LexinFintech Holdings - Earnings Call - Q1 2025

Transcript

Operator (participant)

Today, and thank you for standing by. Welcome to Lexin First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. Please translate your question to English and mute yourself after your question. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Will Tan, Head of Capital Markets. Please go ahead.

Thank you, Operator. Hello everyone. Welcome to our First Quarter 2025 earnings conference call. Our results were released earlier today and are currently available on our IR website. Today, you will hear from our Chairman and CEO, Mr. Jay Wenjie Xiao, who will provide an update on overall performance and strategies of our business. Our CIO, Mr. Arvin Zhanwen Qiao, will then provide more details on our risk management initiatives and updates. Lastly, our CFO, Mr. James Zheng, will discuss our financial performance. Before we continue, I would like to refer you to our Safe Harbor statement in our earnings press release, which also applies to this call, as we will be making forward-looking statements. Last, please note that all figures are presented in RMB terms, and all comparisons are made on quarter-over-quarter basis, unless otherwise stated.

Please kindly note Jay and Arvin will give their whole remarks in Chinese first. Then, the English version will be delivered by Jay's and Arvin's AI-based voices. With that, I'm now pleased to turn over the call to Mr. Jay Wenjie Xiao, Chairman and CEO of LexinFintech. Please.

Will Tan (Head of Capital Markets)

大家好，很高兴和各位分享我们2025年第一季度的业绩。面对宏观环境的外部不确定性，今年一季度GAAP净利润大幅增长，创下13个季度来新高，达4.3亿元，环比增长18.6%，同比增长113.4%。一季度的业绩表明，公司过去两年坚持风险驱动、数据驱动，实现机器化运营的战略转型是成功的。我们如今已完成这一殊为不易的转型，迈入高质量发展的新阶段。底层能力的质变将带来今后持续的价值释放，我们对今年全年完成业绩充满信心。两年来的风险、数据双轮驱动的战略转型，我们坚持风险优先，对业务底层能力全面升级，迭代风控、营销、运营等生命周期的运营策略，同时加强了系统能力建设，实现风险与业务的有效协同。截止目前，我们已经完成了全新风险体系的升级和风险基础设施的搭建，构建起全链条量化经营分析体系，对不同客群实现了差异化的定额定价，机器化运营能力得到显著提升。乐信多个业务生态均取得了不错的进展，个人消费信贷业务通过将模型决策前置到流量分配环节，获客能力和效率显著增强。在差异化定价上，一季度推出随借随还、灵活借与乐金卡乐周转等组成产品矩阵，优化额度、利率、期限，使offer更具竞争力。分期零售业务重构了独立的风险体系，升级了供应链，拓宽了用户的经营边界，为不同用户匹配差异化的商品和分期服务。一季度分期通过率，分期的通过率大幅提升，成交规模环比上涨16.2%。面对小微、小小微、微业务采用量化加交互人工审核的方式，精准匹配优质用户授信额度，降低了风险的同时，提升了产品的市场竞争力。随着继续加大低线城市小微、个体工商户等群体的赠送，加强属地化经营，四五线以下区域的交易额占比超过70%，盈利逐季增长。海外业务方面已完成对墨西哥和印尼两个市场的金融产品升级改造，完善中台风险体系，提升获客渠道运营能力，一季度获客成本环比下降19%，整体达到盈利。成熟的风控技术和中后台能力，让我们可以开拓更多的海外市场。随着各业务的成熟和发展，乐信的业务生态将逐渐成为我们独特的核心竞争力。在未来，我们将重点做好以下几个方面的工作：第一，以用户为中心，提升客户体验，推动优质用户长期稳健增长，加大矩阵化的产品建设，提供有竞争力的offer和灵活还款的方式，增强用户粘性，围绕用户生命周期打造更好的产品和服务，重视消保能力建设，优化用户触点服务体验，提升客户满意度。第二，加强生态业务协同，继续打造乐信独特的差异化的竞争优势，用多样化的产品和服务匹配不同用户，覆盖用户全生命周期，轻松消费灵活周转的消费和信贷需求。分期零售业务针对不同风险表现的人群差异化的需求，完善商品供应链，激发不同层次客群的消费潜力，提升优质用户的交易额占比，发挥获客和活客的作用。面对小微、小小微企业的普惠金融业务，发挥线下直营获客团队与精准一对一服务的能力，深入低线城市产业带和专业市场，探索完善更多的经营形态，加强属地化经营与渗透，提升优质小微客群占比。个人消费信贷业务将重点拓展优质获客渠道，挖掘与大平台合作的潜力，拓宽公司的经营边界，保持规模适度的增长。第三，加大技术投入，尤其是在AI方面的投入，让AI赋能各个业务场景，提升竞争力，通过本地化部署成熟的性能优秀的AI大模型，重塑业务流程，提升经营效率，降低服务成本，探索具备金融自适应能力的AI智能体，深度应用在带钱策略和辅助生存领域，通过自主决策与任务执行，推动获客运营风控等场景的流程自动化和决策的智能化，进一步提升公司精细化运营能力。展望2025年，面对宏观环境波动、行业变化及地缘政治不确定性等诸多挑战，凭借不断增强的能力和独特的多业务生态优势，我们将经营我们的经营能力和经营韧性都得到了大幅的提升。我们对2025年利润持续大幅增长充满信心，因此重申2025年我们净利润大增的一个全年的一个指引维持不变。公司一直以来非常重视股东回报，致力于通过各种方式将价值回馈给股东。去年11月，我们已宣布自2025年开始，将公司现金分红比例由净利润的20%提升至25%。经董事会同意，我们将再次提高分红比例，自2025年下半年开始，公司的现金分红比例将进一步提高到净利润的30%。接下来，我把发言时间交给我们的CIO Erwin，谢谢。

