X Financial (New York Stock Exchange:XYF) Q1 2024 earnings conference call on May 31, 2024 at 7:00 a.m. ET
Company participants
Victoria U – Air
Frank Fuya Cheng – Chief Financial Officer
Conference call participants
Masonbourne – AWH Capital
Operator or worker
Hello and welcome to X Financial’s Q1 2024 Earnings Conference. (Operator Instructions) Please note that this event is being recorded.
I would now like to turn the conference over to Victoria Yu. Please continue.
Victoria Yu
Thank you, operator. Hello everyone, and thank you for joining us today. The company’s results were released earlier today and are available on the company’s IR website at ir.xiaoyinggroup.com.
On the call today from X Financial was Mr. Frank Fuya Cheng, CFO. Mr. Cheng will provide an overview of the company’s business operations and highlights, review the financial statements and then answer your questions during the Q&A session.
I remind you that this call may contain forward-looking statements and safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and current market and operating conditions and relate to events involving known or unknown risks. and other uncertainties and factors, all of which are difficult to predict and many of which are beyond the Company’s control, which could cause the Company’s actual results, performance or achievements to differ materially from those in the forward-looking statements.
More information regarding risks and other risks, uncertainties and factors is included in the Company’s filings with the U.S. Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required by law.
I am now pleased to introduce Mr. Frank Fuya Cheng. Mr. Cheng, please go ahead.
Frank Fuya Cheng
Welcome everyone.
We are pleased to start 2024 with a strong financial performance in the first quarter. We continue to implement our strategy of proactively and dynamically adjusting loan volumes based on convergent cash asset quality dynamics, and this has once again proven effective in securing our profitability.
As a result, although A On an annual basis and a decrease in loan volume on a quarterly basis, both net profit and profit increased on an annual and quarterly basis with a noticeable improvement in profits. In the first quarter, the total loan amount eased and originally decreased by 11% YoY and 18% QoQ to RMB22 billion, in line with our guidance.
Our total outstanding loan balance was RMB44 billion at the end of March 2024. The delinquency rates for outstanding loans that were 31 to 60 days and 91 to 180 days past due were 1.61% and 4.37%, respectively, at the end of the quarter. Compared to 1.05% and 2.4% a year ago.
The increase in delinquent loans as a percentage of total outstanding loans was primarily due to lower outstanding loan balances at the end of this quarter, as a result of the proactive oversight of loan facilitation and origination that we began in the first quarter of last year.
Excluding the impact of lower loan volumes, asset quality began to stabilize during the quarter. We remain committed to monitoring borrowers throughout the entire credit cycle, keeping our risk monitoring system flowing and taking all necessary measures to mitigate risks.
In the first quarter, total net revenue reached CNY 1.2 billion, up 20% year-on-year and 1% q-o-q despite lower loan volume. Thanks to strict risk controls and improved operational efficiency, net income increased by 28% year-on-year and 92% quarter-on-quarter to RMB 363 million. This once again demonstrates the effectiveness of our strategy, strong execution and commitment to ensuring long-term profitability.
Beginning this quarter, we consolidated borrower acquisition costs from origination and servicing expenses. Indirect expenses from the borrower’s purchases from general and administrative expenses, selling and marketing expenses to the borrower’s acquisition expenses and marketing expenses with total operating costs and expenses to provide a clear breakdown of the company’s expenses to the investor. Going forward, we will continue to implement asset quality while unlocking borrower acquisition costs to achieve sustainable profitability.
We are confident in our future profitable targets with stable asset quality. We have a clear vision for loan borrowing for 2024 under our current strategy and expect the total soft loan amount originated for the full year to reach approximately CNY 100 billion. Our commitment to sustainable profitability and shareholder value creation is unwavering.
Our Board of Directors has approved a new program to repurchase up to $20 million of our stock, which will be effective from January 1, 2024 to November 30, 2025. We are confident in our position as a public company and will continue to drive long-term returns for our shareholders. Now I would like to provide some financial performance for the first quarter.
Please note that all figures quoted are in RMB and have been rounded. Total net revenues increased 20% to CNY1,208 million from CNY1,005 million in the same period in 2023, primarily due to growth in various discrete revenues compared to the same period in 2023. Please see further analysis of this revenue equation.
Origination and servicing expenses increased 15% to CNY 427 million from CNY 371 million in the same period in 2023, mainly due to the increase in collection expenses resulting from the cumulative effect of the increase in the volume of loan facilities provided in previous quarters compared to the same period in 2023. .
Borrower acquisitions and marketing expenses decreased 9% to CNY248 million from CNY272 million in the same period in 2023, primarily due to lower borrower acquisition costs compared to the same period in 2023.
The provision for loans receivable was CNY62 million compared to CNY20 million in the same period in 2023, mainly due to an increase in the Company’s loan receivable balance as a result of the cumulative effect of the increased volume of loan facilities provided in previous loans. Compared to the same period in 2023.
Income from operations was CNY 377 million compared to CNY 328 million in the same period in 2023. Net income was CNY 363 million compared to CNY 284 million in the same period in 2023. Non-compliant adjusted net income was GAAP CNY 322 million compared to CNY 307 million in the same period in 2023. For more financial information, please refer to the earnings release on our IR website. Now on to our business forecast.
For the second quarter of this year, we expect the total soft loan amount originated to be between CNY23 billion and CNY24.5 billion. For the full year 2024, we expect the total concessionary amount originated to be between CNY90 billion and CNY110 billion.
This concludes our prepared remarks, and we would like to open the floor to questions. Operator, please.
Question and answer session
Operator or worker
(Operator Instructions) Your first question today comes from Mason Bourne of AWH Capital. Please continue.
Mason Bourne
Hello, thanks for taking the question. I hope you can talk about what you see in the Chinese economy and how it relates to the volume of loans and your expectations for the rest of the year?
Frank Fuya Cheng
Overall, the Chinese economy still faces some challenges. In contrast to the United States, there is an inflationary environment, and we are somewhat in a deflationary environment. In general, for the loan in general, in general, in general, demand is stable or slightly declining. I think if you look at the first quarter financial reports from the — all the major Chinese banks, all of them — their loan volume, their income, and profits are all a little bit down. So we’re in that kind of environment.
But for our application, I think it’s mainly a risk factor. We still remain — our overall loan portfolio remains at a high risk level. But we kind of — in the first quarter, we kind of stabilized that situation. Technically, there is a little improvement compared to the fourth quarter of last year, but still at a high level. I think this is the main factor rather than the current economic environment, which gives everyone in our sector the caution to expand the loan volume in a more aggressive way. We are all under some kind of pressure regarding the quality of loans. I think this is the main factor.
Mason Bourne
And then I was hoping you could also talk about the regulatory environment and how you look at that going forward.
Frank Fuya Cheng
Regulatory environment, there are not many new developments in this quarter and the situation is basically stable. There’s not a lot of news coming from the regulatory side.
Mason Bourne
Thank you.
Frank Fuya Cheng
Thanks.
Operator or worker
(Operator Instructions) There appear to be no further questions at this time. I would like to call back Victoria Yu for any closing remarks.
Victoria Yu
Thank you all for joining us on the call today. If you have not had the opportunity to ask your questions, we will be happy to answer them through follow-up communications. We look forward to speaking with you again in the near future. Thank you.
Operator or worker
The conference has now concluded. Thank you for coming to the show today. You can now disconnect.
