X Financial Reports First Quarter 2023 Unaudited Financial Results

SHENZHEN,China,May 25,2023 -- X Financial (NYSE: XYF) (the "Company" or "we"),a leading online personal finance company in China,today announced its unaudited financial results for the first quarter ended March 31,2023.

First Quarter 2023 Operational Highlights

Three Months Ended

March 31,2022

Three Months Ended

December 31,2022

Three Months Ended

March 31,2023

QoQ

YoY

Total loan facilitation amount (RMB in million)

15,250

21,700

24,088

11.0%

57.9%

Number of active borrowers

889,182

1,370,496

1,523,738

11.2%

71.4%

The total loan amount facilitated and originated[1] in the first quarter of 2023 was RMB24,088 million,representing an increase of 57.9% from RMB15,250 million in the same period of 2022.

Total number of active borrowers[2] was 1,738 in the first quarter of 2023,representing an increase of 71.4% from 889,182 in the same period of 2022.

As of March 31,2022

As of December 31,2022

As of March 31,2023

Total outstanding loan balance (RMB in million)

26,659

37,992

41,531

Delinquency rates for all outstanding loans that are past

due for 31-60 days

1.31%

1.02%

1.05%

Delinquency rates for all outstanding loans that are past

due for 91-180 days

3.46%

1.93%

2.40%

The total outstanding loan balance[3] as of March 31,2023 was RMB41,531 million,compared with RMB26,659 million as of March 31,2022.

The delinquency rate for all outstanding loans that are past due for 31-60 days[4] as of March 31,2023 was 1.05%,compared with 1.31% as of March 31,2022.

The delinquency rate for all outstanding loans that are past due for 91-180 days[5] as of March 31,2023 was 2.40%,compared with 3.46% as of March 31,2022.

[1] Represents the total amount of loans that the Company facilitated and originated during the relevant period.

[2] Represents borrowers who made at least one transaction on the Company's platform during the relevant period.

[3] Represents the total amount of loans outstanding for loans that the Company facilitated and originated 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.

[4] 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 that the Company facilitated and originated 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 March 31,2022,December 31,2022 and March 31,2023 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.

[5] To make the delinquency rate by balance comparable to the peers,the Company also defines the delinquency rate as the balance of the outstanding principal and accrued outstanding interest for loans that were 91 to 180 days past due as a percentage of the total balance of outstanding principal and accrued outstanding interest for the loans that the Company facilitated and originated as of a specific date. Loans that are delinquent for more than 180 days are excluded in the calculation of delinquency rate by balance,except for Xiaoying Housing Loan. All the outstanding loan balance of housing loan as of March 31,2023 were overdue more than 180 days. To make the delinquency rate by balance comparable,the Company excludes Xiaoying Housing Loan in the calculation of delinquency rate.

First Quarter 2023 Financial Highlights

(In thousands,except for share and

per share data)

Three Months Ended

March 31,2023

QoQ

YoY

RMB

RMB

RMB

Total net revenue

888,354

955,640

1,004,934

5.2%

13.1%

Total operating costs and expenses

(574,264)

(681,687)

(700,897)

2.8%

22.1%

Income from operations

314,090

273,953

304,037

11.0%

(3.2%)

Net income

139,931

274,639

284,346

3.5%

103.2%

Non-GAAP adjusted net income

153,906

277,939

306,525

10.3%

99.2%

Net income per ADS—basic

2.52

5.28

5.94

12.5%

135.7%

Net income per ADS—diluted

2.46

5.16

5.82

12.8%

136.6%

Non-GAAP adjusted net income per

ADS—basic

2.76

5.34

6.36

19.1%

130.4%

Non-GAAP adjusted net income per

ADS—diluted

2.70

5.22

6.24

19.5%

131.1%

Total net revenue in the first quarter of 2023 was RMB1,004.9 million (US$146.3 million),representing an increase of 13.1% from RMB888.4 million in the same period of 2022.

Income from operations in the first quarter of 2023 was RMB304.0 million (US$44.3 million),compared with RMB314.1 million in the same period of 2022.

Net income in the first quarter of 2023 was RMB284.3 million (US$41.4 million),compared with RMB139.9 million in the same period of 2022.

Non-GAAP[6] adjusted net income in the first quarter of 2023 was RMB306.5 million (US$44.6 million),compared with RMB153.9 million in the same period of 2022.

Net income per basic and diluted American depositary share ("ADS") [7] in the first quarter of 2023 was RMB5.94 (US$0.86) and RMB5.82 (US$0.85),compared with RMB2.52 and RMB2.46,respectively,in the same period of 2022.

