Hello, and welcome to the X Financial First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Victoria Yu. 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 website at ir.xiaoyinggroup.com. On the call today from X Financial is Mr. Frank Fuya Zheng, Chief Financial Officer. Mr.

Zheng will give an overview of the company's business operations and highlights, go through the financials and then answer your questions during the Q&A session. .

I remind you that this call may contain forward-looking statements and the safe harbor provisions of Private Securities Litigation Reform Act of 1995.

Such statements are based on management's current expectations and current market and operating conditions and relate to 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.

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Further information regarding risks 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 statement as a result of the new information, future events or otherwise, except as required in the law.

It is now my pleasure to introduce Mr. Frank Fuya Zheng. Mr. Zheng, please go ahead. .

Hello, everyone. We are pleased to start 2024 with a solid financial performance in the first quarter. We continue to implement our strategy of proactively and dynamically adjusting loan volumes based on close monetary asset quality dynamics, and this again proved effective in securing our profitability. .

As a result, despite a year-over-year and the quarter-over-quarter decline in the loan volume, both our top and the bottom line increased on a yearly and quarterly basis with notable improvements in profits.

In the first quarter, the total loan amount facilitated and originally decreased by 11% year-over-year and 18% quarter-over-quarter to RMB 22 billion, in line with our guidance. .

Our total outstanding loan balance was RMB 44 billion at the end of March 2024. Delinquency rates for the outstanding loans past due for 31 to 60 days and 91 to 180 days were 1.61% and 4.37%, respectively, at the end of the quarter, compared with 1.05% and 2.4% a year ago.

The increase in overdue loans as a percentage of total outstanding loans is primarily due to lower outstanding loan balances at this quarter end, as a result of proactive control of loan facilitating and originating that we initiated in the first quarter of last year. .

Excluding the impact of the reduced loan volume, asset quality began to stabilize during this quarter. We remain committed to closing monitoring borrowers through the entire credit cycle, continuing streaming our risk control system and taking all necessary measures to mitigate risks. .

In the first quarter, total net revenue was RMB 1.2 billion, up 20% year-over-year and 1% quarter-over-quarter despite decline in the loan volumes. Thanks to our strict risk controls and improved operational efficiency, net income increased by 28% year-over-year and 92% quarter-over-quarter to RMB 363 million.

This once again demonstrates the effectiveness of our strategy, strong execution and commitment to ensuring long-term profitability. .

Beginning this quarter, we combined the borrower acquisition costs from origination and service expenses.

Indirect expenses from the borrower acquisitions from the general and administration expenses and the sales and marketing expense into the borrower acquisitions and marketing expense with total operation costs and expenses to provide a clear breakdown of the company's expenses for the investor.

Going forward, we will continue to implement asset quality while opening up borrower acquisition costs to drive sustainable profitability. .

We are confident in our future profitable goals with stabilized asset quality. We have a clear visibility on the loan borrowing for 2024 under our current strategy and expect the total loan amount facilitated and originated for the full year to be around RMB 100 billion.

Our commitment to sustainable profitability and to shareholder value creation is unmoving. .

Our Board of Directors has authorized a new program to repurchase up to $20 million worth of our shares, which will be effective from January 1, 2024, to November 30, 2025. We are confident in our position as a public company and we will drive long-term returns for our shareholders. Now I would like to give some financial performance for the Q1. .

Please note that all the numbers stated are in RMB and is rounded up. Total net revenue increased by 20% to RMB 1,208 million from RMB 1,005 million in the same period of 2023, primarily due to growth in various disaggregate revenue compared with the same period of 2023. Please see further analysis of this equation of the revenue. .

Origination and servicing expenses increased by 15% to RMB 427 million from RMB 371 million in the same period of 2023, primarily due to the increase in the collection expenses resulting from the cumulative effect of increased volume of loan facility and provided in the previous quarters compared with the same period of 2023. .

Borrower acquisitions and the marketing expenses decreased by 9% to RMB 248 million from RMB 272 million in the same period of 2023, primarily due to the decrease in the borrower acquisition cost compared with the same period of 2023.

Provision for the loan receivable was RMB 62 million compared with RMB 20 million in the same period of 2023, primarily due to an increase in loan receivable hold by the company as a result of the accumulated effect of increased volume of loan facility and provided in previous quarters compared with the same period of 2023. .

Income from the operations was RMB 377 million compared with RMB 328 million in the same period of 2023. Net income was RMB 363 million compared with RMB 284 million in the same period of 2023. Non-GAAP adjusted net income was RMB 322 million compared with 307 million in the same period of 2023.

For further financial information, please refer to the earnings release on our IR website. Now on our business outlook. .

For Q2 this year, we expect total loan amount facilitated and originated to be between RMB 23 billion and RMB 24.5 billion. For the full year of 2024, we expect the total amount facilitated and originated to be between RMB 90 billion to RMB 110 billion. This concludes our prepared remarks, and we would like to open the call to questions.

Operator, please. .

[Operator Instructions] Your first question today comes from Mason Bourne with AWH Capital. .

I hope you could talk about what you're seeing in the Chinese economy and how it's related to loan volumes and your outlook for the rest of the year?.

Overall, Chinese economy is still facing some challenges. Contrast to the U.S., there is an inflation environment, we are sort of in the deflation environment. So overall, for the overall -- generally, overall for the loan, demand is stable or a little bit decline.

I think if you look at the order first quarter financial reports from the -- all the Chinese major banks, they are all -- they loan volume and their income and the profit are all down a little bit. So we are in that kind of environment. .

But for our demand, I think it's mainly is a risk factor. We are still stay -- our overall loan portfolio still at elevated risk level. But we kind of -- in the first quarter, we kind of stabilized that situation. Technical, there's a little bit of improvement compared with the fourth quarter last year, but still on elevated level.

So that is, I think, is the main factor instead of an economic environment to [ restrain ] everybody in our sector cautious to expand loan volume in a more aggressive way. We are all under some kind of pressure for the loan quality. That's the main factor, I believe. .

And then I was hoping you could also talk about the regulatory environment and how you view that going forward. .

Regulatory environment, there's not much new development in this quarter and just basically stable situation. There's not much news coming from the regulatory side. .

[Operator Instructions] It appears there are no further questions at this time. I'd like to turn the call back over to Victoria Yu for any closing remarks. .

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 today's presentation. You may now disconnect..