X Financial Reports First Quarter 2021 Unaudited Financial Results

SHENZHEN, China, June 15, 2021 /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 first quarter ended March 31, 2021.

First Quarter 2021 Financial Highlights

• Total net revenue in the first quarter of 2021 was RMB906.3 million (US$138.3 million), representing an increase of 71.3% from RMB529.0 million in the same period of 2020.
• Income from operations in the first quarter of 2021 was RMB251.2 million (US$38.3 million), compared with loss from operations of RMB130.0 million in the same period of 2020.
• Net income attributable to X Financial shareholders in the first quarter of 2021 was RMB192.8 million (US$29.4 million), compared with net loss attributable to X Financial shareholders of RMB196.3 million in the same period of 2020.
• Non-GAAP^[1] adjusted net income attributable to X Financial shareholders in the first quarter of 2021 was RMB212.0 million (US$32.4 million), compared with Non-GAAP adjusted net loss attributable to X Financial shareholders of RMB159.9 million in the same period of 2020.
• Net income per basic and diluted American depositary share ("ADS")^[2] in the first quarter of 2021 was RMB3.54(US$0.54) and RMB3.48(US$0.53), compared with net loss per basic and diluted ADS of RMB3.66and RMB3.66 in the same period of 2020.
• Non-GAAP adjusted net income per basic and adjusted diluted ADS in the first quarter of 2021 was RMB3.90(US$0.60), and RMB3.84(US$0.59), compared with Non-GAAP adjusted net loss per basic and diluted ADS of RMB3.00 and RMB3.00 in the same period of 2020.

First Quarter 2021 Operational Highlights

• The total loan facilitation amount^[3] in the first quarter of 2021 was RMB10,855 million, representing an increase of 59.1% from RMB6,823 million in the same period of 2020 and an increase of 25.2% from RMB8,673 million in the previous quarter.
• The loan facilitation amount of Xiaoying Credit Loan^[4] in the first quarter of 2021 was RMB10,855 million, representing an increase of 134.4% from RMB4,631 million in the same period of 2020 and an increase of 35.7% from RMB7,997 million in the previous quarter. Xiaoying Credit Loan accounted for 100.0% of the Company's total loan facilitation amount in the first quarter of 2021, compared with 67.9% in the same period of 2020.
• The total outstanding loan balance^[5] as of March 31, 2021 was RMB16,589 million, compared with RMB12,960 million as of March 31, 2020 and RMB13,218 million as of December 31, 2020.
• The delinquency rates for all outstanding loans that are past due for 31-60 days as of March 31, 2021 was 0.82%, compared with 0.79% as of December 31, 2020, and 4.28% as of March 31, 2020.
• The number of cumulative borrowers^[6] was 7.0 million as of March 31, 2021.
• Total cumulative registered users reached 58.2 million as of March 31, 2021.

Mr. Justin Tang, the Founder, Chief Executive Officer and Chairman of the Company, commented, "We're very pleased to report a strong start of the year as our business is fully back on its growth trajectory amid the subsiding COVID-19 pandemic in China. In the first quarter of 2021, both our operational and financial results continued to show progress against our strategic objectives. Our top line significantly improved on both a yearly and quarterly basis in line with the substantial increase in our loan facilitation amount. We also managed to turn profitable with net income exceeding our guidance and outperforming compared with the fourth quarter of 2019, just before the COVID-19 pandemic."

"In May 2021, we received the approval from the Local Financial Regulatory Bureau of Shenzhen Municipality to set up Shenzhen Xiaoying Microcredit Co., Ltd. ("Xiaoying Microcredit"), which is a newly established entity as one of our VIEs for the purpose of operating a microcredit business. Xiaoying Microcredit is the first company of its kind to successfully transform from a P2P business to an online microcredit business. Such an approval is a major milestone towards our full regulatory compliance. It will also expand our services beyond consumer financing, and provide more comprehensive financial services to the large pool of micro and small businesses and self-employed individuals in China, which are key drivers and contributors of China's economic growth. The government is taking a series of active measures to promote the development of micro and small businesses and self-employed individuals, and we will cooperate with other licensed financial institutions to meet their financing needs. This license will enhance our credibility and give us the advantage when we cooperate with other financial institutions, including the benefit of cutting intermediate costs. We are expecting to commence operation in the third quarter of 2021."

"Moving forward, market demand for our products and services continues to grow and we expect to maintain our current growth momentum throughout the year. China's consumer financing and micro and small businesses financing markets have great potential. We believe we are well positioned to capture opportunities ahead with our trusted brand, full regulatory compliance, and our deepening cooperation with financial institutions."