Thanks for joining us today for our First Quarter 2025 Earnings Call. Despite ongoing macroeconomic uncertainties, our GAAP net profit reached RMB 430 million, a record high in 13 quarters, representing quarter-over-quarter growth of 18.6% and year-over-year growth of 113%. Our first quarter results demonstrate the success of our two-year transformation, centering on building a model driven by data analytics, risk management, and refined operations. Having completed this challenging transformation, we have entered a new phase of high-quality development. The fundamental enhancement of our core capabilities will drive sustained value creation moving forward, and we remain confident in delivering our full-year performance targets. Over the past two years of transformation, we have adhered to a risk-first approach, comprehensively upgrading our core business capabilities.

We have iterated and optimized the full lifecycle strategy, covering risk management, marketing, and operations, while also strengthening our system infrastructure to achieve effective coordination between risk management and business development. By far, we have completed the upgrade of our risk management framework and established robust risk management infrastructure. Furthermore, we have built a comprehensive quantitative business analysis framework that supports differentiated credit assessment and pricing strategies tailored to various customer segments. These initiatives have resulted in significant enhancements to our refined operations. Lexin has also achieved significant progress across multiple ecosystem businesses. For our online consumer finance business, we have notably enhanced customer acquisition capabilities and efficiency by implementing model-based decision-making upfront at the traffic allocation stage. Building on our differentiated pricing strategy, we launched the on-demand credit product Linghuo Jie Flexible Loan in the first quarter, featuring flexible use of credit and repayment.

The new product, together with our existing products Linghuo Jie and Linghuo Zhou Zhuan, forms a competitive product matrix. Our overall product offering features optimized credit lines, rates, and tenors, making our financial solutions more competitive in the market. For our installment e-commerce business, we've revamped the risk management system, upgraded the e-commerce supply chain, and expanded the boundary of user development. We match different users with tailored installment services. As a result, approval rate of installment applications increased significantly in the first quarter, driving e-commerce GMV to increase by 16.2%. For our offline-inclusive finance business, targeting small and micro business owners, quantitative assessment is combined with manual review to accurately determine the credit lines granted for high-quality users.

In the first quarter, our offline-inclusive finance business not only saw lower risks but also higher product competitiveness as we continued to increase penetration of small and micro business owners in lower-tier cities and strengthen localized operations. GMV from tier four, tier five, and lower regions has accounted for over 70% of our inclusive finance GMV in the first quarter, alongside sequential profit growth. For our overseas business, we have completed the upgrading of financial products in the Mexico and Indonesia markets, improved the risk management system, and enhanced the operational capabilities of customer acquisition channels. In the first quarter, customer acquisition cost decreased by 19% quarter over quarter, and the overseas business has achieved profitability. Our matured risk management capabilities, technological strength, and back-office support enable us to expand into more overseas markets. As these businesses develop and mature, Lexin's ecosystem will gradually become our unique competitive edge.

Moving forward, we will focus on the following areas. Firstly, we will maintain a user-centric approach, focusing on enhancing user experience and promoting the steady growth of high-quality customers. Our strategy involves strengthening our product portfolio with more competitive offers and flexible repayment methods designed to boost user loyalty throughout the entire customer lifecycle. Additionally, consumer protection will remain a priority. We will continue to optimize customer engagement and service experiences in order to increase overall customer satisfaction. Secondly, we will strengthen synergies across our ecosystem businesses to further build our unique and differentiated competitive advantage. We will match diverse products and services to different user segments, addressing their demands for carefree consumption and flexible liquidity throughout their entire lifecycle. For the installment e-commerce business, we will improve the merchandise supply chain to meet the differentiated demands of users with varying risk profiles.

