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Operator: Hello, and welcome to the X Financial Fourth Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Victoria Yu. Please go ahead.

Victoria Yu: Thank you, operator. Hello, everyone, and thank you for joining today’s call. The company’s financial results were released earlier today and are available on our Investor Relations website at ir.xiaoyinggroup.com. On the call today from X Financial are Mr. Kent Li, President; and Mr. Frank Fuya Zheng, Chief Financial Officer. Additionally, we are delighted to welcome Mr. Noah Kauffman to our company. He brings 20 years of experience in growth strategy, corporate and financial transactions as well as financial and operational improvements in the global financial markets. Before joining X Financial, he served as Head of Strategic Financial Planning and Analysis at the Intercontinental Exchange, where he played a key role in capital allocation and global business strategies.

Mr. Kauffman will be responsible for leading our engagement with the U.S. capital markets, including Investor Relations and strategic financing initiatives. Mr. Li will provide a brief overview of our operations and business highlights, followed by Mr. Zheng, who will review the financial results. Afterwards, Mr. Li, Mr. Zheng and Mr. Kauffman will be 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 involve known and unknown risks, uncertainties and other factors. These factors are difficult to predict and many are beyond the company’s control, which may cause actual results, performance or achievements to differ materially from those described in these statements.

Further information on these and other risks can be found in our SEC filings. The company undertakes no obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required by law. It’s now my pleasure to introduce Mr. Kent Li.

Kent Li: Thank you, Victoria, and hello, everyone. We are very pleased to conclude the year with outstanding operational and financial results in the fourth quarter. Total loan volumes exceeded our guidance with RMB32 billion facilitated in Q4 alone, a 24% year-over-year increase for the quarter. For the full year, total loan volumes reached RMB104.9 billion, reflecting a stable performance compared to 2023. This growth was fueled by disciplined underwriting, strengthened asset quality, positive macroeconomic tailwinds that supported borrower demand and lower funding costs. In the second half of 2024, China’s government implemented monetary and fiscal stimulus measures aimed at stabilizing core economic sectors, notably real estate, and enhancing market liquidity.

These policies lowered the funding costs and fostered healthy borrower demand in the personal finance market. As a result, we saw meaningful revenue and profitability growth with Q4 net income more than doubling year-over-year, so strong asset quality performance. Asset quality continued to strengthen significantly throughout the year. At the end of Q4, the delinquency rate for loans overdue by 31 to 60 days improved to 1.17% from 1.57% a year ago. The 91 to 108 days overdue delinquency rate declined to 2.48% from 3.12% last year. This improvement reflects the effective risk management practices and the discipline in underwriting standards. 2025 outlook and growth strategy. Looking ahead into 2025, the Chinese government has reiterated the importance of the private sector as a key driver of economic innovation and sustainable growth.

Recent regulatory guidance from the National Financial Regulatory Administration, NFRA, further reinforces this stand with policies aimed at expanding access to consumer credit, lowering borrowing costs and supporting consumption-driven economic growth. While this development created a more accommodative environment for financial institutions, our primary focus remains on leveraging technology to enhance financial services efficiency. Through AI-powered risk analytics, automated underwriting models and embedded fintech solutions, we continue to empower our financial institutional partners in optimizing loan origination, credit risk management and borrower engagement, ensuring they can navigate this evolving regulatory landscape with precision and agility.

Accordingly, we expect total loan volumes to increase by approximately 30% for the full year of 2025, supported by both organic demand and a more stable regulatory environment. Despite the usual seasonal impact of the Chinese New Year, we anticipate sequential growth in total loan volume in Q1 2025 as digital financial solutions become increasingly integral to expanding responsible credit access while maintaining disciplined risk management. Strategic AI investments, at X Financial, we continue to expand our strategic investments in AI, leveraging cutting-edge models such as DeepSeek, Alibaba’s Tongyi Qianwen and ByteDance’s Doubao across our operations. AI now powers advanced customer service robots, intelligent agent assistance, targeted marketing campaigns, including AI-generated short videos for platforms like TikTok, streamlined early-stage collection efforts, significantly enhanced efficiency and customer engagement.

In software development, we have implemented AI-driven auto coding tools such as Cursor, accelerating development and system optimization. Additionally, our multi-model AI risk management system delivers over 95% accuracy through sophisticated contextual analysis and advanced image recognition technologies to identify early indicators of credit risk. Looking ahead, we remain committed to further integrate AI into our strategic decision-making process, particularly in risk modeling and credit policy to continue enhancing operational effectiveness and customer experience. With that, I will now pass the call to our CFO, Frank Zheng, who will detail the financial results.

