X Financial Reports Second Quarter 2022 Unaudited Financial Results

SHENZHEN,China,Aug. 9,2022 -- X Financial (NYSE: XYF) (the "Company" or "we"),a leading online personal finance company in China,today announced its unaudited financial results for the second quarter ended June 30,2022.

Second Quarter 2022 Financial Highlights

Total net revenue in the second quarter of 2022 was RMB824.3 million (US$123.1 million),representing a decrease of 11.6% from RMB932.4 million in the same period of 2021.

Income from operations in the second quarter of 2022 was RMB193.8 million (US$28.9 million),compared with RMB337.7 million in the same period of 2021.

Net income in the second quarter of 2022 was RMB185.7 million (US$27.7 million),compared with RMB223.4 million in the same period of 2021.

Non-GAAP[1] adjusted net income in the second quarter of 2022 was RMB210.7 million (US$31.5 million),compared with RMB241.9 million in the same period of 2021.

Net income per basic and diluted American depositary share ("ADS") [2] in the second quarter of 2022 was RMB3.36 (US$0.50) and RMB3.30 (US$0.49),compared with RMB4.08 and RMB3.96,respectively,in the same period of 2021.

Non-GAAP adjusted net income per basic and adjusted diluted ADS in the second quarter of 2022 was RMB3.78 (US$0.56) and RMB3.72 (US$0.56),compared with RMB4.38 and RMB4.26,in the same period of 2021.

Second Quarter 2022 Operational Highlights

The total loan amount facilitated and provided[3] in the second quarter of 2022 was RMB16,879 million,representing an increase of 31.5% from RMB12,835 million in the same period of 2021 and an increase of 10.7% from RMB15,250 million in the previous quarter. Xiaoying Credit Loan[4]accounted for 99.9% of the Company's total loan amount facilitated and providedin the second quarter of 2022,compared with 100% in the same period of 2021.

The total outstanding loan balance[5] as of June 30,2022 was RMB29,075 million,compared with RMB26,659 million as of March 31,2022 and RMB20,504 million as of June 30,2021.

The delinquency rate for all outstanding loans[6] that are past due for 31-60 days as of June 30,2022 was 0.93%,compared with 1.31% as of March 31,2022 and 0.77% as of June 30,2021.

The number of cumulative borrowers[7] was 9.0 million as of June 30,2022.

Total cumulative registered users reached 74.4 million as of June 30,2022.

[1] The Company uses in this press release the following non-GAAP financial measures: (i) adjusted net income (loss),(ii) adjusted net income (loss) per basic ADS,and (iii) adjusted net income (loss) per diluted ADS,each of which excludes share-based compensation expense and income (loss) from financial investments. For more information on non-GAAP financial measure,please see the section of "Use of Non-GAAP Financial Measures Statement" and the table captioned "Unaudited Reconciliationsof GAAP and Non-GAAP Results" set forth at the end of this press release.

[2] Each American depositary share ("ADS") represents six Class A ordinary shares. On November 19,2020,a ratio change that has the same effect as a 1-for-3 reverse ADS split took effect,and as a result,one ADS currently represents six Class A ordinary shares.

[3] Represents the total amount of loans that X Financial facilitated and provided during the relevant period.

[4] Xiaoying Credit Loan is a category of online personal credit loan products facilitated and provided through our platform,including Xiaoying Card Loan and other unsecured loan products we introduce from time to time.

[5] Represents the total amount of loans outstanding for loans X Financial facilitated and provided at the end of the relevant period. Loans that are delinquent for more than 60 days are charged-off and are excluded in the outstanding loan balance,except for Xiaoying Housing Loan. As Xiaoying Housing Loan is a secured loan product and the Company is entitled to payment by exercising its rights to the collateral,the Company does not exclude Xiaoying Housing loan delinquent for more than 60 days in the outstanding loan balance.