This will help unlock consumption potential across different customer tiers and increase GMV from high-quality users, enhancing customer engagement and acquisition. For the inclusive finance business, we will leverage our in-house offline teams' capabilities in customer acquisition and personalized one-on-one service. We will deepen our presence in industrial clusters and specialized markets in lower-tier cities, explore and refine various business models, and strengthen localized operations and deepen market penetration to increase the share of quality micro business owner customers. For the online consumer finance business, we will focus on expanding high-quality customer acquisition channels, tapping into the potential of large platform partnerships and broadening our business boundaries to maintain sustainable growth and scale. Thirdly, we'll increase investment in technology, particularly in applying AI to empower various business scenarios and enhance the company's competitiveness.

By locally deploying mature and high-performance large AI models, we will reshape business processes, improve operational efficiency, and reduce service costs. We will explore the application of AI agents with financial adaptive capabilities in the pre-lending process through autonomous decision-making and task execution. We will promote process automation and decision intelligence in scenarios such as customer acquisition, operations, and risk management, further enhancing the company's operational refinement. Despite the volatile macroeconomic environment, evolving industry landscape, and yielding uncertainties, our operational resilience has significantly improved thanks to our continuously enhanced capabilities and unique ecosystem advantage. Therefore, we are confident in achieving sustained growth in net profit. For full year 2025, we are firming our full year 2025 profit guidance of substantial year-over-year growth. The company has always attached great emphasis on shareholder returns and remains committed to delivering value to our shareholders through various channels.

In November 2024, we announced to increase our cash dividend payout ratio from 20% to 25% of total net profit starting from 2025. The Board of Directors has approved to further increase the dividend payout ratio to 30% of net profit effective from the second half of 2025. Now, I would like to give the floor to our CRO, Arvin. Thanks.

Arvin Zhanwen Qiao (Chief Risk Officer)

好，谢谢 Jay。下面我将汇报一下一季度风险管理方面的工作情况和进展。一季度，我们继续坚持控风险、稳规模、提盈利战略，聚焦于风险识别能力提升、风险策略体系持续优化，以及智能化风控工具的建设和积极探索大模型在风控领域的应用。得益于此，我们新增资产和全量资产的风险一季度继续保持下降趋势，环比2024年四季度，一季度新增资产 FPD 下降了约5%左右，全量资产入吹率下降了约11%左右，全量资产90天不良率下降了9%左右。下边向大家介绍一下我们在一季度采取的重点风险管理措施。首先，在模型识别能力建设上，一季度我们持续提升各类风险识别模型的性能。首先，通过建立多模态融合模型，更好地整合利用文本类、时序类、数值类、图特征类的异构数据，进一步提升了模型的风险识别能力。其次，通过两阶段建模，针对标准模型识别出的中长尾客户，通过样本优化、额外三方数据引入，进一步提升对这部分客户的风险区分。最后，针对来自不同 K 渠道的客户与渠道方进行了深度联合建模，充分利用渠道方数据和自有数据来提升模型的性能。其次，我们加强正负向风险管理，一方面加强加快多头人群、稳定性弱客群和风险波动较大客群的清退降额，以及优化还款提醒，提升账单日和逾期后的智能化代扣能力，减少不良分子的生成。另一方面，优化提升优质客户的 offer，促进优质资产增长，共同促进风险下降，资产结构和健康度持续提升。二季度，我们将更快速地根据市场情况与资产风险表现，充分利用正负向相结合的风险管理工具和风险管理策略，保障资产风险水平继续保持下降趋势。第三，继续加大智能化风控工具建设和应用，可以大幅提升额度决策和定价决策精准性和时效性的额度机器人和定价机器人，完成开发和建设。在各业务场景开始逐步引入和投产应用，通过 A/B 测试对照，利用机器人策略开发工具，可以大幅提升决策的效果和决策的时效性。通过过去一年实现风险能力提升、风控体系完善和智能化风控工具全面应用，帮助我们实现了连续四个季度新增资产和全量资产风险的持续下降。当前外部环境和行业波动加大，二季度我们将继续提升和运用风险自动巡检和处置能力，加强准入交易管理，快速识别和处置高风险客户，保障各关键风险指标继续保持下降趋势。下面有请 CFO 镜子介绍公司一季度的财务表现情况。

Thanks, Jay. Next, I will provide a review of our key initiatives and achievements in risk management for the first quarter. In the first quarter, we remained committed to our strategy of prioritizing asset quality, focusing on scale stability and profitability enhancement. Specifically, we focused on improving risk identification capability, optimizing risk strategy system, and developing smart risk tools, as well as actively exploring the application of large models in risk management. Thanks to the initiatives we've taken, risks of both new and overall assets maintained the downward trend in the first quarter, leading risk indicator for new loans, first payment default, FPD, over seven days of the first quarter, declined by about 5% compared to the previous quarter.

