Hello, and welcome to the X Financial First Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would like to turn the conference over to Tanya Win. Please go ahead..

Thank you, Operator. Hello everyone, and thank you for joining us today. The company's results were released earlier today and are available on the company's IR Web site at ir.xiaoyinggroup.com. On the call today from X Financial are Mr. Simon Cheng, President; and Mr. Kevin Zhang, Chief Financial Officer. Mr.

Cheng will give a brief overview of the company's business operations and highlights, followed by Mr. Zhang, who will go through the financials and the guidance. They are all available to answer your questions during the Q&A session.

I remind you that this call may contain forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Such statements are based on management's current expectations and the current market and operating conditions and related events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements.

For the information regarding this and other risks, uncertainties and factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events, or otherwise, except as required under law.

It is now my pleasure to introduce Mr. Simon Cheng. Mr. Cheng, please go ahead..

Hello everyone. Despite the challenges created by the coronavirus disease, COVID-19, adversely impacting our operating environment, we made meaningful progress in expanding institutional funding for all new loan products originated on our platform during the quarter.

Institutional funding accounted for 81.7% of the loans facilitated in the first quarter, an increase from 50.2% in the previous quarter. We rapidly built upon this with institutional funding, which is now accounting for 100% of loan facilitated throughout our platform.

As of March 30, 2020, the total credit line provided by our institutional partners expanded to RMB50.6 billion, from RMB46.7 billion as of December 31, 2019.

Given the current uncertainties in the market, this further proves our asset quality and risk management capabilities continue to be well recognized by our institutional partners, despite the impact from the pandemic.

We remain in active negotiations with funding partners to further decrease our funding costs, and further expand our funding partners, which could bring down funding costs going forward. At present, we have ample funding resources to meet growing demand as consumer sentiment improves.

We continue to adopt the strategic and disciplined approach to our risk management and have implemented stricter criteria when assessing borrowers because we believe it is even more important now for the sustainability of our business.

[Technical difficulty] to strengthening our ability to generate stronger results when the market is expected to rebound during the second half of 2020. An adjustment period is therefore expected and is reflected in the lower number of active borrowers during the quarter. The number of active borrowers this quarter was 228,366.

It is a decrease of 29.7% from 609,368 in the fourth quarter of 2019. Over the past few quarters, we continued to ramp up our technology-driven risk infrastructure and strengthened customer acquisition to successfully manage a rise in the delinquency rate during the peak of the pandemic.

While restrictions put in place to contain the pandemic continue to ease and life returns to normal, we have seen an improvement in delinquency rates from April 2020. We also saw a significant rebound both in loan facilitation amount and numbers of active borrowers, which strengthens our confidence in the gradual recovery taking place in China.

Overall, the evolving health crisis and growing impact from COVID-19 have weighed heavily on consumer sentiment in China, which is reflected in the performance of Yaoqianhua and Xiaoying Online Mall during the quarter.

Also, in order to control the impact of COVID-19, we have taken more stringent risk policies, therefore the GMV of Xiaoying Online Mall declined 62.2% from the fourth quarter of 2019 to RMB60.8 million.

Despite this, the number of active users of Yaoqianhua reached around 463,000 as of March 31, 2020, representing an increase from roughly 408,000 as of December 31, 2019. Transaction volumes of Yaoqianhua only declined slightly to RMB2,192 million from RMB 2,204 million in the last quarter.

Yaoqianhua outstanding loan balance increased to RMB1,801 million as of March 31, 2020, from RMB1,503 million at December 31 2019. Now it has approved cumulative credit line of RMB11 billion with credit utilization rate of around 28% as of March 31, 2020.

We believe the pandemic has significantly affected on consumer behavior, but in doing so also created many more new opportunities for us to drive further growth. In addition, China's central and local governments have recently been rolling out a series of policies to improve business.

As we continue to evolve from pure financial services provider to a more comprehensive business service provider, we are confident we are well-positioned to not just survive this challenging environment but thrive when the market rebounds. Now, I will take the call to Kevin who will go through our financials..

(a) the new current expected credit loss model that took into account the deterioration in the economic outlook caused by the COVID-19 pandemic; and (b), an increase in the estimated default rates since the COVID-19 outbreak.

Provision for loans receivable was RMB42.8 million compared with RMB7.5 million in the same period of 2019, primarily due to the increase of expected credit loss for revolving loan product when compared with the first quarter of 2019.

Non-GAAP adjusted net loss attributable to X Financial shareholders was RMB159.9 million compared with non-GAAP adjusted net income attributable to X Financial shareholders of RMB251.2 million in the same period of 2019.

Non-GAAP adjusted net loss per basic and diluted ADS were RMB1.00 and RMB 1.00 respectively, compared with non-GAAP adjusted net income per basic and diluted ADS of RMB1.64 and RMB1.56 respectively in the same period of 2019.

As the company continues to assess the impact of the COVID-19 outbreak and market indicators around the recovery in the first-half of 2020, it is anticipated that the company's total loan facilitation amount for the second quarter of 2020 will also be negatively impacted, and the company expects a second quarter loss with drop in revenue.

The company plans to provide a business update in the second quarter 2020 earnings release. This forecast reflects the company's current and preliminary views, which are subject to change. Now, this concludes our prepared remarks, and we would like to open the call to questions. Operator, please. .

Okay. Thank you everyone for joining us on the call today. If you haven't got a chance to raise your questions, we will be pleased to answer them through follow-up contacts. We look forward to speaking with you again in the near future. Thank you..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..