X Financial (New York Stock Exchange:XYF) First Quarter 2024 Earnings Conference Call May 31, 2024 at 7:00 a.m. ET
Corporate Participants
Victoria Yu – IR
Frank Hooya Jen – CFO
Conference Call Participants
Mason Bourne – AWH Capital
operator
Good afternoon and welcome to the X Financial Q1 2024 earnings conference call. (Operator Instructions) Please note that this event is being recorded.
Now, I would like to hand the conference over to Victoria Yu. Please go ahead.
Victoria Yu
Thank you, operator. Good afternoon, everyone. Thank you for joining us today. Our financial results were released today and can be found on our IR website at ir.xiaoyinggroup.com.
X Financial will host a conference call today with Chief Financial Officer Frank Fuya Zheng. Mr. Zheng will provide an overview of the company’s business operations and highlights, review the company’s financial position, and then participate in a Q&A session to answer questions.
This call may contain forward-looking statements and safe harbor statements under the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and current market and business conditions and relate to events that involve known and unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company’s control, and may cause the Company’s actual results, performance or achievements to differ materially from those in the forward-looking statements.
Further information regarding these and other risks, uncertainties and factors is included in the company’s filings with the Securities and Exchange Commission. Except as required by law, the company undertakes no obligation to update any forward-looking statements as a result of new information, future events or otherwise.
Now, I would like to introduce Mr. Frank Hooya Jen. Mr. Jen, please.
Frank Hooya Jen
Hi guys.
We are pleased to report a strong start to our performance in the first quarter of 2024. We continue to execute on our strategy of proactively and dynamically adjusting lending volume based on trends in financial asset quality, which has once again proven effective in ensuring profitability.
the result, Despite year-on-year and quarter-on-quarter declines in loan volume, our revenue and profits increased year-on-year and quarter-on-quarter, with profits also improving significantly. Total loan volume in the first quarter was RMB22 billion, down 11% year-on-year and 18% quarter-on-quarter, as planned.
Our outstanding loan balance was RMB44.0 billion as of the end of March 2024. Delinquency rates for outstanding loans 31-60 days past due and 91-180 days past due were 1.61% and 4.37%, respectively, at the end of the quarter, up from 1.05% and 2.4% in the same period last year.
The increase in delinquent loans as a percentage of total outstanding loans was primarily due to a decrease in outstanding loan balances at the end of the quarter, primarily as a result of loan facilitation and active management of loans that began in the first quarter of last year.
Excluding the impact of lower lending volumes, asset quality began to stabilize during the quarter. We remain committed to closely monitoring borrowers throughout the credit cycle, continuously improving our risk management systems, and taking all necessary steps to mitigate risk.
Net revenue in the first quarter was RMB1.2 billion, up 20% year-on-year and up 1% quarter-on-quarter, despite the decline in loan volume. Driven by strict risk management and improved operational efficiency, net profit increased 28% year-on-year and 92% quarter-on-quarter to RMB363 million, further proving the effectiveness of our strategy, strong execution and commitment to long-term profitability.
Starting this quarter, we have consolidated our acquisition costs from our acquisition and servicing costs. We have consolidated the indirect costs associated with acquiring our loans from general and administrative expenses and sales and marketing expenses into acquisition and marketing expenses, along with our total operating expenses and expenses, to provide investors with a clearer breakdown of our expenses. We will continue to unbundle our acquisition costs while improving asset quality and driving sustainable profitability.
With stable asset quality, we are confident of achieving our future earnings targets. Our current strategy gives us clear visibility into borrowings in 2024 and we expect total facilitated and disbursed loans for the full year to be approximately RMB100 billion. Our commitment to sustainable profitability and shareholder value creation remains unwavering.
Our board of directors has authorized a new share repurchase program of up to $20 million, effective January 1, 2024 through November 30, 2025. We remain confident in our position as a public company and intend to deliver long-term benefits for our shareholders. Now, I would like to talk about our first quarter results.
Please note that all figures quoted have been rounded up to the nearest RMB. Total net revenue increased 20% to RMB1.208 billion from RMB1.005 billion for the same period in 2023, driven by increases in various sub-revenues compared to the same period in 2023. A detailed analysis of this formula for revenue can be found here.
Origination and servicing expenses increased 15% to RMB427 million from RMB371 million in the same period in 2023, mainly due to higher collection expenses resulting from the cumulative impact of increased loan facilities provided in the previous quarter compared to the same period in 2023.
Borrower acquisition and marketing expenses decreased 9% to RMB248 million from RMB272 million in the same period in 2023 primarily due to lower borrower acquisition costs compared to the same period in 2023.
Loan provisions were RMB62 million compared to RMB20 million in the same period in 2023. This was mainly due to the increase in the Company’s loan holdings as a result of the cumulative effect of the increase in loan facilities provided in the previous quarter compared to the same period in 2023.
Operating income was RMB377 million, up compared to RMB328 million in the same period in 2023. Net income was RMB363 million, up compared to RMB284 million in the same period in 2023. Non-GAAP adjusted net income was RMB322 million, up compared to RMB307 million in the same period in 2023. For detailed financial information, please see the earnings release on our IR website. Next, I will explain our business outlook.
We expect total loan volume to be RMB 23 billion to RMB 24.5 billion in the second quarter of this year. For the full year 2024, we expect total loan volume to be RMB 90 billion to RMB 110 billion.
This concludes our prepared remarks. I would like to open the question and answer session. Operator please.
Q&A session
operator
(Operator Instructions) Our first question today comes from Mason Bourne with AWH Capital. Please go ahead.
Mason Bourne
Hello, thank you for your question. Could you please talk about the current state of the Chinese economy and how that relates to lending volumes and the outlook for the rest of the year?
Frank Hooya Jen
Overall, the Chinese economy still faces some challenges. In contrast to the United States, where you have an inflationary environment, we are in a deflationary environment. So overall, in general, loan demand is stable or declining slightly. I think if you look at the first quarter financial reports of all the big Chinese banks, loan volumes, revenues, profits are all down slightly. So we are in that kind of environment.
But in terms of our demand, I think it’s mainly a risk factor. Our overall loan portfolio is still at a high risk level. But in the first quarter, we’ve sort of stabilized that situation. Technically, we’re seeing some improvement compared to the fourth quarter of last year, but it’s still at a high level. So I think it’s not the economic environment that’s the main driver, it’s just that everyone in our sector is being cautious about expanding lending volumes more aggressively. We’re all under some pressure with respect to loan quality. I think that’s the main driver.
Mason Bourne
And then I was wondering if you could talk a little bit about the regulatory environment and how you see the regulatory environment going forward.
Frank Hooya Jen
Regarding the regulatory environment, there were no major developments this quarter and the situation remains essentially stable. There is not much news from the regulatory side.
Mason Bourne
thank you.
Frank Hooya Jen
thank you.
operator
(Operator Instructions) It appears there are no further questions at this time. I would now like to turn to Victoria Yu for any closing comments.
Victoria Yu
Thank you for joining the call today. If we didn’t have a chance to ask you any questions, we’ll be happy to answer them in a follow-up call. We look forward to speaking with you again in the near future. Thank you.
operator
The meeting has concluded. Thank you for attending today’s presentation. You may now disconnect.