On total loan portfolio, day one delinquency ratio decreased by about 11% and 90-day delinquency ratio decreased by 9% quarter over quarter. I will introduce in detail the key initiatives we've taken for the first quarter. Firstly, in terms of risk identification capabilities, we've continued to improve the performance of our risk identification models. We built a multimodal fusion model, integrating different types of heterogeneous data, including textual time series, numerical, and graph features, which helped further improve the risk identification capabilities by 10%. Meanwhile, we deployed a two-stage modeling structure. A standard model was used to identify the mid to long-tail customer groups. We then optimized the data samples and brought additional data sources to conduct more granular risk identification for these customers further improving the risk differentiation capabilities. Besides, for customers from different channels, we conducted deep joint modeling with our channel partners.

This allowed us to fully leverage both partner channel data and our own internal data to improve model performance. Secondly, we also strengthened risk management through preventive and proactive approaches. Regarding high-risk assets, we adopted a preventative approach specifically, for customers who have borrowings across multiple platforms, exhibit weaker repayment capabilities, or present volatile risk profiles, we reduced or suspended their credit lines. Additionally, we optimized repayment reminders and enhanced the auto-debit repayment functionality both on and after the due date to minimize the formation of overdue assets. Regarding high-quality assets, we conducted a proactive approach. We promoted the growth of high-quality assets by strengthening the competitiveness of offers to customers. These concerted efforts have collectively contributed to reducing risks, optimizing our asset mix, and enhancing asset quality.

In the second quarter, we will respond more closely to market dynamics and asset quality performance, fully leveraging a combination of proactive and preventative risk management approaches and tools to ensure the continued decline in asset risk levels. Thirdly, we continue to ramp up the development and application of intelligent risk management tools, which significantly increase the accuracy and time efficiency of credit line and pricing decision-making. We have developed credit line robot and pricing robot and gradually applied them in various business scenarios. Our A/B testing results demonstrate that these robot tools substantially helped improve the effectiveness and time efficiency of decision-making. Over the past year, our efforts in enhancing risk identification capabilities, building a more robust risk management framework, and applying intelligent risk management tools comprehensively have contributed to a sustained decline in risk levels for both new and total assets for four consecutive quarters.

Looking ahead to the second quarter of 2025, amid increased volatility in the external environment and evolving industry dynamics, we will continue to strengthen our capabilities in automated high-risk asset screening and resolution, further refine credit approval and lending management, and swiftly identify and address potential high-risk assets. These measures are aimed at ensuring that key risk indicators remain on a downward trajectory. Next, I will hand over to our CFO, James, to provide a review of the company's financial performance for the first quarter.

James Zheng (CFO)

Thanks, Arvin. I will now provide a detailed overview of our first quarter financial results. Please note that all figures are presented in RMB terms and all comparisons are made on a quarter-over-quarter basis unless otherwise stated. Our first quarter performance marked another strong leap forward and are well-on track on our profit growth roadmap.

During the quarter, our net income increased by 18.6% to RMB 430 million and 113.4% year-over-year, even though the overall new loan volume and the loan balance declined slightly due to the Chinese New Year seasonality. Our net income margin increased to 13.9% from 9.9% last quarter. Net profit take rate, calculated as the net income divided by the average loan balance, increased to 1.58% from 1.31% from last quarter and 0.66% a year ago and advancing by 27 basis points sequentially. The net income margin and the net take rate all reached the highest level in the last three years, laying a solid foundation for future profit expansion.

From a unit economics perspective, the 27 basis point net profit take rate improvement quarter over quarter is led by a 47 basis point increase of revenue take rate, which is calculated by dividing the sum of credit facilitation service and the tech empowerment service income after deducting the funding and the credit cost by the average loan balance. During the quarter, the revenue take rate increased from 6.22% to 6.69% of the previous quarter. The improvement of revenue take rate reflects our ongoing risk-centered business transformation, which resulted in better asset quality and therefore a lower credit and funding cost and a refined business operations. The specific business execution involved focus on retaining prime customers through competitive loan offers, including lower prices and improved tenor, and a migrating subprime borrowers to capture live model via intelligent credit platform, ICP, to reduce the risk exposure on the optimized profitability.

Next, I will provide more details in the following three highlights. First, reduction in credit cost driven by continuous improvement in asset quality. The reduced credit cost reflected our sustained improvements in asset quality driven by our enhanced risk management capability. The following key risk indicators demonstrated improvement. On the loan balance side, day one delinquency rate declined by 11% and the 90-day delinquency ratio declined by nearly 33 basis points from 3.6% to 3.3%. On the new loan side, on quarterly basis, the first payment default rate over seven days decreased by about 5%. With higher quality new loans gradually replacing matured vintage loans, we expect to see continued asset quality improvement contributing to our profit expansion.