Mr. Kent Li, President of the Company, added, "During the first quarter, our total loan facilitation amount reached RMB10.9 billion, an increase of 59.1% year-over-year and 25.2% quarter-over-quarter, representing a record high in the last two years. This was mainly driven by the strong growth of loan facilitation amount of Xiaoying Card Loan, which increased 145.4% year-over-year and 35.7% quarter-over-quarter. Since last year, we have shifted our product focus to Xiaoying Card Loan, which accounted for 100% of total loan facilitation amount for the first quarter of 2021, compared with 92.2% in the previous quarter. Our focused product strategy has proven to be effective in gaining traction among borrowers and deliver profitable growth. As of the end of March 2021, total outstanding loan balance of Xiaoying Card Loan reached RMB16.3 billion, an increase of 29.4% compared with the prior quarter. We will continue to enhance and focus on Xiaoying Card Loan products to address consumers' growing financing needs going forward."

"In the meantime, we have been working to expand our service coverage by exploring more opportunities to cooperate with more regional financial institutions. A diversified geographic reach will further enhance our business flexibility and help us navigate uncertainties in the macro environment and expand our funding sources. This is one of our key business development strategies in 2021 and beyond. In addition, we will further strengthen risk management by introducing more advanced and effective data analytics, and further improve asset quality."

Mr. Frank Fuya Zheng, Chief Financial Officer of the Company, added, "We are pleased to have delivered a strong financial performance during the first quarter. Total net revenue increased 71.3% year-over-year and 26.5% quarter-over-quarter to RMB906.3 million. Our net income for the quarter was RMB192.8 million, compared with a net loss of RMB196.3 million in the same period of last year and a net loss of RMB655.5 million in the previous quarter. This significant improvement in our top line and bottom line resulted mainly from the strong growth in our loan facilitation amount, enhanced operational efficiency and extensive premium borrower base."

"During the first quarter, the proportion of loan amount we facilitated covered by third-party financial guarantee companies increased to 48.1% from 38.8% in the previous quarter. Our efforts to expand partnerships with third-party financial guarantee companies to further optimize financing costs for borrowers will remain on our agenda throughout the year."

"In conclusion, the progress we have made this quarter has strengthened our position and reputation in the markets and improved our ability to expand and deepen cooperation with financial institutions. We are entering a new chapter of our journey as our core consumer financing business gets back on track and we are ready to explore additional opportunities in the microcredit sector as well. We remain confident of the enormous potential of the industry and our capabilities to deliver long-term growth and return to our shareholders."

First Quarter 2021 Financial Results

Total net revenue in the first quarter of 2021 increased by 71.3% to RMB906.3 million (US$138.3 million) from RMB529.0 million in the same period of 2020, primarily due to a change in the product mix with the increase in total loan facilitation amount of Xiaoying Card Loan in this quarter when compared with that in the same period of 2020.

Loan facilitation service fees under the direct model in the first quarter of 2021 increased by 181.4% to RMB692.1 million (US$105.6 million) from RMB246.0 million in the same period of 2020, primarily due to an increase in the amount of Xiaoying Card Loan facilitated through direct model compared with that in the same period of 2020, as a result of our improved ability to attract and retain more borrowers with better credit score.

Loan facilitation service fees under the intermediary model in the first quarter of 2021 decreased by 99.6% to RMB0.1 million (US$0.02 million), compared with RMB37.0 million in the same period of 2020, primarily due to the fact that substantially all of the institutional funding partners invested their funds in the loans facilitated under direct model and/or trust model, depending on their investment strategies.

Post-origination service fees in the first quarter of 2021 decreased by 6.9% to RMB59.7 million (US$9.1 million) from RMB64.1 million in the same period of 2020, as a result of the cumulative effect of decreased volume of loans facilitated in the prior 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 the first quarter of 2021 decreased by 24.7% to RMB131.5 million (US$20.1 million) from RMB174.6 million in the same period of 2020, primarily due to a decrease in average loan balances held by the Company. These loans do not qualify for sales accounting, and the service fees are recognized as financing income over the life of the underlying financing using the effective interest method.

Other revenue in the first quarter of 2021 increased by 215.6% to RMB23.0 million (US$3.5 million) from RMB7.3 million in the same period of 2020, primarily due to an increase in referral service fee for introducing borrowers to other platforms and technology service fees received for providing assistant technology development services.