[6] Represents the balance of the outstanding principal and accrued outstanding interest for loans that were 31 to 60 days past due as a percentage of the total balance of outstanding principal and accrued outstanding interest for loans the Company facilitated as of a specific date. Loans that are delinquent for more than 60 days are charged-off and excluded in the calculation of delinquency rate by balance. Xiaoying Housing Loan was launched in 2015 and ceased in 2019,and all the outstanding loan balance of housing loan as of June 30,2021,March 31,2022 and June 30,2022 were overdue more than 60 days. To make the delinquency rate by balance comparable,the Company excludes Xiaoying Housing Loan in the calculation of delinquency rate.

[7] Represents borrowers who made at least one transaction during that period from the commencement of the Company's loan facilitation business to a certain date on the Company's platform.

Mr. Justin Tang,the Founder,Chief Executive Officer and Chairman of the Company,commented,"We are pleased with our performance this past quarter given the great challenges brought by the significant economic slowdown amid the escalation of COVID-19 containment measures in China. We continued to scale up our loan facilitation volume while improving asset quality quarter-over-quarter. Total loan facilitated and provided during the past quarter maintained steady growth on both a yearly and quarterly basis,exceeding the high end of our forecast. Thanks to our effective risk management system and premium borrower base,we saw a meaningful decrease in the delinquency rate from the previous quarter. We have further demonstrated our business resilience and ability to navigate tough conditions."

"On the regulatory side,the China Banking and Insurance Regulatory Commission issued the Notice on Strengthening the Management of Commercial Banks' Internet Loan Business to Improve the Quality and Efficiency of Financial Services on July 15,2022. The new rules affirm the positive role of internet loans,further refine and clarify the requirements for internet loan management,and extend the grace period for the rectification of internet loan operations to June 2023 from July 2022. This initiative aims to promote the stable and healthy development of the internet loan business,and it is part of the government's stimulus strategy to revive the pandemic-hit economy by encouraging more credit to stimulate investments and consumption. This is conducive to the overall development of the financial industry and the extended grace period also gives us more time to explore market opportunities under the new regulation,especially financial services for small and micro-businesses."

"Looking ahead,with the COVID-19 pandemic subsiding and the macro economy gradually rebounding,we are cautiously optimistic about our business in the second half of the year. With an increasingly accommodative environment,we expect to see steady sequential growth in upcoming quarters."

Mr. Kent Li,President of the Company,added,"During the second quarter,our total loan amount facilitated and provided reached RMB17 billion,representing an increase of 31.5% year-over-year and 10.7% quarter-over-quarter. The delinquency rate for all outstanding loans past due for 31-60 days as of June 30,2022 decreased to 0.93% from 1.31% as of March 31,2022. While the asset quality of the financial industry as a whole deteriorated during the quarter due to the macro headwinds,we managed to improve our asset quality as we continued to enhance our risk management system. We expect our asset quality to remain stable in the second half of the year."

"During the past quarter,we stepped up our efforts to acquire more high-quality borrowers. As a result,our number of active borrowers increased 28.2% on both a yearly and quarterly basis,and reached a high level of over 1 million in this quarter. We are pleased to see that our products and services have been well received by an extensive and growing user base. This is a testament to our reputation for reliability and it has laid a solid foundation for our future growth. Going forward,we will continue to expand and deepen our cooperation with our institutional funding partners to jointly serve the diverse financing needs of small and micro-businesses and consumers in China."

Mr. Frank Fuya Zheng,Chief Financial Officer of the Company,"Although our top line saw a slight decrease on a quarterly basis as we continued to reduce the total borrowing cost of the borrowers in line with government guidance,we improved our bottom line from the previous quarter. Net income for the second quarter of 2022 improved to RMB185.7 million from RMB139.9 million in the previous quarter,and Non-GAAP adjusted net income for the second quarter of 2022 was RMB210.7 million,representing an increase of 36.9% quarter-over-quarter. With a more stabilized macroeconomy and a clearer regulatory environment,we expect to see further improvement in financial performance in the future."

"During the second quarter,we started to execute our share repurchase program. Going forward,we will continue to keep a close eye on market dynamics,regularly revaluate how to best use our cash in order to maximize returns for our shareholders."