Meanwhile, our provision coverage ratio, which is calculated as the total outstanding provisions divided by the total outstanding loan balance between 90 and 180 days, stood sufficiently at 268%, the highest level since the second quarter of 2024. Second, decrease in funding costs. Funding costs for new loans and the capital-heavy model dropped by 9 basis points to 3.93%, further boosting our revenue take rate. While we've already achieved relatively low funding costs, we expect to maintain this advantage through improving asset quality, strengthening partnerships with funding partners, and diversifying our funding sources. Third, capital-light model volume growth. During the quarter, we have optimized our risk-bearing arrangements by shifting more high-risk volumes to the capital-light model through our intelligent credit platform, ICP, where we don't take principal risks for customers with risk rating beyond our preferred range.

Total volume and the capital-light model increased by 43% quarter over quarter and accounted for 28% of the total GMV, up from 20% of last quarter. Under the capital-heavy model, we have improved competitiveness of our offering with lower pricing and improved the tenor to attract prime customers. The APR was lowered about 100 basis points from 23.9% down to 22.6% for the last quarter, while at the same time, the user quality has improved, as evidenced by the super prime customers taking a higher percentage of new loans. With the capital-light model, we migrated more subprime customers to the ICP platform, offering risk-based pricing and shortened loan tenor to reduce overall risk exposure. As a result, the overall tenor for new loans under both capital-heavy and capital-light models slightly decreased quarter over quarter.

To summarize the above three highlights, due to the improvement of credit cost and funding cost, our net profit take rate increased from 1.31% to 1.58% last quarter. Additionally, the capital-light model volume growth has lowered the risk exposure for our business, enabled differentiated risk-based pricing for high-risk users, enhanced risk-adjusted returns, and sustained our offer competitiveness for high-quality customers. Next, let's go through some key financial items. Total revenue from lending-related business, which includes credit facilitation in the service income and the tech empowerment service income combined, decreased by 15% quarter over quarter. There are three factors attributing to the change. One, lower APR of loans under the capital-heavy model as our effort to attract better quality customers, as mentioned earlier. Two, increased early payoff due to more flexible early payoff terms for offer competitiveness and customer satisfaction.

Three, the GMV volume shift to capital-light model where the revenue is booked net of related credit cost, while in comparison under the capital-heavy model, gross revenue and the credit cost are booked in two separate lines. Loan volume originated under the capital-heavy model decreased by 11% quarter over quarter and accounted for 72% of total GMV, down from 80% in the previous quarter. As a result, credit facilitation and service income primarily associated with the capital-heavy model decreased by 19% quarter over quarter. In contrast to the decline in the credit facilitation and service income, the tech empowerment service income, which is primarily associated with our capital-light model, increased by 4% quarter over quarter.

This revenue now accounted for 20% of total revenue, up from 16% last quarter, mainly driven by the increased volume from the capital-light model and partially offset by increased provision driven by our prudent provision estimation. Similar to the revenue side of the story, total credit cost, including total provisions and the fair value change of financial guarantee derivatives and the loans at fair value, decreased by 40% quarter over quarter. This is partially due to the net revenue accounting method as well as the contribution from the asset quality improvement. As a cross-reference, we can take a holistic view to add total revenue and the credit cost and both the capital-heavy and the capital-light models together. Total revenue from lending-related business, net of total cost, was about RMB 18.2 billion, increased by 5.6% or RMB 970 million from RMB 17.2 billion last quarter.

Separately, installment e-commerce platform service income decreased by 16.4%, while GMV grew by 16.2% quarter over quarter. Similarly, this difference was caused by accounting difference due to the volume mix shift between the third-party sellers and the company direct sourcing. For third-party sellers, only platform service commission is recognized as the revenue rather than the entire transaction amount under the direct sourcing model. This structural volume mix change is evidenced by the sales growth volume from third-party seller accounting for 56% of total e-commerce GMV in the first quarter, up from 36% in the last quarter. As a result, our installment e-commerce platform service income decreased despite total e-commerce GMV increase from RMB 970 million to RMB 1.1 billion. Furthermore, it's worth highlighting that the gross profit from e-commerce business more than doubled in the first quarter.

As a priority within our integrated business ecosystem, we'll keep growing our e-commerce business moving forward by developing tailored financial solutions that actively stimulate and fulfill the evolving consumption and financing needs across diverse customer segments. We aim to diversify our revenue structure and eventually enhance the overall operational resilience and profitability. Total operating expenses, which include processing and servicing costs, sales and marketing expenses, research and development expenses, and general and administrative expenses, remained relatively stable at RMB 1.3 billion. Driven by the aforementioned factors, our net income in the first quarter increased by 18.6% quarter over quarter from RMB 363 million to RMB 430 million, and our net income margin increased from 9.9% to 13.9%. For balance sheet items, as of March 31, our cash position, which includes cash, cash equivalents, and restricted cash, was approximately RMB 5 billion. Shareholders' equity remained solid at about RMB 11.2 billion.

Looking ahead, despite challenging macroeconomic environment, evolving industry landscape, and geopolitical uncertainties, the management remains confident in achieving a significant year-over-year growth in net income, reaffirming our four-year earning guidance. This concludes our prepared remarks for today. Operator, we are now ready to take questions.

