for money. last and interest make government, based for try But seem They the are mainly promote ton loan. is is banks, mostly risk companies That's business. but very two years business of we issue thing the business a clear loan factor, to low like to from state-owned only a supporting always sure. is they

Our into bit but business we our compatible - higher probably a spread take risk are more but wider them, out. also - with than is banks, we big the little

question made is very still bit the the little terms that clear those in fundamental But not interest or that reason has is of bit is think I for why I - justified. government - spread, - in clear - that's a probably think, that's we believe totally it everyone. a regulatory on more target have very little So fully not by or - that

the - people why still to charge we relative - we because high. is That relatively speak is

from I the be think If only is you business, some small is so And know effect. again, whatever X%, range the taking bad. you're don't loan model. government, risk based if I owner, but But this charge think see the about individual workable, you To frank, will that of on anyway. called provided be we how X% those, loan most it maybe that to factor ask I do in once that - they think different economically I not

again, why the not that's - is yes. Our once by model not fully endorsed authorities,

or a if to Well, a XX% credit cards having you or Express, which to from they're American Americard, back you're States, you or unsecured were loans, got X%. with X%, of discussions be If basis, month XX% got X%. Citibank, tell United secured unsecured every I a they that loan, you get an it And right? in to would paid be to collateralized pay like bank them, can I all a how loan money have you cards, what would credit mortgage the similar on be Bank loan

a I as it's business model. cash my said, have against can a - have and just flow, If we receivables, I I small different right? So borrow you

just money on go to want XX% I I to a a want I restaurant laptop basis, unsecured if use a card, and to or XX%. But credit an borrow it's XX% or or buy when

- in are cards, card. And rates it can't to any credit you a the out and you credit one. have credit if history by still to even means your because paid So have get you line not back, get of a haven't even past,

you're right. So,

they secured model small business is are revenues? can businesses different loaning against banks loan than who Your when

- Pete's see XX sake. stock times I the any love in could your mean for So wish you case, higher I'd your be best. to I

to to $X who think extremely has and any very okay very, to assessment, why loan whatever you're make at That's you business assessing you wouldn't a financial have losses is loan algorithm by good right? because not keeping $XX, X% like model good? be of your whatever for I you a So it trading measure, If that's have, who record at. all to share, credit institution shown track down

time if you make please. a known much loans, put computation you're news, finance all right some using that intelligence as sort And or of your - to out more that well, thank for a technology company, as artificial the AI you're okay, So company. make

you technology use and it You use very effectively.

for you thank question thank [indiscernible]. you and you, the for Thank Thanks.

I'll on let somebody Thank if else, are they call you. the in. phone

Thank you.

[Operator Instructions] Our from question from comes next go ahead. Capital. Please Heinz] [Boyd Equinox

because And stock. with what questions. the have they business on had taking primary that's my valuation Hi, focus with have thank the that concerns your regulation, that model? primary the of wanted think to issue back regulators, you the for that's you also here, the held discussions I been the I

regulator We right now model. for much don't have years. regarding the they And the regulatory the issue mandatory dialogue last sometimes three business only care with just

So it's a complaint. customer

- KPI. one we And that's so, are just best number the the their KPIs,

issues. So, voluntarily. address we to than area comply other - do in - are our we other best And those

we will regulator think XX.XX. So, is regarding a discussion yet model. concern the not have that's business this our I never with don't frankly well their

Let this take me question.

Frank very the that between and has made clear. huge it barrier, been have It's us think I not a regulators. we

in government who you to financial any not the here one are key then companies of financial very you us some the a should doing activities, is - license be should that or if it just we get doing think I activities. that terms Chinese has issues we clear of be made licensed. the should be licensing But need other

have in I any made they actually - - very been the a balancing clear. key between We this issue business question over for of is uncertainty financial don't has because that - regulator this the think that And mean this for think our have I kind I company I we this and question, think and any it is one there. haven't activities. - the fintech - question. China, don't this answers tying

facilitator indicated, financial financial whether a Yes, what licensed and like be should we license so question according call not. it. to activities our issue philosophy maybe the engaged a in will a is as all - we government, they as are activities company us, But for

probably So key that question. the is

Yes.

