X Financial

Second-quarter 2026 net revenue was RMB 993.6 million (USD 146.4 million), down 56.3% year over year and 15.5% sequentially. Income from operations was RMB 194.9 million (USD 28.7 million), down 71.1% year over year but up 38.6% sequentially; net income was RMB 47 million (USD 6.9 million), compared with RMB 37.9 million in Q1 and RMB 528 million a year ago. Basic earnings were RMB 1.26 per ADS, and non-GAAP adjusted basic earnings were RMB 4.44 per ADS. Operating margin was 19.6% versus 12% in Q1, and net profit margin was 4.7% versus 3.2% in Q1 and 23.2% a year ago. For outlook, management gave no quantitative third-quarter guidance due to “material uncertainties,” and said it would resume guidance when visibility improves.

Kan Li said the company stayed disciplined and put credit quality, liquidity, and balance-sheet strength ahead of near-term origination volume. He highlighted a slower pace of loan contraction, tighter underwriting for newer vintages, more automation in servicing and collections, and a shift toward higher-quality borrowers. His tone was cautious but somewhat more constructive on credit, saying delinquency trends improved sequentially for the first time in several quarters while emphasizing that the company is “not declaring victory on credit.”

Noah Kauffman emphasized that the quarter showed a second consecutive period of sequential improvement in operating performance, even though revenue is still “finding its floor.” He cited aggregate credit-related provisions of RMB 183.1 million, borrower acquisition and marketing expense of RMB 149.5 million, operating income of RMB 194.9 million, and net income of RMB 47 million, noting that margins, provisions, and net income all moved in the right direction. Frank Zheng added that total assets were about RMB 12.1 billion, shareholders’ equity about RMB 7.8 billion, the equity-to-asset ratio was about 64%, and total cash including restricted cash was about RMB 2 billion; he also said the company repurchased about 2.63 million ADSs for roughly USD 12.49 million and had about USD 35.5 million remaining under its USD 100 million buyback program. The board also approved a USD 0.28 per ADS cash dividend.

Analysts pressed management on why the company remains public despite a large gap to tangible book value, and whether it should go private or return more capital. Management said privatization would be a one-way door for a Chinese-based firm that may struggle to re-list overseas, and argued the better path is to preserve capital, buy back shares within the current framework, pay dividends, and explore new revenue sources. Another question focused on the drop in contingent guarantee liability provisions; Noah Kauffman said the reduction mainly reflected a lower loss-rate assumption and a reversal of previously booked reserves, while also acknowledging that older delinquencies remain elevated even as newer vintages perform better. Management also explained that the jump in provision for credit losses for deposits and other financial assets was tied to one funding institution and a cautious write-off of funds that were behind schedule to return.