Origination and servicing expenses in the first quarter of 2021 increased by 28.0% to RMB572.5 million (US$87.4 million) from RMB447.2 million in the same period of 2020, primarily due to the increase in commission fee and insurance cost resulting from the increased total loan facilitation amount in this quarter when compared with the same period of 2020. Meanwhile, to better reflect the origination and servicing expenses incurred in connection with the loans facilitated through the Consolidated Trusts, the management fees paid to third-party trust companies, amounting to RMB8.7 million compared with RMB22.3 million in the same period of 2020, have been reclassified from general and administrative expenses to origination and servicing expenses. The comparative figures have been reallocated to conform with the current period's classification.

General and administrative expenses in the first quarter of 2021 decreased by 10.7% to RMB42.5 million (US$6.5 million) from RMB47.6 million in the same period of 2020, primarily due to a decrease in share-based compensation expenses.

Sales and marketing expenses in the first quarter of 2021 decreased by 61.7% to RMB4.5 million (US$0.7 million) from RMB11.8 million in the same period of 2020, primarily due to a continuing cost reduction in promotional and advertising activities since the outbreak of COVID-19. 

Provision for accounts receivable and contract assets in the first quarter was RMB17.3 million (US$2.6 million) compared with RMB82.1 million in the same period of 2020, primarily due to a decrease of the average estimated default rate compared with that the same period of 2020, and partially offset by an increase in accounts receivable from facilitation services as a result of the increase in total loan facilitation amount in the first quarter of 2021.

Provision for loans receivable in the first quarter of 2021 was RMB26.6 million (US$4.1 million), compared with RMB42.8 million in the same period of 2020, primarily due to a decrease of the average estimated default rate compared with that in the same period of 2020.

Income from operations in the first quarter of 2021 was RMB251.2 million (US$38.3 million), compare with loss from operation of RMB130.0 million in the same period of 2020.

Income before income taxes and gain from equity in affiliates in the first quarter of 2021 was RMB228.1 million (US$34.8 million), compared with loss before income taxes and gain from equity in affiliates of RMB228.3 million in the same period of 2020.

Income tax expense in the first quarter of 2021 was RMB37.2 million (US$5.7 million), compared with income tax benefit of RMB31.2 million in the same period of 2020.

Net income attributable to X Financial shareholders in the first quarter of 2021 was RMB192.8 million (US$29.4 million), compared with net loss attributable to X Financial shareholders of RMB196.3 million in the same period of 2020.

Non-GAAP adjusted net income attributable to X Financial shareholders in the first quarter of 2021 was RMB212.0 million (US$32.4 million), compared with Non-GAAP adjusted net loss attributable to X Financial shareholders of RMB159.9 million in the same period of 2020.

Net income per basic and diluted ADS in the first quarter of 2021 was RMB3.54(US$0.54), and RMB3.48(US$0.53), compared with net loss per basic and diluted ADS of RMB3.66 and RMB3.66 in the same period of 2020.

Non-GAAP adjusted net income per basic and diluted ADS in the first quarter of 2021 was RMB3.90(US$0.60), and RMB3.84(US$0.59), compared with Non-GAAP adjusted net loss per basic and diluted ADS of RMB3.00 and RMB3.00 in the same period of 2020.

Cash and cash equivalents was RMB799.8 million (US$122.1 million) as of March 31, 2021, compared with RMB746.4 million as of December 31, 2020.

Business Outlook

For the second quarter of 2021, the Company raises the guidance for total loan facilitations to be in the range of RMB12.4 billion to RMB13.0 billion and net income attributable to X Financial's shareholders to be no less than RMB220 million. 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 16, June, 2021 (7:00 PM Beijing / Hong Kong Time on the same day).

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 June 23, 2021:

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 loans to prime borrowers under a robust 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 attributable to X Financial shareholders, (iii) adjusted net income per basic ADS, and (iv) adjusted net income per diluted ADS, each of which excludes investment income and share-based compensation expense. These non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. 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 RMB6.5518 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 March 31, 2021.

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 following: 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.

For more information, please contact:

X Financial
Mr. Frank Fuya Zheng
E-mail: ir@xiaoying.com

Christensen

In China
Mr. Eric Yuan
Phone: +86-10-5900-1548
E-mail: eyuan@christensenir.com  

In US 
Ms. Linda Bergkamp
Phone: +1-480-614-3004
Email: lbergkamp@christensenir.com

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SOURCE X Financial