SHENZHEN, China, Dec. 1, 2020 /PRNewswire/ — X Financial (NYSE: XYF) (the “Company” or “we”), a leading technology-driven personal finance company in China, today announced its unaudited financial results for the third quarter ended September 30, 2020.
Third Quarter 2020 Financial Highlights
- Total net revenue was RMB559.8 million (US$82.5 million), representing a decrease of 34.5% year-over-year and an increase of 44.3% quarter-over-quarter.
- Loss from operations was RMB101.4 million (US$14.9 million), compared with income from operations of RMB214.7 million in the same period of 2019 and loss from operations of RMB341.5 million in the previous quarter.
- Net loss attributable to X Financial shareholders was RMB113.0 million (US$16.6 million), compared with net income attributable to X Financial shareholders of RMB169.6 million in the same period of 2019 and net loss attributable to X Financial shareholders of RMB343.7 million in the previous quarter.
- Non-GAAP adjusted net loss attributable to X Financial shareholders was RMB111.7 million (US$16.5 million), compared with non-GAAP adjusted net income attributable to X Financial shareholders of RMB208.0 million in the same period of 2019 and non-GAAP adjusted net loss attributable to X Financial shareholders of RMB325.9 million in the previous quarter.
- Net loss per basic and diluted American depositary share (“ADS”) was RMB2.10 (US$0.31) and RMB2.10 (US$0.31), respectively, compared with net income per basic and diluted American depositary share (“ADS”) of RMB3.24 and RMB3.12, respectively, in the same period of 2019.
- Non-GAAP adjusted net loss per basic and adjusted diluted ADS was RMB2.10 (US$0.31), and RMB2.10 (US$0.31), respectively, compared with non-GAAP adjusted net income per basic and adjusted diluted ADS of RMB3.96 and RMB3.84, respectively, in the same period of 2019.
Third Quarter 2020 Operational Highlights
- The total loan facilitation amount was RMB8,027 million, representing a decrease of 25.3% from RMB10,750 million in the same period of 2019 and an increase of 30.4% from RMB6,153 million in the second quarter of 2020.
- The loan facilitation amount of Xiaoying Credit Loan was RMB6,847 million, representing a decrease of 15.3% from RMB8,086 million in the same period of 2019 and an increase of 49.4% from RMB4,583 million in the second quarter of 2020. Xiaoying Credit Loan accounted for 85.3% of the Company’s total loan facilitation amount, compared with 75.2% in the same period of 2019.
- The total outstanding loan balance as of September 30, 2020 was RMB12,280 million, compared with RMB19,606 million as of September 30, 2019 and RMB12,185 million as of June 30, 2020.
- The average loan amount per transaction of Xiaoying Term Loan was RMB9,041, representing a decrease of 29.6% from RMB12,848 in the same period of 2019 and an increase of 8.2% from RMB8,356 for the second quarter of 2020.
- The delinquency rates for all outstanding loans that are past due for 31-90 days and 91–180 days as of September 30, 2020 were 2.13% and 4.62%, respectively, compared with 3.53% and 9.44%, respectively, as of June 30, 2020, and 2.95% and 4.50%, respectively, as of September 30, 2019.
- The number of cumulative borrowers, each of whom made at least one transaction on the Company’s lending platform, as of September 30, 2020 was 6,326,338.
- Total cumulative registered users reached 51.1 million as of September 30, 2020.
 The Company uses in this press release the following non-GAAP financial measures: (i) adjusted net income (loss), (ii) adjusted net income (loss) attributable to X Financial shareholders, (iii) adjusted net income (loss) per basic ADS, and (iv) adjusted net income (loss) per diluted ADS, each of which excludes share-based compensation expense. For more information on non-GAAP financial measure, please see the section of “Use of Non-GAAP Financial Measures Statement” and the table captioned “Unaudited Reconciliations of GAAP and Non-GAAP Results” set forth at the end of this press release.
 Each American depositary share (“ADS”) represents six Class A ordinary shares. On November 19, 2020, a ratio change that has the same effect as a 1-for-3 reverse ADS split took effect, and as a result, one ADS currently represents six Class A ordinary shares.
 Represents the total amount of loans that X Financial facilitated during the relevant period.
 X Financial integrated Xiaoying Card Loan and Xiaoying Preferred Loan into one general product category, Xiaoying Credit Loan, in 2018.
 Represents the total amount of loans outstanding for loans X Financial facilitated at the end of the relevant period. Loans that are delinquent for more than 180 days are charged-off and are excluded in the calculation of delinquency rate by balance, except for Xiaoying Housing Loan. Xiaoying Housing Loan is a secured loan product and the Company is entitled to payment by exercising its rights to the collateral. X Financial does not charge off Xiaoying Housing Loans delinquent for more than 180 days and such loans are included in the calculation of delinquency rate by balance.
 Calculated by dividing the total loan facilitation amount by the number of loans facilitated during the relevant period.
 Xiaoying Term Loan refers to the loans with fixed repayment periods including Xiaoying Credit Loan, Xiaoying Housing Loan, and Internet Channel.
Mr. Justin Tang, the Founder, Chief Executive Officer and Chairman of the Company, commented, “Despite the impact from COVID-19 and the tightened regulatory environment in China, we delivered encouraging operational and financial results in the third quarter. Thanks to the solid recovery in loan facilitation amount of Xiaoying Credit Loan, our total loan facilitation amount increased by 30.4% quarter-over-quarter to RMB8,027 million.”