Second Quarter 2022 Financial Results

Total net revenuein the second quarter of 2022decreased by 11.6%to RMB824.3million (US$123.1million) from RMB932.4 million in the same period of 2021,primarily due to a decrease in average total borrowing cost of the borrowers;and also partially offset by an increase in the total loan amount facilitated and provided this quarter compared with the same period of 2021.

Loan facilitation service fees in the second quarter of 2022 decreased by 32.1%to RMB471.5million (US$70.4million) from RMB694.7million in the same period of 2021,primarily due to a decrease in average total borrowing cost of the borrowers; andpartially offset by an increase in the amount of loan facilitated this quarter compared with the same period of 2021.

Post-origination servicefees in the second quarter of 2022 increased by 13.2%to RMB82.3million (US$12.3million) from RMB72.7million in the same period of 2021,primarily due to the cumulative effect of increased volume of loans facilitated in the previous quarters. Revenues from post-origination services are recognized on a straight-line basis over the term of the underlying loans as the services are being provided.

Financing incomein the second quarter of 2022 increased by 57.5%to RMB234.8million (US$35.0million)from RMB149.0million in the same period of 2021,primarily due to an increase in average loan balances held by the Company as a result of the increase in total loan amount facilitated and provided this quarter compared with the same period of 2021.

Other revenue in the second quarter of 2022 increased by 124.7%RMB35.7million (US$5.3million),compared withRMB15.9million in the same period of 2021,primarily due to an increase in referral service fee for introducing borrowers to other platforms.

Origination and servicing expenses in the second quarter of 2022 increased by 2.3%to RMB533.1million (US$79.6million) from RMB520.9million in the same period of 2021,primarily due to an increase in commission fees resulting from the increased in total loan amount facilitated and provided this quarter,and partially offset by a decrease in insurance fee paid to insurance company.

General and administrative expensesin the second quarter of 2022decreased by 6.6%to RMB41.1million (US$6.1million) from RMB44.0million in the same period of 2021,primarily due to a decrease in consulting service fee expenses this quarter compared with the same period of 2021.

Provision foraccounts receivable and contract assetsin the second quarter of 2022 was RMB25.7million (US$3.8million),compared with RMB25.2million in the same period of 2021,primarily due to an increase in accounts receivable from facilitation services as a result of the increase in total loan facilitation amount this quarter compared with the same period of 2021.

Provision for loans receivable in the second quarter of 2022was RMB32.2million (US$4.8million),compared with reversal of provision for loans receivable of RMB1.1 million in the same period of 2021,primarily due to an increase in loans receivable held by the Company as a result of the increase in total loan amount facilitated and provided this quarter compared with the same period of 2021.

Income from operationsin the second quarter of 2022was RMB193.8million (US$28.9million),compared with RMB337.7million in the same period of 2021.

Income before income taxes and gain from equity in affiliatesin the second quarter of 2022was RMB220.2million (US$32.9million),compared with RMB280.1million in the same period of 2021.

Income tax expense in the second quarter of 2022was RMB42.2million (US$6.3million),compared with RMB57.9million in the same period of 2021.

Net incomein the second quarter of 2022was RMB185.7million (US$27.7million),compared with RMB223.4million in the same period of 2021.

Non-GAAP adjusted net income in the second quarter of 2022was RMB210.7 million (US$31.5 million),compared with RMB241.9 million in the same period of 2021.

Net income per basic and diluted ADSin the second quarter of 2022was RMB3.36(US$0.50),and RMB3.30(US$0.49),compared with RMB4.08and RMB3.96,in the same period of 2021.

Non-GAAP adjusted net income per basic and diluted ADS in the second quarter of 2022was RMB3.78(US$0.56),and RMB3.72(US$0.56),compared with RMB4.38and RMB4.26respectively,in the same period of 2021.

Cash and cash equivalentswas RMB702.9million (US$104.9million) as of June 30,2022,compared with RMB649.2million as of March 31,2022.

