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01/11 16:18
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals a mixed financial performance with increasing delinquencies, declining margins, and sequential declines in income and active borrowers. Despite share repurchases, regulatory uncertainties pose risks. The Q&A section highlights negative impacts on volume and profitability due to new regulations and vague management responses, reinforcing a negative sentiment. These factors, combined with a lack of clear guidance and a focus on maintaining dividends rather than growth, suggest a likely negative stock price reaction in the coming weeks.
Loans Facilitated and Originated RMB 33.64 billion, an 18.7% increase year-over-year but a 13.7% decline sequentially. The year-over-year increase was due to growth in loan facilitation, while the sequential decline was intentional to prioritize asset quality and risk management.
Total Net Revenue RMB 1.96 billion, a 23.9% increase year-over-year but a 13.7% decline sequentially. The year-over-year growth was supported by higher average loan balances and prior facilitation activity, while the sequential decline reflected reduced loan volumes.
31- to 60-Day Delinquency Rate 1.85%, up from 1.16% in Q2 and 1.02% a year ago. The increase reflects a cautious borrower environment and rising repayment stress.
91- to 180-Day Delinquency Rate 3.52%, up from 2.91% in Q2 and 3.22% in Q3 2024. This increase also indicates rising repayment stress among certain borrower segments.
Outstanding Loan Balance RMB 62.83 billion, a 37.3% increase year-over-year. This growth demonstrates resilience despite moderated origination activity.
Active Borrower Base Approximately 2.44 million, a 24.2% increase year-over-year but a 14.4% decline sequentially. The sequential decline was due to moderated origination activity, while the year-over-year growth reflects franchise resilience.
Income from Operations RMB 331.9 million, a 29.9% decrease year-over-year and a 46.4% decline sequentially. The decline was primarily due to higher provisions for credit losses and guarantee liabilities.
Operating Margin 18.5%, compared to 29.7% in Q2 and 32.2% a year ago. The decline was driven by higher provisions and lower loan volumes.
Net Income RMB 421.2 million, a 12.1% increase year-over-year but a 20.2% decline sequentially. The sequential decline was due to higher provisions and lower activity levels.
Non-GAAP Adjusted Net Income RMB 438.2 million, a 1% increase year-over-year but a 26.1% decline sequentially. The sequential decline was due to higher provisions and reduced loan volumes.
Return on Equity 21.5%, supported by tight cost management and share repurchases.
Total Assets RMB 14.69 billion, a 26.4% increase year-over-year. This growth reflects a strong balance sheet and healthy cash flow generation.
Total Shareholders' Equity RMB 7.93 billion, a 15% increase year-over-year. This growth indicates financial stability and capital strength.
Cash and Restricted Cash Approximately RMB 1.55 billion, providing ample liquidity to support operations and capital returns.
Loan Facilitation and Origination: Facilitated and originated RMB 33.64 billion in loans, an 18.7% increase year-over-year but a 13.7% decline sequentially. This moderation was intentional to prioritize asset quality and risk management.
Delinquency Rates: 31-60 day delinquency rate rose to 1.85% (from 1.16% in Q2 and 1.02% a year ago). 91-180 day delinquency rate increased to 3.52% (from 2.91% in Q2 and 3.22% in Q3 2024). Steps were taken to tighten underwriting criteria and improve collection effectiveness.
Operational Enhancements: Improved borrower experiences by simplifying application flows, accelerating approval times, and expanding transparency. Strengthened AI-driven analytics for borrower identification and delinquency detection.
Financial Positioning: Total net revenue reached RMB 1.96 billion, a 23.9% increase year-over-year but a 13.7% decline sequentially. Maintained profitability and positive earnings despite a softer operating backdrop.
Regulatory Alignment: Adapted to evolving regulatory environment in China's fintech sector, focusing on compliance, consumer protection, and responsible lending practices. Adjusted operations to align with regulatory objectives.
Capital Management: Repurchased approximately $67.9 million worth of shares under the share repurchase program, with $48 million remaining under the plan. Maintained a strong balance sheet with RMB 1.55 billion in cash and restricted cash.
