Earnings call transcript: X Financial Q2 2025 highlights growth and AI focus

X Financial reported strong growth in its Q2 2025 earnings call, with total revenue reaching RMB 2.27 billion, marking a 65.6% increase year-over-year. The company’s stock price reflected positive investor sentiment, rising 6.53% in premarket trading. Key drivers included advancements in AI and robust borrower demand. According to InvestingPro data, the company maintains excellent financial health with a "GREAT" overall score, supported by strong profitability metrics and robust cash flow generation.

Key Takeaways

• Revenue grew by 65.6% YoY to RMB 2.27 billion.
• Loan originations increased by 71.4% YoY.
• AI enhancements in client management and customer service.
• Stock price rose 6.53% in premarket trading.
• Focus on asset quality over volume growth.

Company Performance

X Financial demonstrated significant growth in the second quarter of 2025, driven by a strong demand for loans and strategic investments in AI technology. The company reported a 17.3% sequential growth in revenue, highlighting its upward trajectory despite a challenging regulatory environment in China. Compared to its peers, X Financial’s focus on leveraging technology and maintaining robust underwriting practices sets it apart in the competitive landscape.

Financial Highlights

• Total revenue: RMB 2.27 billion (65.6% YoY increase)
• Non-GAAP adjusted net income: RMB 593.2 million (58.3% YoY increase)
• Income from operations: RMB 675.1 million (45.8% YoY increase)
• Loan originations: RMB 38.99 billion (71.4% YoY increase)

Market Reaction

Following the earnings announcement, X Financial’s stock price increased by 6.53% in premarket trading, reaching $13.70. This positive movement reflects investor confidence in the company’s strategic direction and its ability to deliver strong financial results. The stock remains well-positioned within its 52-week range, with a high of $20.355 and a low of $4.36. InvestingPro analysis suggests the stock is currently undervalued, trading at an attractive P/E ratio of 3.88 and delivering an impressive year-to-date return of 56.57%. The company’s free cash flow yield stands at 39%, indicating strong cash generation capabilities.

Outlook & Guidance

X Financial has set a loan origination target of RMB 32-34 billion for 2025, emphasizing asset quality over sheer volume growth. The company plans to continue investing in AI to enhance operational efficiency and maintain its competitive edge. Additionally, a share repurchase program with $68.2 million remaining and a semi-annual dividend of $0.28 per ADS are part of its strategic initiatives. The company’s strong financial position is evidenced by its debt-to-equity ratio of just 0.08, while maintaining a healthy dividend yield of 3.76%.

Want deeper insights? InvestingPro offers comprehensive analysis of X Financial’s valuation metrics, peer comparison tools, and expert financial health scores to help you make informed investment decisions.

Executive Commentary

Ken Li, President of X Financial, stated, "We remain confident in our strategic path, rooted in robust underwriting practices, prudent risk controls, and continued operational enhancements." The emphasis on AI was further highlighted by Li’s remark, "We have already been leveraging AI largely in our client management space, like the collections, like the customer service." CFO Frank Huya Zheng added, "The regulatory environment in China continues to evolve, and we remain fully committed to compliance and alignment with the government’s policy goals."

Risks and Challenges

• Regulatory changes in China could impact operations.
• Potential for increased competition in the fintech space.
• Economic fluctuations affecting borrower demand.
• Dependence on AI advancements for maintaining operational efficiency.
• Ensuring asset quality amidst rapid loan growth.

Q&A

During the earnings call, analysts inquired about the company’s shift from loan growth to a focus on asset quality. Ken Li emphasized the importance of maintaining strong asset quality to ensure long-term sustainability. Additionally, questions about AI’s role in cost reduction were addressed, with confirmation of ongoing development in client management systems.

Full transcript - X Financial Class A (XYF) Q2 2025:

Conference Operator: Hello and welcome to the X Financial Second Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Victoria Yu. Please go ahead.

Victoria Yu, Investor Relations, X Financial: 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. Ken Li, President Mr.

Frank Huya Zheng, Chief Financial Officer and Mr. Noah Kaufman, Chief Financial Strategy Officer. Mr. Li will start with a brief overview of our business progress and financial performance. Then Mr.

Kaufman will go over some key Q2 metrics and highlights. After that, Mr. Zhen will share updates on financials, regulatory insights and our 2025 outlook. Afterwards, Mr. Li, Mr.

Zhen and Mr. Kaufman will be available to answer your questions during the Q and 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 or 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 and 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 is now my pleasure to introduce Mr. Ken Li.

Ken Li, President, X Financial: Thank you, Victoria, and hello, everyone. We are very pleased with our continued momentum in 2025. In the second quarter, we facilitated RMB38.99 billion in loans, a 10.9% sequential increase and a strong 71.4% growth year over year. This was another standout quarter for originations, supported by robust borrower demand and continued advance in risk management. Our team remains committed to expanding market opportunities through both new partnerships and the deepening of existing relationships, further strengthening our technology platform and underwriting models to drive profitability and scalability, carefully balancing growth opportunities with prudent risk management as we increase access to qualified borrowers.

