[Management View]
X Financial reported strong growth in loan originations and revenue, driven by rising borrower demand and disciplined risk management. Key metrics include an 8.8% sequential increase and 63.4% year-over-year growth in loan originations, reaching RMB 35.15 billion. Total revenue increased by 13.4% from Q4 2024 and over 60% year over year, reaching RMB 1.94 billion. The company also saw improvements in asset quality, with the 31 to 60-day delinquency rate improving to 1.25% and the 91 to 180-day delinquency rate declining to 2.7%.

[Outlook]
Management expects facilitated and originated loan amounts to range from RMB 37.5 billion to RMB 39.5 billion in Q2 2025. The company aims to achieve 30% volume growth this year, pending any regulatory impacts in the fourth quarter. X Financial remains committed to regulatory compliance and views increased oversight as a positive step for long-term industry development.

[Financial Performance]
X Financial reported a 44.9% year-over-year increase in non-GAAP adjusted net income, reaching RMB 467 million. Basic earnings per ADS improved by approximately 45.6% year over year to USD 1.50. Return on equity increased to 25.5%, up 1.4 percentage points year over year and 3.2 percentage points sequentially. The company authorized a new share repurchase plan for up to $100 million of Class A shares and ADS, effective January 1, 2025, to November 30, 2026.

[Q&A Highlights]
Question 1: Hi. I'm Kenning from Norton Andrews. Congratulations, and thank you for the great performance in the first quarter. Well, my first question is there's strong growth in your business, both in new loan origination and active users. You mentioned there will be further growth. I wonder if that means you like the current macroeconomic environment and the loan market? And, well, it's not big, but the delinquency rate has also ticked up a little bit compared to the end of last year. If the loan volumes continue to grow, should we expect further increases in the delinquency rate? And, oh, can I have a second question?

Answer: Of course. Thank you. Responding to your, I think you mentioned several questions in your comments. So let's focus on them one by one. The first one, how we view the current environment. I think our company has never tried to grow our portfolio for the sake of growth. So we are always trying to manage our portfolio based on our assessment of the future environment. That being said, I think right now, based on our historic trend and our analysis, the overall environment is still good for portfolio growth. That is why we are still focused on growth at this moment. Another thing is that since the second half of last year, we have invested a lot in acquiring new customers. So as these customers mature in our portfolio, we are able to offer them better lines and better products, so they stick with us longer. That is also the best foundation for our growth. In terms of the delinquency rate, I think the reason you see an uptick from the lower level we achieved somewhat last year is that I would say that probably was the bottom part of our delinquency rate. So even with this uptick, I think our delinquency rate with regard to our portfolio is still very healthy. So we are not particularly concerned about that. And going forward, we do expect that our delinquency rate will still have some uptick, but those upticks will be more than offset by our overall scale. That basically means that our profit will not be impacted by a certain frequency.

Frank Fuya Zheng: Let me add also regarding the delinquency rate. That number is actually as a risk profile situation from last quarter to Q1 is actually stable. And the number is a little bit skewed, and if you take another look, if you look at our Q1 income statement under the operation expense cost expenses, the first one is automation and services. It's basically operation expenses. The second one is the marketing acquisition, customer acquisition. And the third one is general and administration cost. So those are the three general costs. But the rest, like provision this way and provision that way, if you add up together, this is all risk-related cost. If you add up this quarter, Q1, and you add up Q4 last quarter, all the provisions together, you will find the Q1 provision is about RMB 60 million less than last quarter. But the amount is RMB 60 million actually, because this RMB 57 million is related to our own insurance business, which means because our own insurance business, the revenue you book in one period and the cost you book the whole thing together in one time. Because last quarter, Q4, they did more, well, you know, first the guarantee company did more business so they have more of that. So if you take out this RMB 57 million, actually, the cost apple to apple, the cost related to, you know, you take out all the, you know, the risk related to the guarantee business, actually, we have a, like, RMB 3-4 million less cost on Q1 compared with Q4. So overall, the conclusion is, you know, the risk situation remains basically the same. Not much better, not much worse. That's the thing. But having said that, we all expect because this regulatory development will be coming in October, we will prepare and there will be costs because of that, there may be some uptick, you know, cost risk situation with some uptick down the road, but not in Q1. Not in Q2. We haven't found this situation change much at all. That's why we continue to invest a lot in customer acquisition also.

Question 2: Thank you for the detailed answer. Well, my second question is about the repurchase. You haven't repurchased any shares in the first quarter, but you have approved another share repurchase program. Just wondering if you repurchased any, like, during April's market volatility, and should we expect you to continue the aggressive stock buybacks as you did last year? Thank you.