Operator (participant)

Thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. Please translate your question to English and mute yourself after your question. To withdraw your question, please press star one one again. Please stand by as we compile the Q&A roster. Just a moment for our first question, please. Our first question comes from Emma Xiu, from Bank of America. Your line is now open.

Emma Xiu (Analyst)

谢谢给我第一个提问的机会。恭喜公司取得了非常优秀的业绩。那我这个问题是想问一下，就是面对这个宏观层面的各种挑战，然后还有监管层面最近也出台了住贷新规，这个会对公司造成怎样的影响？地缘政治方面也有挺多的不确定性的，这个会如何影响这个公司上市地位，公司是否有回港上市的计划？那我简单翻译一下我的问题。

So how does the company address various external challenges, such as the impact of the new rules on loan facilitation business and geopolitical uncertainties on the company's listing standards? Does the company have any plans for Hong Kong IPO?

Arvin Zhanwen Qiao (Chief Risk Officer)

好的，这个问题我来回答一下。今年以来，我们的确看到外部环境都发生了较大的一些变化，但是公司我们始终坚持风险驱动、数据驱动、清晰化运营的整个的一个战略。所以说我们能够看到我们仍然取得了一个不错的一个成绩。虽然有诸多外部的挑战，但我们已经做好了准备。所以说管理层仍然对今年全年我们达成我们既定的目标充满信心。所以对于刚才说到的住贷新规的出台，我们支持监管机构对行业能够进一步规范的，最终行业继续规范的整个的一个发展的一些初衷，就是支持这一规范。虽然说这个新规短期内对行业的一个影响，我觉得是因为刚出来不久，我们认为还需要进一步的整个的一个观察。但从长期的角度上来看，这个将会促进整个行业的一个规范、健康、可持续性的发展。这样的环境其实对于包括我们在内的一些可能目前规模偏大一点的整个的一个平台是非常有利的。对于我们来说，我们是有能力去应对这个新规潜在的一些影响。因此我们也对这个新规表示欢迎，而且我们也对全年去继续达成我们的目标仍然还是充满信心。刚才讲到一个就是地缘政治带来公司上市地位的一个影响，其实我觉得公司我们已经在采取一些积极的措施，正在准备和应对，要探索在不同交易所上市的一个可能性，包括在香港的整个的一个上市，以保障全体股东的整个的利益。一旦我们有具体的方案或者重要的进展的时候，我们将会及时向市场来公布这个信息。 This is the translation for Jay's remarks.

Jay Wenjie Xiao (Chairman and CEO)

Despite significant changes in the macroeconomic environment and industry landscape this year, the company has delivered outstanding results by adhering to its strategy, focusing on risk management, data analytics, and refined operations. Although external challenges persist, the company is well prepared to navigate through them, and management remains confident in achieving its 2025 performance targets. Regarding the new rules on loan facilitation business, we welcome and support regulator's efforts in standardizing the industry.

While the full impact of these rules remains to be seen in the short term, they are expected to foster a more compliant, healthy, and sustainable environment for the sector in the long run, a trend that particularly benefits large and compliant platforms like Lexin. For us, we have the capabilities and resilience to address the potential impacts of the new rules. Therefore, we are confident in achieving our full-year profit target. Regarding the geopolitical uncertainties, the company has proactively taken measures to prepare, including exploring potential listings on different exchanges, including Hong Kong Stock Exchange, in order to protect the interests of all shareholders. Once any concrete plan or significant progress materializes, we will promptly disclose relevant information to the market in accordance with laws and regulations.

Operator (participant)

Thank you. Just one moment for our next question, please. Our next question comes from Alex Yi from UBS. Your line is now open.

Alex Yi (Analyst)

感谢关于陈哥提问的机会。我这边有两个问题。第一个想请教一下，能不能给我们介绍一下公司目前各个生态业务的一个进展和未来的一个策略。第二个问题是想请问一下，在风险方面，目前现阶段咱们改善的一个进程达到一个什么阶段，以及我们的风控能力，我们应该怎么去理解一下达到了一个什么水平，以及咱们下阶段的一些主要的目标。谢谢。

So my questions include: first one is what are the progress and development plan for your ecosystem business? And second is, can you give us more color in terms of where we are in terms of our asset quality improvement trend, and how to understand the strengths of your current risk management capabilities, and what's your plan for the next stage? Thank you.