Share Repurchase Plan

OnMarch 30,the Company announced that its board of directors had approved a share repurchase plan under which the Company may repurchase up to US$15 million worth of its Class A ordinary shares in the form of American depositary shares ("ADSs") until September 2023. As ofJune30,the Company had repurchasedan aggregate of174,089 ADSs (the equivalent of approximately 1,044,534of our Class A ordinary shares),which worth US$0.5 million in total.

Business Outlook

For the third quarter of 2022,the Company expects total loan amount facilitated and provided to be between RMB19.0 billion and RMB20.0 billion. For the full year of 2022,the Company expects the increment in total loan amount facilitated and provided to be no less than 25%. This forecast reflects the Company's current and preliminary views,which are subject to changes.

Conference Call

X Financial's management team will host an earnings conference call at 7:00 AM U.S. Eastern Time on August 9,2022 (7:00 PM Beijing / Hong Kong Time on the same day).

Dial-in details for the earnings conference call are as follows:

United States:

1-888-346-8982

Hong Kong:

852-301-84992

Mainland China:

4001-201203

International:

1-412-902-4272

Passcode:

X Financial

Please dial in ten minutes before the call is scheduled to begin and provide the passcode to join the call.

A replay of the conference call may be accessed by phone at the following numbers until August 16,2022:

United States:

1-877-344-7529

International:

1-412-317-0088

Passcode:

4041918

Additionally,a live and archived webcast of the conference call will be available at http://ir.xiaoyinggroup.com.

About X Financial

X Financial (NYSE: XYF) (the "Company") is a leading online personal finance company in China. The Company is committed to connecting borrowers on its platform with its institutional funding partners. With its proprietary big data-driven technology,the Company has established strategic partnerships with financial institutions across multiple areas of its business operations,enabling it to facilitate and provide loans to prime borrowers under a risk assessment and control system.

For more information,please visit: http://ir.xiaoyinggroup.com.

Use of Non-GAAP Financial Measures Statement

In evaluating our business,we consider and use non-GAAP measures as supplemental measures to review and assess our operating performance. We present the non-GAAP financial measures because they are used by our management to evaluate our operating performance and formulate business plans. We believe that the use of the non-GAAP financial measures facilitates investors' assessment of our operating performance and help investors to identify underlying trends in our business that could otherwise be distorted by the effect of certain income or expenses that we include in income (loss) from operations and net income (loss). We also believe that the non-GAAP measures provide useful information about our core operating results,enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.

We use in this press release the following non-GAAP financial measures: (i) adjusted net income,(ii) adjusted net income per basic ADS,and (iii) adjusted net income per diluted ADS,each of which excludes income (loss) from financial investments and share-based compensation expense. These non-GAAP financial measuresare not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. These non-GAAP financial measures have limitations as analytical tools,and when assessing our operating performance,investors should not consider them in isolation,or as a substitute forthe financial information prepared and presented in accordance with U.S. GAAP.

We mitigate these limitations by reconciling the non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures,which should be considered when evaluating our performance. We encourage you to review our financial information in its entirety and not rely on a single financial measure.

For more information on these non-GAAP financial measures,please see the table captioned "Reconciliations of GAAP and Non-GAAP results" set forth at the end of this press release.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted,all translations from RMB to U.S. dollars are made at a rate of RMB6.6981 to US$1.00,the exchange rate set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System as of June 30,2022.

Safe Harbor Statement

This announcement contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934,as amended. These forward-looking statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "potential," "continue," "ongoing," "targets," "guidance" and similar statements. The Company may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"),in its annual report to shareholders,in press releases and other written materials and in oral statements made by its officers,directors or employees to third parties. Any statements that are not historical facts,including statements about the Company's beliefs and expectations,are forward-looking statements that involve factors,risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include,but not limited to the following: the Company's goals and strategies; its future business development,financial condition and results of operations; the expected growth of the credit industry,and marketplace lending in particular,in China; the demand for and market acceptance of its marketplace's products and services; its ability to attract and retain borrowers and investors on its marketplace; its relationships with its strategic cooperation partners; competition in its industry; and relevant government policies and regulations relating to the corporate structure,business and industry. Further information regarding these and other risks,uncertainties or factors is included in the Company's filings with the SEC. All information provided in this announcement is current as of the date of this announcement,and the Company does not undertake any obligation to update such information,except as required under applicable law.