Non-GAAP adjusted net income per basic and adjusted diluted ADS in the first quarter of 2023 was RMB6.36 (US$0.93) and RMB6.24 (US$0.91),compared with RMB2.76 and RMB2.70,in the same period of 2022.

[6] 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,impairment losses on financial investments,income (loss) from financial investments and impairment losses on long-term 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 Reconciliations of GAAP and Non-GAAP Results" set forth at the end of this press release.

[7] Each American depositary share ("ADS") represents six ClassA ordinary shares.

Mr. Justin Tang,the Founder,Chief Executive Officer and Chairman of the Company,commented,"We are very pleased to be off to a good start in 2023. We delivered solid operational and financial performance in the first quarter. The loan facilitation amount was in line with our guidance range and net revenue grew steadily both year-over-year and quarter-over-quarter. We also saw a decent improvement in our bottom line."

"We have seen signs of economic recovery in China,with increased consumer spending and better-than-expected GDP growth in the first quarter. However,as stated by the National Bureau of Statistics,'inadequate domestic demand remains prominent and the foundation for economic recovery is not solid yet.' We saw increased competition in the personal finance industry with challenges in borrower acquisition. Against this backdrop,our first quarter performance is very encouraging and impressive thanks to our strong business resilience and execution."

"During the recent May 'Golden Week' holiday,Chinese tourist spending has reached pre-pandemic levels for the first time,according to government figures. Although the economic recovery is still in its early stages and there are concerns about the sustainability of the growth,we remain cautiously optimistic about the steady business growth this year as the government releases various measures to stimulate domestic demand and accelerate economic growth. Meanwhile,we are keeping a close eye on the regulatory side and have been consistently cooperating with the government on the industry-wide rectification work previously scheduled to be completed by June 2023. To date,no further guidance has been released by the Chinese government,but we do not rule out the possibility that new interpretations or updated implementation details of the rectification work will be released,which could have an impact on the industry and our business."

Mr. Kent Li,President of the Company,added,"During the first quarter,our total loan amount facilitated and originated reached RMB24.1 billion,increased by 57.9% year-over-year and 11.0% quarter-over-quarter. Despite intense competition,we continued to grow our premium borrower base. During the quarter,the number of active borrowers grew by 71.4% to more than 1.5 million. In addition,our asset quality remained stable sequentially and improved significantly year-over-year. Our delinquency rate for all outstanding loans past due for 31-60 days decreased to 1.05% as of the end of March 2023 from 1.31% a year ago. We do not expect our risk performance to fluctuate significantly for the remainder of the year. In addition,with sufficient credit lines in place,we continue to negotiate funding costs with our institutional funding partners and expect to see a positive impact in the near future."

Mr. Frank Fuya Zheng,Chief Financial Officer of the Company,"We were pleased to deliver solid financial performance in the first quarter. Total net revenue was RMB1,004.9 million,increased by 13.1% year-over-year and5.2% quarter-over-quarter. Our net income per basic ADS improved significantly to RMB5.94 from RMB2.52 in the same period of last year,reflecting our strong profitability and the impact of our ongoing share buyback program to enhance shareholder value. Going forward,we will continue to diversify our channels to reach more borrowers,while maintaining our strategy of profitable growth with credit risk management at its core. We expect to deliver steady quarterly improvement in both our top and bottom lines throughout the year. To create more value for our shareholders,we are taking steps to be able to pay dividends in the future."

First Quarter 2023 Financial Results

Total net revenuein the first quarter of 2023increased by 13.1%to RMB1,004.9million (US$146.3million) from RMB888.4million in the same period of 2022,primarily due to an increase in the total loan amount facilitated and originated this quarter compared with the same period of 2022.

Three Months Ended March 31,

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

2022

2023

YoY

RMB

%ofRevenue

RMB

%ofRevenue

Loan facilitation service

508,703

57.3%

580,604

57.8%

14.1%

Post-origination service

87,344

9.8%

121,273

12.1%

38.8%

Financing income

231,275

26.0%

254,056

25.3%

9.9%

Other revenue

61,032

6.9%

49,001

4.8%

(19.7%)

Total net revenue

888,354

100.0%

1,934

100.0%

13.1%

Loan facilitation service fees in the first quarter of 2023 increased by 14.1%to RMB580.6million (US$84.5million) from RMB508.7million in the same period of 2022,primarily due to an increase in the total loan amount facilitated this quarter compared with the same period of 2022.

Post-origination servicefees in the first quarter of 2023 increased by 38.8%to RMB121.3million (US$17.7million) from RMB87.3million in the same period of 2022,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 first quarter of 2023 increased by 9.9%to RMB254.1million (US$37.0million)from RMB231.3million in the same period of 2022,primarily due to an increase in average loan balances compared with the same period of 2022.