“We continued to adhere to our prudent risk management approach. The delinquency rates for all outstanding loans that are past due for 31-90 days and 91–180 days as of September 30, 2020 decreased further to 2.13% and 4.62%, respectively, compared with 3.53% and 9.44%, respectively, as of June 30, 2020. As the epidemic continues to ease and the macro economic environment recovers gradually in China, our credit risk profile continues to improve.”
“Based on the solid progress we have made on the operational front, we improved both our top and bottom lines. Our total net revenue increased by 44.3% quarter-over-quarter and net loss attributable to X Financial shareholders narrowed to RMB113.0 million from RMB343.7 million in the previous quarter, demonstrating our strong capability to navigate in an uncertain regulatory environment and challenging economy.”
“In August 2020, the Supreme People’s Court of the PRC lowered the ceiling of the private lending interest rate protected by law. We believe this new policy is currently only applicable to private lending, which mainly refers to loans made to individuals or companies by private organizations or individuals instead of financial institutions. The regulation does put pressure on the whole lending sector, but it’s not directly applicable to our business at this moment as we are a financial institution regulated by local financial regulatory authorities.”
“Recently, the Chinese government also planned to impose tighter regulations on small loans offered online by microloan companies. The regulators have started seeking public opinion on the interim measures for the administration of online small lending businesses. The new ruling will significantly affect the fundamentals of the online small lending industry with requirements on borrowing limits, fund leverage, prohibition of multi-regional lending and other measures. It is expected that the new regulations will be finalized by the end of this year. Due to the low visibility caused by regulatory uncertainties, it is difficult for companies in this sector to precisely evaluate its impact on their businesses at this moment but they will need to adjust their strategies and bring substantial changes to their operations over a transitional period of one to three years to comply with the new policies.”
“Despite all the challenges ahead, we will continue to expand and improve our offerings to cater to the growing demand for personal financing in China. We are on track to apply for an online microcredit license and will keep a close watch on the evolving market dynamics and regulatory environment. We have experienced reforms and navigated difficult periods before, and emerged stronger as a key player in this industry. We are confident that we are capable of making strategic adjustments in a timely way to fit into the new business environment.”
Mr. Simon Cheng, President of the Company, added, “We continued to expand our cooperation with financial institutions. In the third quarter, we successfully achieved 100% institutional funding for the new loans facilitated through our platform, compared with 97.4% in the previous quarter. Both the total available credit lines and the number of financial institutional partners have continued to expand. Our risk management capabilities and proven record have been fully recognized by our financial institutional partners.”
“Our exit from the P2P business has progressed in an orderly manner. The outstanding loan balance of the P2P business continued to decrease from RMB1.6 billion as of June 30, 2020 to RMB0.4 billion as of September 30, 2020 and further decreased to RMB0.3 billion as of October 31, 2020. Protecting the interests of our investors is always our top priority and we believe it helps us minimize regulatory risks and establish a solid foundation of trust and integrity in the personal finance sector.”
“During the third quarter, our number of active borrowers continued to grow to 692,997, representing an increase of 10.8% from 625,707 in the previous quarter, mainly due to an increase in the number of active borrowers of Xiaoying Credit Loan. This is further acknowledgement of the high value and quality of the loan products we offer to borrowers, as well as the traction and growth momentum we gained as the market continues to gradually recover.”
“Overall, we will continue to strengthen our cooperation and relationships with financial institutions and keep diversifying our institutional funding sources. With China’s steady economic rebound and implementation of favorable policies to support domestic consumption, we are confident in our execution capabilities to create long-term value for our investors and shareholders.”
Mr. Frank Fuya Zheng, Chief Financial Officer of the Company, added, “We are pleased to have seen gradual recovery during the third quarter, thanks to the overall improving market conditions and our continuous efforts to enhance the top line growth and reduce costs across various parts of our business.”
“We continued to strengthen our risk management capabilities and focused on expanding the quality of our borrower base. The improvement in our credit risk profile has brought a significant decrease of RMB56.3 million in the bad debt provisions for accounts receivable and loans receivable in the third quarter when compared with the previous quarter. Together with other cost control initiatives, we successfully narrowed the net loss for the quarter. So far into the fourth quarter, we are seeing more positive signs on the borrower side. As of October 31, 2020, the delinquency rates for all outstanding loans that are past due for 31-90 days and 91–180 days further dropped to 1.94% and 3.84%, respectively, an outstanding performance showing the high effectiveness of our risk control model and improvements in the quality of our borrowers.”
“In addition, our efforts to expand and deepen our cooperation with financial institutional partners continued to bear fruit. The total number of financial institutions which we cooperate with continued to increase during the third quarter, and at the same time, we also managed to reduce overall funding costs in this quarter. We will continue to engage with more financial institutions to further optimize our cost structure. In the meantime, we continued to diversify our partnerships with third-party financial guarantee companies.”
“In conclusion, we will continue to closely monitor regulations and market conditions, and ensure we will adapt quickly in response to any potential impact on our business due to changes in the macro environment. In addition, we will continue to provide more attractive loan products, further improve the credit quality of our borrower base and explore additional cooperation opportunities with financial institutions to capture untapped growth in the personal finance industry.”