We also continue improving borrower experience by speeding up decision making, streamline applications and enhancing transparency. Simultaneously, we have made meaningful enhancements to platform reliability and borrower facing tools, empowering users to make informed credit decisions and managing repayments confidently. Despite the ongoing regulatory environment and macroeconomic uncertainty, we delivered significant sequential growth in loan volume and revenue. Total revenue reached RMB2.27 billion, up 17.3% sequentially and notably higher at 65.6% growth year over year. These results reflected disciplined execution and ongoing expansion of our platform and capabilities.

Operational and credit quality update. We also continued making positive strides in asset quality. As of June 30, our thirty one sixty day delinquency rate improved to 1.16%, down from 1.29% a year ago, reflecting nearly a 10% improvement year over year. The ninety one to one hundred and eighty days delinquency rate was 2.91%, substantially lower than the 4.38% in Q2 twenty twenty four, demonstrating a meaningful 33% reduction year over year. This improvement highlights our continued commitment to discipline the borrower screening and the rigorous underwriting practices.

We have also proactively improved borrower engagement, leveraging timely communication and customized repayment assistance programs. These initiatives continue to drive better borrower behavior, significantly contributing to the stability and the quality of our portfolio. With that, I’ll now turn it over to Noah, who will walk through additional financial and operational highlights from the second quarter.

Noah Kaufman, Chief Financial Strategy Officer, X Financial: Great. Thank you. Hello, everyone. It’s great to speak with you today. Let me highlight some key points from our Q2 operational and financial results.

On operational metrics, we facilitated approximately RMB38.99 billion in loan originations, up significantly by 71.4% year over year. Our total outstanding loan balance, excluding loans delinquent more than sixty days, reached RMB64.91 billion, representing an increase of 55.3% from Q2 twenty twenty four. Total number of loans facilitated increased substantially to approximately 3,720,000.00, reflecting a growth of 70.8% year over year with an average loan size of RMB 10,476. Our active borrower base grew meaningfully reaching approximately $2,850,000 a notable 73.7 percent increase year over year. On the financial highlights, our total net revenue reached RMB2.27 billion, reflecting strong sequential growth of 17.3% and impressive 65.6% year over year growth driven by increased loan origination volumes and continued expansion of our loan facilitation services.

Income from operations increased meaningfully to RMB675.1 million, rising by 45.8% year over year, underscoring our continued focus on operating leverage and disciplined expense management. We reported non GAAP adjusted net income of RMB593.2 million, reflecting robust year over year growth of 58.3, demonstrating continued profitability momentum as we scale our business. Importantly, we delivered this bottom line growth while maintaining operating margins near 30%, even as we increased borrower acquisition spending, reflecting strong unit economics and platform efficiency. In addition, the weighted average number of basic shares outstanding declined approximately 14.4% year over year, contributing to meaningful growth in earnings per ADS alongside strong net income performance. This reflects our ongoing commitment to capital return through our share repurchase program, which Frank will speak on more in a moment.

At the same time, with net income up 27% year over year and only modest growth in total equity, our implied return on equity expanded significantly, affirming the strength and efficiency of our earnings model and our ability to generate high returns on capital while maintaining a conservative balance sheet. Our strong Q2 results reflect consistent execution, improved operational efficiency and resilient asset quality amidst a challenging regulatory and market environment. I’ll now hand it over to our CFO, Frank, who will dive deeper into these financial results, provide an update on our capital return strategy and share insights on regulation and growth outlook for the remainder of 2025. Thank you. Go ahead, Frank.

Frank Huya Zheng, Chief Financial Officer, X Financial: Thank you, Noah. It’s great to speak with everyone today. Let me provide additional highlights of our profitability metrics, liquidity position, strategic capital allocation and the regulatory environment for the 2025. Financial and probability metrics, Non GAAP adjusted net income for Q2 reached RMB593.2 million, US82.8 dollars up significantly by 58.3% year over year, reflecting a strong core profitability driven by prudent expense control and high quality loan growth. Non GAAP adjusted net income per ADS basically improved significantly to RMB14.68, 1.98 representing 85.8% increase year over year, underscoring the effectiveness of operational leverage and the enhanced profitability per share.

Return on equity further improved to approximately 27.9% in Q2, increased both sequentially and year over year. As Noah mentioned, our improved ROE reflects both core earnings growth and the capital efficiency, supported by disciplined equity management and reinvestment. This demonstrates our continuous financial discipline and increased operation efficiency as we scale. Our liquidity remains robust, giving us the flexibility to fund strategic growth initiatives, invest in technology and borrow acquisition and return capital to shareholders, primarily through our ongoing share repurchase program. Share repurchase plan from 01/01/2025 through 08/15/2025, X Financial purchased an average of approximately 16,700,000 Class A ownerships, including approximately 2,300,000.0 ADS for a total consideration about approximately US47.7 million under its share repurchase plans.