For more information,please contact:

X Financial

Mr. Frank Fuya Zheng

E-mail: ir@xiaoying.com

Christensen IR

In China

Mr. Eric Yuan

Phone: +86-10-5900-1548

E-mail: eyuan@christensenir.com

In US

Ms. Linda Bergkamp

Phone: +1-480-614-3004

Email: lbergkamp@christensenir.com

X Financial

Unaudited Condensed Consolidated Balance Sheets

(In thousands,except for share and per share data)

As of December 31,2021

As of June 30,2022

As of June 30,2022

RMB

RMB

USD

ASSETS

Cash and cash equivalents

584,762

702,923

104,944

Restricted cash

407,276

375,564

56,070

Accounts receivable and contract assets,net

747,480

730,808

109,107

Loans receivable from Xiaoying Credit Loans and Revolving Loans,net

2,484,073

3,528,453

526,784

Loans at fair value

389,679

353,760

52,815

Deposits to institutional cooperators,net

1,500,407

1,691,952

252,602

Prepaid expenses and other current assets,net

213,127

75,396

11,256

Financial guarantee derivative

11,817

427

64

Deferred tax assets,net

274,869

159,862

23,867

Long-term investments

560,038

566,688

84,604

Property and equipment,net

6,188

5,427

810

Intangible assets,net

36,817

36,337

5,425

Loan receivable from Xiaoying Housing Loans,net

12,083

10,061

1,502

Financial investments

82,844

147,845

22,073

Other non-current assets

31,277

21,175

3,161

TOTAL ASSETS

7,342,737

8,406,678

1,255,084

LIABILITIES

Payable to investors at fair value

462,714

388,685

58,029

Payable to institutional funding partners

1,487,379

2,307,584

344,513

Financial guarantee derivative

565,953

473,149

70,639

Short-term bank borrowings

166,500

20,000

2,986

Accrued payroll and welfare

44,605

36,607

5,465

Other tax payable

219,544

240,590

35,919

Income tax payable

117,148

208,529

31,133

Deposit payable to channel cooperators

21,012

20,100

3,001

Accrued expenses and other current liabilities

268,967

338,327

50,511

Other non-current liabilities

12,019

9,988

1,491

Deferred tax liabilities

-

1,753

262

TOTAL LIABILITIES

3,365,841

4,045,312

603,949

Commitments and Contingencies

Equity:

Common shares

207

207

31

Treasury stock

-

(3,303)

(493)

Additional paid-in capital

3,159,523

3,188,877

476,087

Retained earnings

810,856

1,136,488

169,673

Other comprehensive income

6,310

39,097

5,837

Total X Financial shareholders' equity

3,976,896

4,361,366

651,135

Non-controlling interests

-

-

-

TOTAL EQUITY

3,135

TOTAL LIABILITIES AND EQUITY

7,084

X Financial

Unaudited Condensed Consolidated Statements of Comprehensive Income

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands,except for share and per share data)

2021

2022

2022

2021

2022

2022

RMB

RMB

USD

RMB

RMB

USD

Net revenues

Loan facilitation service

694,711

471,531

70,398

1,386,934

980,234

146,345

Post-origination service

72,738

82,304

12,288

132,403

169,648

25,328

Financing income

149,006

234,756

35,048

280,458

466,031

69,577

Other revenue

15,912

35,747

5,337

38,921

96,780

14,449

Total net revenue

932,367

824,338

123,071

1,838,716

1,712,693

255,699

Operating costs and expenses:

Origination and servicing

520,874

533,062

79,584

1,093,376

997,561

148,932

General and administrative

44,037

41,144

6,143

86,571

86,489

12,912

Sales and marketing

5,547

4,567

682

10,072

9,225

1,377

Provision for accounts receivable and contract assets

25,228

25,715

3,839

42,482

51,771

7,729

(Reversal of) provision for loans receivable

(1,093)