Jay Wenjie Xiao (Chairman and CEO)

好的，第一个问题我来回答一下。其实我们大家知道乐信其实我们的业务还是相对来说比较多元和有自己独特的一些生态优势的。所以我们在刚前面我的讲话稿里面也提到的，其实在个人消费信贷业务上面，我们的整个的一个精细化运营能力正在不断地提升。获客的能力，包括获客的效率都在持续地加强。所以未来我们在销金的业务上面，我们将会继续加大我们在差异化的整个的一个经营能力，来加强我们对于整个的一个客户的整个差异化的整个的识别，从而给不同的用户提供不同的整个的一个产品，来丰富我们整个产品矩阵，加强我们整个的竞争力。同时我们也会开始发力在拓展一些新的一个增长的渠道，尤其是说我们在今年以来，我们在继续加强我们在一些重大的一些合作伙伴，一些KA的一些合作伙伴上的一些合作的潜力。所以我们看到这块的整个的一个潜力在今年以来，其实它的整个的增长的势头还是非常不错的。我们通过这种大型平台的整个的合作，进一步拓宽了整个的公司的整个的一个获客的渠道，可以帮助我们能够持续稳健的一个增长。第二个就是我想再聊一下我们整个的分期的零售业务。去年以来，我们重构了我们分期零售的整个的一个风险管理体系，升级了我们的一些供应链。它帮助我们能够满足不同层次的一个用户的整个的一个分期消费需求。所以未来我们将会充分地发挥整个的一个零售场景，它在于帮助整个平台来活跃客户，还有获取客户上的一些独特的作用，提升我们在未来应对环境变化的一个重要的一个能力，提升公司，持续提升公司的整个的一个经营的韧性。所以在普惠的这个业务上面，其实我们也在持续地优化我们的整个的一些模式，因为它是一个非常独特的线上加线下的整个的一个业务模式。我们在差异化的整个的一个风险管理模式下面，我们在探索继续加大在下沉市场的，要下沉区域的整个的一个面对这些城市的小微个体工商户的客群的整个的一个渗透率，加强我们的竞争性。我觉得这个在整个的一个普惠线下主题化的整个的经营方面，其实我们也看到这个业务也表现得非常的不错。所以它是我们自己的一个获客的一个渠道，而且它的整个的一个盈利能力各方面其实都表现得还是挺好的。再聊一聊我们整个海外业务。海外业务，我们仍然认为我们现在还在进一步地优化我们的业务模式，在打下我们整个更多的一些好的基础。目前整个海外业务它也是整体盈利的。所以我们对这个业务也是保持一个比较谨慎的整个的一个投入的一个态度。

Lexin has always had very diverse business deployments in not only having online business but also offline, and we have unique competitive edge in our own ecosystem business. More specifically, as I mentioned in my remarks, for our online consumer finance business, we continue to improve the risk management capabilities and operational refinement, and have witnessed a substantial enhancement in the capability and efficiency of customer acquisition.

Going forward, we'll focus on providing tailored product offers to match customers with varying risk profiles, enriching our product portfolio to enhance customer offer competitiveness, and expanding customer acquisition channels. Meanwhile, we will further explore collaboration with huge traffic platforms, which have already exhibited good momentum this year, and expanding our business model to achieve sustainable volume growth. For our installment e-commerce business, we have revamped our risk management system, upgraded merchandise supply chain, and expanded the business boundaries. By tailoring installment services to users based on their risk profiles, we better address diverse customer demands. Going forward, we will fully leverage our e-commerce business to better engage existing customers and attract new ones, making it a key lever for us to adapt to industry changes and enhance the company's operational resilience.

For our offline inclusive finance business, which is quite a unique feature of our business deployment, we have strengthened our in-house channel development and optimized the risk management model to ensure the differentiated competitiveness of products and also secure sequential increase of profits. Going forward, we will continue to increase the penetration of micro business owners in lower-tier cities, enhance localized business development, and improve operational efficiency. For our overseas business, we better optimize the business model and capabilities at various fronts. By far, our overseas business has achieved profit overall. Going forward, for overseas business, we will adopt a prudent approach in terms of investment and expansion.

Operator (participant)

Thank you.

关于风控能力建设情况方面和下一阶段目标方面，由我来介绍一下。在风险管理能力建设方面，过去一年我们从各个方面对整个风险管理能力进行了一个全面的升级和提升，包括从风险识别方面、风险的全生命周期的决策方面，以及差异化的风险定价方面，以及针对不同风险资产的风险承担模式方面，以及自动化的风控预警预测监控方面，以及对应的智能化风险管理工具方面，都进行了一个全面的升级。以上面的这些建设和升级帮助我们在风险管理能力和应对风险周期波动的时候的能力得到了一个显著的提升。经过过去一年的建设，我们已经完全具备行业主流成熟的量化风险管理体系，得益于这一个体系的迭代和升级，也帮助我们在过去一年，无论是全量资产的风险还是新增放款的风险，连续多个季度持续下降和改善。面向未来，整个消费信贷的外部环境和行业的不确定性依然比较大，然后仍然在风险管理方面面临比较大的挑战和压力。我们未来将坚持继续风险驱动战略，不断地提升和优化我们整个风险管理能力和完善我们的风险管理体系，审慎稳健经营，保障我们整个的风险管理的精度效率，不断地改善，推动积极探索大模型在整个风控领域的应用，保障我们在未来继续风险下降。

Over the past year, we have comprehensively upgraded our risk management system across multiple fronts, including risk identification, differentiated risk strategy, differentiated risk pricing, risk bearing models, risk monitoring and early warning, and risk management tool, et cetera.