I hard think whether bank having should - not? time regulated a as they're understanding or is be everybody a having think you I

yes. Yes,

the least at - also balance with like sheet. seem fantastic I of be mean where the doing sheet? about that's regulators do And - is like a a competitors the fintech more job their the in issues credit have they're on your I space I you risk. at they're lot be the actually address, holding of model, balance which think would to think the a you concerned some And on They're going the undisclosed to that's managing other is of not making U.S. that's the loans themselves. what to capital-heavy which loans back actually are in risk beginning

They're is should your corporate your are you're information just you're on them worried you that not provide basically you've that's just just helping know got taking and any that - the model be you're partners facilitating and They're the risk or the where about showing treat information that facilitating based sheet. in institutional that they're what how actually without you the those potentially you. giving borrower to balance loans loans. People don't to that making have loans

that? probably address how - would issue and here that's the you is think I key

of with Would analyzed Have and guarantors. work mean, know guarantees. you you a third-party you you - their back-to-back I you because do - lot financials, I - do have

your the it the in But taking here? So think probably sheet? issue effect, on that's on you is balance key are, shown I risk.

don't Well, balance that our we in sheet. show model, terms in of our business

billion. But $X managing our sorry, business, true. so crude capital other sorry on if a the just right? take we're and is - leverage - net billion very I - you think around our loan RMBXX billion not we around So RMBXX hand, if - comps that's RMBX total XX billion,

is I which ratio, to X we take - the about that can quite room in So the think that of there over way X that right, terms very - high. that if handle, it's to rough X, X I risk the or

deposit low. So industry to as have is - take that mentioned, thing I what at when And different about of will that is risk we we that offset looking the another - are I overall compare be institutions. very in is sales ratio. coming generate RMBX.X that that use that across normally just And business have in at terms credit up. offer billion that we a we - look Frank that is a model can is But our various to we any tax

of company risk need that for our itself to not to So take does a business. much our

just because let's the, that And you that in say, to our - - other our that of company not another balance very own own is or that thing the that under supervision. moving but institutions financial from dilemma mentioned heavy that loans, terms micro banks we the this I balance solve, another than loan other loan have directly cannot and company micro issued is sheet

offer can't we really So, loans lot company. the a of to

our some business not apply to actually of does So, solution here. the

I larger market the sell potentially already institution to to licensing. mean, to way here, mean, value proper created partner you could doesn't has because for I clearly a yourself got that a that care. recognize there's you be you've the the financial or

as business their business. in say license don't or because that is of of of institution you compatibility recognized of not through by big they that's kind model think terms guys. desirable - There's no means. in but actually, culture, at will big us other our acquire for are probably China quite since and - will our - through a in guy you likely think terms financial valuation the - between not China I the in a kind I government business,

that's highly think I unlikely.

Okay.

tax the going first that in housekeeping the you you consistent do last rate about forward? be expect to what question quarter with one rate, Just reported

think that question I - answered I before. that

in is because most I entity - entity about the tax our rate XX%. think we China, operate - is of China, in

a over XX%. - there's So way rate time. reconciled U.S. we being tax the about actually is to is - being That charge

basis effective will tax rate think below going be and once So forward will on stabilized. again, XX% be our I

date is And past still there there's Okay. like you to June terms going in is clear in kind once series of - are of of I no that ongoing June the date XX regulatory XX, be that and that of after get mean, issues? or you

I know. don't I know, don't

others, mean, including the what which not that one marked plus think - we I finished. XX are being fact we and end and are even focused - is to basically write in are They from know the on marked, everybody I You alone even others. are news We financial XX I think but And all government ever to be financial I as the one, first financial. that to and regulated mentioned work, I no they pretty much ratification. not is and in the know

to pass asked will pass maybe fully, they don't all be. pass of I the type all they but pass, I'm the know answer I that they what magic to hope XX, position other they maybe you question. think in we comply - be, - do know, even me, a June I along, just XX Then - but will stage don't will not

questions, very luck you. Thanks. much Okay, good thank you answering for my to and

Thank you much. very

our closing for conference to questions There back question-and-answer the session. are any in Victoria queue. remarks. the like to This Yu, would I no more turn concludes over

for everyone, on joining you, Okay. Thank the call today. us

the context. future. look raise to you. speaking We haven't will our again we forward you a in you through Thank got with your chance to be questions, near answer follow-up If to pleased them

for attending presentation. concluded. today's you now has Thank conference The

may now You disconnect.