Frank Fuya Zheng: Thank you, Kan. Good morning, everyone. We are pleased to report strong financial results for the fourth quarter. The total net revenue increased 43% year-over-year to RMB1.7 billion. The net income grew 104% year-over-year to RMB386 million. Throughout the year, our top and bottom lines expanded quarter-over-quarter, bringing full year total net revenue to a record RMB5.9 billion, full year net income to RMB1.5 billion, strong balance sheet and capital returns. Our balance sheet remains strong with total shareholder equity at the year-end increased by 19% year-over-year. Leveraging this solid financial foundation, we returned approximately USD76 million to shareholders in 2024, including USD16.5 million in cash dividends, USD9.2 million in our tender offer and USD50.3 million invested in share repurchase.

Dividend announcement. Additionally, our Board of Directors has approved the declaration and payment of a semiannual dividend of USD0.25 per ADS, reinforce our commitment to delivering shareholder value. Share repurchase program. In Q4, we repurchased 38.4 million Class A ordinary shares, equivalent 6.4 million ADS for USD49 million. For full year 2024, total repurchase reached 52.2 million shares with 50.5 million in ADS form, amounting to USD59.4 million. As of today, our previous USD30 million and USD20 million repurchase plans are fully utilized. We have USD15.9 million remaining under our USD50 million repurchase program effective through June 30, 2026. 2025 outlook, looking ahead, we remain optimistic about our growth trajectory. For the first quarter of 2025, we expect the total loan amount facilitated and originated to be between RMB33.5 billion and RMB34.5 billion.

This position us to achieve a full year total loan amount facilitated and originated between RMB134.4 billion and RMB138.4 billion. Closing remarks. As we progress through 2025, we remain confident in our strategic direction, supported by robust underwriting standards, disciplined risk management, operational efficiency improvements with a strong financial foundation, disciplined capital allocation and a clear commitment to enhancing shareholder value, we are well positioned for sustainable and profitable growth. Thank you for our shareholders, partners and especially our dedicated employees at X Financial. We appreciate your trust and support as we execute on our strategy and driving long-term value creation. We look forward to delivering continued growth and success in the quarters ahead.

Victoria Yu: Okay, operator, we can transfer to the Q&A session now.

Operator: Thank you. We will now begin the question and answer session. [Operator Instructions] The first question comes from Ramsey Manor [ph] with Blackbird Capital. Please go ahead.

Unidentified Analyst: Hello. Congratulations, guys, on a great quarter and happy to be a shareholder. My question is during the fourth quarter, the company repurchased approximately 6.4 million ADSs on December 16. However, the share count on the financial report as of December 31 does not fully reflect the reduction. So I’m not sure if this is an accounting discrepancy. And if you could clarify that, that would just be better for me. Thank you.

Frank Fuya Zheng: Hi. I will be happy to answer your question. And since we bought our share back in the last quarter of 2024, but the share count calculation is based on weighted average. So say, you own that share in 2024 around 300 days out of 365 days, so that share count still will be account for 300 days. So that share count calculation is weighted average. That is why you do not see that big reduction in the year-end because it’s weighted average. So in 2025, you will see those share totally disappear from the share count. I hope I answered your question.

Unidentified Analyst: Absolutely. Thank you guys.

Operator: The next question is from Mason Bourne with AWH Capital. Please go ahead.

Mason Bourne: Hi, thanks for taking the questions. I guess just to start, it sounds like you have someone new who has joined the company, is on the call. Could you just talk about that a little bit, please, in his role?

Kent Li: Well, why don’t we ask Noah to tell you himself.

Frank Fuya Zheng: Yes, Noah, could you answer that question by yourself?

Noah Kauffman: Yes, sure. Yes, good morning and evening everyone. And thanks, Mason, for the question. Yes, I’m excited to be here and to officially join X Financial. I’d also like to thank Victoria for the introduction and express appreciation to Kent and Frank for their entire leadership. From my early conversations with the team, I was deeply impressed with the strategic vision of the team and the foundation they built. X Financial’s sustained profitability and growth speak for themselves, and I look forward to playing a role in strengthening that. My focus is going to be on deepening our engagement with U.S. capital markets. I’m sure Mason, I will be speaking to you in the near future and enhancing Investor Relations, driving strategic financial initiatives, and I’ll be working closely with the leadership team to optimize the financial strategy and capital allocation and ensuring the continued delivering of long-term value for shareholders.

Mason Bourne: Great. Well, welcome to the company. I had a couple more. Just to start, it sounds like pretty strong loan volume growth is expected for 2025. Could you just talk about drivers behind that and how you expect that to impact profitability this year?