Other revenue in the first quarter of 2023 decreased by 19.7%to RMB49.0million (US$7.1million),compared with RMB61.0million in the same period of 2022,primarily due to a decrease in technology service fees received for providing assistant technology development services.

Origination and servicing expenses in the first quarter of 2023 increased by 36.5%to RMB633.8million (US$92.3million) from RMB464.5million in the same period of 2022,primarily due to the following factors: (i) an increase in commission fees resulting from the increased in total loan amount facilitated and originated this quarter compared with the same period of 2022,(ii) an increase in interest expenses as a result of an increase in payable to institutional funding partners and investors,and (iii) partially offset by a decrease in insurance fee paid to insurance company.

Reversal of provision for accounts receivable and contract assets in the first quarter of 2023 was RMB0.9 million (US$0.1 million),compared with provision for accounts receivable and contract assets of RMB26.1million in the same period of 2022,primarily due to a decrease in the average estimated default rate compared with the same period of 2022.

Provision for loans receivable in the first quarter of 2023was RMB20.4million (US$3.0million),compared with RMB33.7 million in the same period of 2022,primarily due to a decrease in the average estimated default rate compared with the same period of 2022,and partially offset by an increase in loans receivable held by the Company as a result of the increase in total loan amount facilitated and originated this quarter compared with the same period of 2022.

Income from operationsin the first quarter of 2023was RMB304.0million (US$44.3million),compared with RMB314.1million in the same period of 2022.

Income before income taxes and gain from equity in affiliatesin the first quarter of 2023was RMB330.6million (US$48.1million),compared with RMB317.8million in the same period of 2022.

Income tax expense in the first quarter of 2023was RMB52.6million (US$7.7million),compared with RMB181.0million in the same period of 2022.

Net incomein the first quarter of 2023was RMB284.3million (US$41.4million),compared with RMB139.9million in the same period of 2022.

Non-GAAP adjusted net income in the first quarter of 2023was RMB306.5 million (US$44.6 million),compared with RMB153.9 million in the same period of 2022.

Net income per basic and diluted ADSin the first quarter of 2023was RMB5.94(US$0.86),and RMB5.82(US$0.85),compared with RMB2.52and RMB2.46,in the same period of 2022.

Non-GAAP adjusted net income per basic and diluted ADSin the first quarter of 2023was RMB6.36(US$0.93),and RMB6.24(US$0.91),compared with RMB2.76and RMB2.70respectively,in the same period of 2022.

Cash and cash equivalentswas RMB921.2million (US$134.1million) as of March 31,2023,compared with RMB602.3 million as of December 31,2022.

Share Repurchase Plan

On November 16,the Company announced that its board of directors authorized to increase its share repurchase program to US$30 million from US$20 million,effective through September 2023. The Company didn't repurchase shares during the first quarter of 2023.

Business Outlook

For the second quarter of 2023,the Company expects the total loan amount facilitated and originated to be between RMB25.0 billion and RMB26.0 billion.

Conference Call

X Financial's management team will host an earnings conference call at 7:00 AM U.S. Eastern Time on May 25,2023 (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 June 1,2023:

United States:

1-877-344-7529

International:

1-412-317-0088

Passcode:

7019207

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 originateloans 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,income (loss) from financial investments and impairment losses on long-term investments. 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 RMB6.8676 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 March 31,2023.

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 followings: 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: eric.yuan@christensencomms.com