The company’s previous US50 million dollars repurchase authorization has been fully utilized. The company now has approximately US68.2 million dollars remaining under its new US100 million dollars share repurchase programs, which is effective through 11/30/2026. This ongoing share repurchase activity underscores our confidence in the company’s long term growth perspectives and demonstrates our continued commitment to enhance shareholder value. Further repurchase and this program remains subject to market conditions and regulatory guidelines and our discretion regarding capital allocation priorities. Dividend update.

As part of our semi annual dividend policy, the Board has approved a cash dividend of US0.28 dollars per ADS, which is equivalent to approximately US0.0467 dollars per ordinary shares. Shareholders of record as of 09/26/2025 will be entitled to receive the dividend and the payments are expected to be distributed on and around 10/15/2025. ADS holders will receive their dividend payments through our depository, the Bank of New York, Maryland shortly thereafter with the timing subject to brokerage processing. Regulatory environment update. The regulatory environment in China continues evolve and we remain our fully committed to compliance and alignment with the government’s policy goals.

Regulatory guidance from the National Financial Regulatory Administration emphasize responsible lending practice, consumer protection and financial stability, areas where we remain fully aligned. While involving regulations may introduce incremental compliance obligations for industry participants, we view these changes positively as they support a sustainable industry landscape and encourage responsible innovation. We will continue to proactively engage with regulatory authorities ensuring our operations adhere strictly to involving standards and we believe our platform is well positioned to navigate those changes while continue to create long term value. 2025 growth outlook based on current trends, ex financial expects the total return amount of facility and originate in the 2025 to be the range of 32,000,000,000 to RMB 34,000,000,000. This represents a deliberate moderation from a record of Q2 levels as management plays great emphasis on asset quality and the probability over pure volume growth.

The company remains attentive to the challenge and uncertain case from the evolving regulatory environment while maintaining confidence in the resilient order demand and the disciplined execution. With that, I will hand the call back to our President, Hen Li for closing remarks.

Ken Li, President, X Financial: Thank you, Frank. As we move further into 2025, we remain confident in our strategic path, rooted in robust underwriting practices, prudent risk controls and continued operational enhancements. Our strong financial position and unwavering commitment to long term value creation give us confidence in our ability to deliver sustained and profitable growth.

Victoria Yu, Investor Relations, X Financial: This concludes our prepared remarks. We will now open the call for questions. Operator, please go ahead.

Conference Operator: We will now begin the question and answer session. The first question comes from Randy Vellachan with NPS Trading. Please go ahead.

Randy Vellachan, Analyst, NPS Trading: Hi there. Congratulations on a good quarter and thank you for the call. I do have two questions. The first one is, can you guys provide some light on the pivot that you’ve made on providing loan growth at the beginning of the year to switching to asset quality? And then the second question is, do you guys see opportunity to run the company leaner through artificial intelligence?

Thank you.

Ken Li, President, X Financial: Sorry, I didn’t hear your first question clearly. Can you repeat that, please?

Randy Vellachan, Analyst, NPS Trading: Yes, yes. Can you provide some information or some color on the pivot that you guys have had from providing loan growth or going from loan growth at the beginning of the year and switching over to asset quality as your prioritization?

Ken Li, President, X Financial: Okay. I think asset quality has always been our priority no matter what. So I think at the beginning of the year that we provide roughly 30% increase in our scale. I think we maintain our expectation on that. I don’t see any significant change from our original expectation.

That being said, that asset quality of theirs has always been our top priority. So based on the environment that we are seeing right now, I think we are paying even more attention to making sure that our we are not growing our portfolio just for the sake of growth. But that being said, I still don’t see we still maintain our expectation that we will likely finish out the whole year by finish by reaching that goal. I think that’s your first question. The second one is about the AI application.

We have already been leveraged AI largely in our client management space, like the collections, like the customer service. So we have already been utilizing AI to replace some of the live agents before. This is this will be a continued growth and I don’t see that we will sort of reach the end stage and this will be an ongoing development from our side. Obviously, are very interested in developing our AI capability in order to reduce the future cost. And this certainly align with our profitability goal.

Frank Huya Zheng, Chief Financial Officer, X Financial: I see.

Randy Vellachan, Analyst, NPS Trading: Thank you.

Ken Li, President, X Financial: I think if

Noah Kaufman, Chief Financial Strategy Officer, X Financial: I just add one thing, Randy, we have a investor deck that’s been released this last slide that highlights all the AI capabilities that we’re testing internally.

Randy Vellachan, Analyst, NPS Trading: That may be helpful. Okay. Thank you.

Conference Operator: 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, Investor Relations, X Financial: 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 soon. Operator, back to you.

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

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