Kent Li: Sure. I’ll take that question. The reason that we forecast a 30% increase in terms of the loan volume really is coming from the two strengths that we are creating in the past year. The first one is the way that we are able to reach better and more customers by ourselves. And this obviously has always been the key focus of our acquisition strategy. The second part is that also in the 2024 and actually continue into 2025 that we are able to partner with more partners, more platforms that based on our track record, they are more willing to cooperating with us. So, basically open a new acquisition channel for the company. That’s why combined with the two strengths that we foresee a fairly good increase in our loan volume. Mason, did I answer your other question? If I am missing some part, could you repeat that? I will answer for you.

Mason Bourne: Yes, just the last part of it, I was asking how do you expect the loan volume growth to translate to profitability this year? If there’s any large items to think about?

Kent Li: Yes, I will mention that even though that we don’t give the forecast of the profitability, but for our company as a whole that we always focus – I think our number one focus has always been the profit. So, not to guarantee anything, but we think that our profit will be increasing at the same pace as our volume.

Frank Fuya Zheng: Mason, if you’re looking in 2024 and I basically have almost the same volume as 2024 and 2023, just also a little bit down a few billion or something like that. But we are profit increase, I believe it’s almost RMB300 million on net income. And the reason is mainly by two factors. One is if you remember back in 2004 and the beginning of 2004, the risk level for our sector or our industry is at the highest level. We are managing from the risk level on a quarter-by-quarterly basis, already managed to lower the credit risk. That’s why we are having more profitable than originally much thought. Another big factor is the funding cost. Its funding cost is down on a yearly basis, in 2024 it is down more than 2%. And looking to 2025, the trend is more or less the same.

The funding cost probably not going to lower, but more or less remain in the low level as current right now. And the risk profile also more or less remain the same. But also that visibility may be short, maybe one quarter or two quarters, we cannot guarantee the full year, but that’s basically as the situation right now. So, as long as the situation based on current situation, we are very confident in reach a very meaningful growth, both in volume and profitability in 2025. Thank you.

Mason Bourne: That’s very helpful. Last thing for me. I really appreciate the capital return to shareholders, both through dividends and buybacks. You’re still fairly low on the dividend even after the raise as a portion of net income, but I know you’re returning a lot through buyback activity. Just wondered how you think about capital allocation priorities going forward, whether you continue to expect more on the buyback or if you would maybe lean into the dividend more? That’s all, thanks.

Frank Fuya Zheng: Yes, Mason, I thought you will ask that question. I’m ready for you. You see when we introduced the dividend like $0.70 semi-annual yearly and $0.34 a year. And at that time, our stock has been around about $3, $4 range for several years. And we pay like $0.34 for less than $4 stock price. Basically, what we try to tell all the investors and potential investors say, if you buy our stock, we pay you more than you can get from short-term U.S. treasuries. And we definitely don’t know when the stock price will appreciate. But in case stock price appreciate, you will have a double cane and double sweet, something like that. But since last end of September, and because Chinese government policy change and the stock price basically from around $5 shoot to up to $8, then after the major event happened excited by DeepSeek and the whole Chinese assets, especially technology, all be revalued at the time.

It’s just like a suddenly for no particular reason besides the DeepSeek, all the concern or the main issue, which kept our Chinese stock at a very ridiculous low level and all being blown away. So I don’t know. But that’s what happened. So based on this situation change, we want to give – the stock since last September, our stock is up almost more than 2%, we want to give them extra kick, so which means we want to put more weight on stock buyback a little less on dividend payout. And you see in 2024, we in combination of both, we pay out US$76 million, and we hope we can accomplish even more percentage. 34% is about – over 30% payout for earnings for 2024. And 2025, we hope we have a bigger payout combination of both, but more weight on share buyback.

And I think even though our stock has been appreciated 200%, our stock still is very, very cheap. I’ll just give you one number, and you see on 2024, our earnings per share in U.S. dollar is US$4.83 and our stock is based right now what, $0.30 – $13, something like that. And you can – I challenge anyone who have around $4, $5 range earnings per share, you find a much – not going to find much stock in the U.S. for our sector below 100%. So we believe our stock is still very – have a long way to go. So we will have more emphasis on share buyback in 2025. I hope I answered your question. Thank you.

Mason Bourne: Thanks great. Thank you.

Operator: [Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Victoria Yu for any closing remarks.

Victoria Yu: Thank you, everyone, for joining us today. If you have additional questions, please reach out to our Investor Relations team directly. We appreciate your interest and look forward to speaking with you again. Operator, back to you.

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