In US

Ms. Linda Bergkamp

Phone: +1-480-614-3004

Email: linda.bergkamp@christensencomms.com

X Financial

Unaudited Condensed Consolidated Balance Sheets

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

As of December 31,2023

As of March 31,2023

RMB

RMB

USD

ASSETS

Cash and cash equivalents

602,271

921,162

134,132

Restricted cash

404,689

431,666

62,855

Accounts receivable and contract assets,net

1,161,912

1,271,635

185,164

Loans receivable from Xiaoying Credit Loans and other loans,net

3,810,393

3,838,666

558,953

Loans at fair value

120,280

46,771

6,810

Deposits to institutional cooperators,770,317

1,884,712

274,435

Prepaid expenses and other current assets,net

71,082

58,228

8,479

Deferred tax assets,net

88,428

74,311

10,821

Long-term investments

495,995

504,383

73,444

Property and equipment,net

5,861

5,923

862

Intangible assets,net

36,550

36,156

5,265

Loan receivable from Xiaoying Housing Loans,net

10,061

10,061

1,465

Financial investments

192,620

180,537

26,288

Other non-current assets

67,204

63,570

9,257

TOTAL ASSETS

8,837,663

9,327,781

1,358,230

LIABILITIES

Payable to investors and institutional funding partners at amortized cost

2,627,910

2,647,753

385,543

Payable to investors at fair value

141,289

62,693

9,129

Financial guarantee derivative

107,890

61,325

8,930

Short-term borrowings

70,209

462,709

67,376

Accrued payroll and welfare

63,681

31,532

4,591

Other tax payable

255,691

265,720

38,690

Income tax payable

270,089

305,120

44,429

Deposit payable to channel cooperators

19,700

19,700

2,869

Accrued expenses and other current liabilities

476,035

379,716

55,291

Other non-current liabilities

51,193

47,818

6,963

Deferred tax liabilities

722

618

90

TOTAL LIABILITIES

4,084,409

4,284,704

623,901

Commitments and Contingencies

Equity:

Common shares

207

207

30

Treasury stock

(124,597)

(121,504)

(17,692)

Additional paid-in capital

3,191,194

3,200,837

466,078

Retained earnings

1,622,851

1,907,197

277,709

Other comprehensive income

63,599

56,340

8,204

Total X Financial shareholders' equity

4,753,254

5,043,077

734,329

Non-controlling interests

-

-

-

TOTAL EQUITY

4,329

TOTAL LIABILITIES AND EQUITY

8,230

X Financial

Unaudited Condensed Consolidated Statements of Comprehensive Income

Three Months Ended March 31,

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

2022

2023

2023

RMB

RMB

USD

Net revenues

Loan facilitation service

508,703

580,604

84,542

Post-origination service

87,344

121,273

17,659

Financing income

231,275

254,056

36,993

Other revenue

61,032

49,001

7,135

Total net revenue

888,354

1,934

146,329

Operating costs and expenses:

Origination and servicing

464,499

633,809

92,290

General and administrative

45,344

45,647

6,647

Sales and marketing

4,658

2,038

297

(Reversal of) provision for accounts receivable and contract assets

26,056

(940)

(137)

Provision for loans receivable

33,740

20,377

2,967

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

732

(34)

(5)

Reversal of provision for credit losses for other financial assets

(765)

-

-

Total operating costs and expenses

574,264

700,897

102,059

Income from operations

314,090

304,037

44,270

Interest income (expenses),027

(1,999)

(291)

Foreign exchange gain

955

3,018

439

Loss from financial investments

-

(9,514)

(1,385)

Fair value adjustments related to Consolidated Trusts

1,759

(553)

(81)

Change in fair value of financial guarantee derivative

(20,133)

24,299

3,538

Other income,net

20,118

11,332

1,650

Income before income taxes and gain from equity in affiliates

317,816

330,620

48,140

Incometaxexpense

(181,035)

(52,563)

(7,654)

Gain from equity in affiliates,net of tax

3,150

6,289

916

Net income

139,931

284,346

41,402

Less: net income attributable to non-controlling interests

-

-

-

Net income attributable to X Financial shareholders

139,402

Net income

139,402

Other comprehensive income,net of tax of nil:

Gain from equity in affiliates

212

2

Foreign currency translation adjustments

(3,084)

(7,261)

(1,057)

Comprehensive income

137,059

277,087

40,345

Less: comprehensive income attributable to non-controlling interests

-

-

-

Comprehensive income attributable to X Financial shareholders

137,345

Net income per share—basic

0.42

0.99

0.14

Net income per share—diluted

0.41

0.97

0.14

Net income per ADS—basic

2.52

5.94

0.86

Net income per ADS—diluted

2.46

5.82

0.85

Weighted average number of ordinary shares outstanding—basic

331,805,070

288,027,062

288,062

Weighted average number of ordinary shares outstanding—diluted

339,603,359

294,330,508

294,508

X Financial

Unaudited Reconciliations of GAAP and Non-GAAP Results

Three Months Ended March 31,except for share and per share data)

2022

2023

2023

RMB

RMB

USD

GAAP net income

139,402

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

-

(9,385)

Less: Impairment losses on financial investments (net of tax of nil)

-

-

-

Less: Impairment losses on long-term investments (net of tax)

-

-

-

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

13,975

12,665

1,844

Non-GAAP adjusted net income

153,906

306,525

44,631

Non-GAAP adjusted net income per share—basic

0.46

1.06

0.15

Non-GAAP adjusted net income per share—diluted

0.45

1.04

0.15

Non-GAAP adjusted net income per ADS—basic

2.76

6.36

0.93

Non-GAAP adjusted net income per ADS—diluted

2.70

6.24

0.91

Weighted average number of ordinary shares outstanding—basic

331,508