32,224

4,811

25,496

65,964

9,848

Reversal of provision for contingent guarantee liabilities

(24)

(14,000)

(2,090)

(24)

(14,090)

(Reversal of) provision for credit losses on deposits to institutional cooperators

78

7,803

1,165

(8,174)

8,534

1,274

Reversal of provision for credit losses for other financial assets

-

-

-

-

(765)

(114)

Total operating costs and expenses

594,647

630,515

94,134

1,249,799

1,204,779

179,868

Income from operations

337,720

193,823

28,937

588,917

507,914

75,831

Interest income (expense),net

7,278

1,691

252

9,608

2,718

406

Foreign exchange gain (loss)

3,768

(13,102)

(1,956)

2,194

(12,146)

(1,813)

Loss from financial investments

-

(9,626)

(1,437)

-

(9,437)

Fair value adjustments related to Consolidated Trusts

(7,729)

(3,250)

(485)

(7,678)

(1,491)

(223)

Change in fair value of financial guarantee derivative

(61,889)

44,758

6,682

(95,616)

24,625

3,676

Other income (loss),net

942

5,911

882

7,102

26,028

3,886

Income before income taxes and gain from equity in affiliates

280,090

220,205

32,875

504,527

538,022

80,326

Incometaxexpense

(57,889)

(42,243)

(6,307)

(95,110)

(223,278)

(33,335)

Gain from equity in affiliates,net of tax

1,243

7,738

1,155

3,227

10,888

1,626

Net income

223,444

185,700

27,723

412,644

325,632

48,617

Less: net income attributable to non-controlling interests

-

-

-

-

-

-

Net income attributable to X Financial shareholders

223,617

Net income

223,617

Other comprehensive income,net of tax of nil:

Gain (loss) from equity in affiliates

-

(142)

(21)

-

70

10

Foreign currency translation adjustments

(11,598)

35,801

5,345

(6,472)

32,717

4,885

Comprehensive income

211,846

221,359

33,047

406,172

358,419

53,502

Less: comprehensive income attributable to non-controlling interests

-

-

-

-

-

-

Comprehensive income attributable to X Financial shareholders

211,502

Net income per share—basic

0.68

0.56

0.08

1.26

0.98

0.15

Net income per share—diluted

0.66

0.55

0.08

1.23

0.96

0.14

Net income per ADS—basic

4.08

3.36

0.50

7.56

5.88

0.88

Net income per ADS—diluted

3.96

3.30

0.49

7.38

5.76

0.86

Weighted average number of ordinary shares outstanding—basic

330,785,047

331,967,010

331,010

327,743,729

331,886,487

331,487

Weighted average number of ordinary shares outstanding—diluted

339,695,992

339,516,588

339,588

336,654,674

339,436,065

339,065

X Financial

Unaudited Reconciliations of GAAP and Non-GAAP Results

Three Months Ended June 30,except for share and per share data)

2021

2022

2022

2021

2022

2022

RMB

RMB

USD

RMB

RMB

USD

GAAP net income

223,617

Less: Loss from financial investments (net of tax of nil)

-

(9,437)

Add: Share-based compensation expenses (net of tax of nil)

18,438

15,362

2,293

41,287

29,337

4,380

Non-GAAP adjusted net income

241,882

210,688

31,453

453,931

364,595

54,434

Non-GAAP adjusted net income per share—basic

0.73

0.63

0.09

1.39

1.10

0.16

Non-GAAP adjusted net income per share—diluted

0.71

0.62

0.09

1.35

1.07

0.16

Non-GAAP adjusted net income per ADS—basic

4.38

3.78

0.56

8.34

6.60

0.99

Non-GAAP adjusted net income per ADS—diluted

4.26

3.72

0.56

8.10

6.42

0.96

Weighted average number of ordinary shares outstanding—basic

330,065

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