Regulatory Environment: China's fintech sector remains under close supervision, with regulators emphasizing consumer protection, transparency, and responsible lending practices. This regulatory focus may exert pressure on industry pricing and profitability.
Credit Quality: The 31- to 60-day delinquency rate rose to 1.85% from 1.16% in Q2, and the 91- to 180-day delinquency rate increased to 3.52% from 2.91% in Q2, indicating rising repayment stress among borrowers.
Loan Origination and Volume: Loan origination declined sequentially by 13.7% as the company deliberately moderated growth to prioritize asset quality and risk management over volume expansion.
Profitability: Net income declined sequentially by 20.2%, and operating margin dropped to 18.5% from 29.7% in Q2, driven by higher provisions for credit losses and guarantee liabilities.
Borrower Base: The active borrower base decreased by 14.4% sequentially, reflecting a cautious approach to underwriting and reduced exposure to lower-tier channels.
Economic and Market Conditions: Broader market trends indicate a cautious borrower environment and rising repayment stress, which may continue to challenge credit quality and operational performance.
Loan Origination Guidance for Q4 2025: X Financial expects the total loan amount facilitated and originated in the fourth quarter of 2025 to be in the range of RMB 21 billion to RMB 23 billion.
Full Year 2025 Loan Origination Guidance: The total loan amount facilitated and originated for the full year 2025 is expected to be in the range of RMB 128.82 billion to RMB 130.8 billion.
Focus on Asset Quality and Credit Discipline: The company will continue to prioritize asset quality, credit discipline, and profitability optimization rather than aggressive volume expansion.
Regulatory and Market Adaptation: X Financial remains attentive to the evolving regulatory landscape and changing credit conditions while maintaining confidence in resilient borrower demand, prudent risk control, and disciplined execution to support sustained long-term growth.
Share Repurchase Program: From January 1, 2025, through November 20, 2025, X Financial repurchased an aggregate of approximately RMP 4.26 million ADS, including approximately 3.80 million ADS and 2.76 million Class A ordinary shares, for a total consideration of approximately $67.9 million under its share repurchase program. The company now has approximately $48 million remaining under its existing $100 million share repurchase plan, which is effective through November 30, 2026. This program underscores the company's confidence in its long-term growth outlook and its commitment to enhancing the shareholder value. Repurchases under the program remain subject to market conditions and other factors and may be modified or suspended at the management's discretion.
The earnings call reveals a mixed financial performance with increasing delinquencies, declining margins, and sequential declines in income and active borrowers. Despite share repurchases, regulatory uncertainties pose risks. The Q&A section highlights negative impacts on volume and profitability due to new regulations and vague management responses, reinforcing a negative sentiment. These factors, combined with a lack of clear guidance and a focus on maintaining dividends rather than growth, suggest a likely negative stock price reaction in the coming weeks.
The company showed strong financial performance with significant growth in loan originations and revenue, improved delinquency rates, and increased profitability. The share repurchase program and dividend policy further enhance shareholder value. Although there are concerns about macroeconomic uncertainties and compliance costs, the management's focus on asset quality and use of AI for cost reduction are positive signs. The Q&A section did not reveal any major negative concerns. Overall, the positive financial results and shareholder return plans outweigh the potential risks, indicating a positive stock price movement.
The company's strong financial performance, including significant year-over-year increases in loan originations, revenue, and net income, supports a positive sentiment. The new share repurchase plan and dividend announcement further enhance shareholder value. Despite concerns about regulatory changes and delinquency rates, management's proactive approach and confidence in compliance mitigate these risks. The positive loan growth outlook and improved asset quality contribute to a favorable market reaction, likely resulting in a 2% to 8% stock price increase over the next two weeks.
The earnings call summary shows strong financial performance with significant revenue and loan origination growth, improved profitability metrics, and a positive outlook for loan volume growth. The dividend and share repurchase plans further enhance shareholder value. Despite some regulatory uncertainties and competitive pressures, management remains confident in adapting to changes and maintaining growth. The Q&A section highlights management's proactive approach to compliance and market adaptation, with positive sentiment towards their strategies. Overall, the positive financial results and strategic initiatives suggest a likely positive stock price movement.
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