This has led to a significant improvement in our risk management strength and our ability to handle risk volatility. Thanks to our efforts and upgrades in the past year, we have established a mature, robust, quantitative-driven risk management system. As a result, risk levels of both new and overall assets have exhibited a sustained decline over the past year. In light of the persistently challenging external environment and ongoing industry uncertainties, we remain committed to our risk-centric strategy and prudent operational approach. We will further strengthen our risk management capabilities while actively exploring the application of large models to enhance the accuracy and efficiency of our risk management system. This will ensure asset risk maintains the current downward trajectory.

Thank you. Just a moment for our next question, please. Our next question comes from Yada Li from CICC. Your line is now open.

Yada Li (Executive Director and Equity Analyst)

各位同好，首先恭喜公司取得新高的业绩，也感谢给我这个提问的机会。第一个问题想请教一下，公司本季度收入结构出现了较大的一个调整，想请教一下背后的主要的原因是什么？第二个问题是股东回报方面，公司后续还有什么样的一个规划？非常感谢。

Then I'll do the translation.First, congrats to the record high results and thanks for taking my questions. My first question is, in this quarter, I've noticed that the revenue structure experienced some material changes, and I was wondering what are the main reasons to drive this change? Second, what is the company's plan in shareholders' returns going forward? Thank you so much.

James Zheng (CFO)

Okay. I will take the first question and ask Jay to talk about the second. For the first question, first of all, as I mentioned in my previous script, it is important to bear in mind that despite the different factors contributing to the quarter over quarter revenue variance analysis, we should always take a holistic view to look at the total revenue and the credit cost together to get the big picture.

The big picture is that from the unit economics perspective, our revenue take rate increased from 6.22% to 6.69% quarter over quarter, and the net take rate after offsetting the operational cost increased from 1.31% to 1.58% quarter over quarter. In terms of the specific revenue variance analysis, basically, the quarter over quarter variance in total revenue was primarily due to lower credit facilitation service income driven by the reduced pricing, higher early repayments, and a shift in GMV towards the capital-light model. While the tech empowerment service line income saw some increase driven by the capital-light GMV volume migration, here the net-based accounting recognition is used, where the revenue is net of related credit costs instead of recognizing revenue and credit costs in two separate lines. Related to this, the total credit cost declined at the same time, partially due to the same reason.

Additionally, despite the sequential GMV growth of 16.2% quarter to quarter, the installment e-commerce platform revenue decreased similarly as a result of the revenue recognition difference due to the volume mix shift between the third-party sellers and the company direct sourcing. For the third-party sellers, only the platform service commissions recognized as revenue rather than the entire transaction amount under the direct sourcing model. The sales volume from the third-party seller accounted for 56% of the total e-commerce GMV in the first quarter, up from 36% in the last quarter. In conclusion, the revenue structural variance really reflected our ongoing risk-centric business transformation and our operational refinement. While the accounting treatment across different business models may cause some top-line variances however our profit and profit margin continued to improve, really firmly tracking our plan.

Jay Wenjie Xiao (Chairman and CEO)

好的。第二个问题我来回答一下。公司一直以来非常重视股东的回报。我们致力于通过各种方式将价值回馈给股东。自去年11月到现在，公司在半年时间内再次提升我们整个现金分红的比例，体现出公司对于股东回报的整个重视。同时也证明了公司稳健可靠的盈利能力，反映出管理层对未来稳定可持续的增长信心。未来公司将继续为股东创造价值。我们理解投资者对股东回报的期望，也将结合公司的自身资源、经营发展及资本市场情况，适时提高回报率，努力与股东期待的目标保持一致。谢谢。

The company has always attached great importance on shareholders' returns and is committed to delivering value to shareholders through various means. Since November 2024, the company has increased its cash dividend payout ratio twice within six months, demonstrating its emphasis on shareholders' return. This not only testifies to the company's stable and reliable profitability but also reflects the management's confidence in achieving stable and sustainable growth in the future. The company will continue to create value for shareholders. We understand investors' expectations regarding shareholders' returns and will work to align our dividend policy with shareholders' expectations by considering the company's resources, its business development, and capital market conditions while striving to enhance returns appropriately.

Operator (participant)

Thank you for all the questions. I see no further questions at this time. I will now hand the conference back to Will for closing remarks.

Will Tan (Head of Capital Markets)

Thank you, Operator. This conference is now concluded.

Thank you for joining today's call. If you have any more questions, please do not hesitate to contact us. Thanks again.