Answer: Yes. Because Q1 has no open window, so we usually do the buyback during the open window from the old shareholders. Right now, I mean, the incoming open window, we pretty much show, you know, the remaining, almost RMB 60 million is locked, it will be used up in the coming open window, and we will very likely kick into the buyback during the, you know, down window period also. So that's why we have this newly authorized RMB 100 million to cover that. I hope it answers your question.

Question 3: Hi. Good evening, management. Thanks for taking my question. It's Alex from UBS. So I have two questions, if I may. So the first one is regarding your loan growth guidance for the next quarter. Is it still going to be a bit of a good growth? Just wondering, what's driving the growth behind and how do you see, you know, the underlying loan application or credit demand in the last two months in April or May? Have you seen any suffering trend given a lot of the noise on the macro front? And the second question is a bit on your funding supply. So given, you know, there has been this new regulatory announcement since April, I'm wondering, have you heard any feedback from your funding partners with regard to their attitude towards this loan pricing, which is going above 24%? And then do you see anything we need to adjust in our current purchase order to ensure that we're more compliant? Thank you.

Answer: Okay. I'll first answer the first question about the growth. As I mentioned to the last investor, our growth has always been based on our assessment of the upcoming risk environment. So at this moment, I think that the way we grow our portfolio has always been acquiring new customers, getting the customers on board, and gradually introducing them to better products, which largely means lower fees and higher lines. Our growth has largely grown from this strategy. So you asked about April or May or June. Our growth path has always been like that. In terms of our funding institutional partners, right now, we are in very close conversation with them about the upcoming changes. And at this moment, what I can say is that we expect there will be changes. We are going to make some adjustments, but I don't see our company has always been confident we will be fully compliant with the new regulation before the October 1st deadline. So we are not particularly concerned about that. That being said, any new regulation will always bring some small shocks to the industry. So we do expect that there will be some shocks in our industry. It's just that I think our company is in a very good position to take those shocks.

Answer: Hi, Alex. First of all, welcome to our earnings call. Welcome. Regarding the, let me just basically ask the same question again. And I think we really took advantage of the good risk environment since the second half of last year. So our run rate is, you know, at the end of last year, it's already pretty high, and you saw that we spent very aggressively in acquisition in Q1, and we will keep the same pace in the acquisition effort in the second quarter. So based on our current forecast, we look to Q2 this year, we are ahead of, you know, 30% the gross volume growth for this year. But we are not, you know, not have no intention to increase the forecast anytime soon because we will, you know, see when in Q3, you know, what's the effect, you know, the regulatory policy impact on the industry. So the YCAA, you know, they look at the insertion regarding Q4 volume, and that's what I'm trying to say. And so overall, I think we are confident to achieve 30% volume growth for this year. But other than that, maybe not more, it's all because Q4 volume is kind of in limbo right now. Regarding the preparation for the new regulatory, possible regulatory impact, we do some, you know, talking to the people and, you know, talking to the regulatory mostly our institutional partners, and with some regulatory authorities. And we are preparing some, you know, technology-wise, you know, if the deal there's no new policy can come down, and we can accommodate it very quickly, efficiently, you know, from technology operation-wise. Other than that, we, you know, like anybody else, we don't know much of what's going to come down. Thank you.

[Sentiment Analysis]
Analysts expressed positive sentiment regarding X Financial's strong performance and growth prospects. Management maintained a confident and optimistic tone, emphasizing their strategic focus on disciplined growth, risk management, and regulatory compliance.

[Quarterly Comparison]
| Metric | Q1 2025 | Q4 2024 | YoY Change |
|---------------------------------|------------------|------------------|------------------|
| Loan Originations | RMB 35.15 billion| RMB 32.3 billion | +63.4% |
| Total Revenue | RMB 1.94 billion | RMB 1.71 billion | +60.4% |
| 31-60 Day Delinquency Rate | 1.25% | 1.61% | -22% |
| 91-180 Day Delinquency Rate | 2.7% | 4.7% | -37% |
| Non-GAAP Adjusted Net Income | RMB 467 million | RMB 322 million | +44.9% |
| Basic Earnings per ADS | USD 1.50 | USD 1.03 | +45.6% |
| Return on Equity | 25.5% | 22.3% | +3.2 pp |

[Risks and Concerns]
1. Potential regulatory changes in the Chinese financial sector could introduce compliance costs and operational adjustments.
2. The delinquency rate may experience minor upticks, although management expects these to be offset by overall scale and profitability.
3. Market volatility and macroeconomic conditions could impact loan demand and borrower behavior.

[Final Takeaway]
X Financial demonstrated robust growth in loan originations and revenue, supported by disciplined risk management and strategic customer acquisition. The company remains confident in its ability to navigate regulatory changes and achieve its growth targets for 2025. Despite potential risks, X Financial's strong financial foundation and commitment to compliance position it well for sustainable and profitable growth.