Q4 2022 Lexinfintech Holdings Ltd Earnings Call

March 14, 2023

Speaker 2: Today and thank you for standing by. Welcome to Low-Sync Syntax 4.4 and 4-year 2022 owning contrast call. At this time all participants are in the listen only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you need to press star 11 on your telephone.

Speaker 3: With us on the line today are our CEO Jay Hsiao, President Jared Wu, and CFO James Jung. Before we get started, I'd like to remind you that the call and presentation containing business outlook and forward-looking statements, which are based on the assumptions as of today.

Speaker 3: The actual results might differ materially, and we undertake no obligation to update any forward-looking statements. Jay will first provide an update on our overall performance. James will cover the financial results in more detail. And lastly, Jared will then discuss risk management.

Speaker 3: I'll now turn the call over to our DOJ. His remarks will be in English and the, sorry, his remarks will be in Chinese and the English translation will follow. Okay.

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Speaker 3: Good morning and good evening everyone. It's my pleasure to introduce you again. In the fourth quarter of 2022, the COVID situation in China underwent a major turning point, bringing considerable pressure to the Chinese economy. But despite the such pressure, we were able to achieve satisfactory results by rigorously adhering to a strategy that was not yet established.

Speaker 3: representing an increase of 29% year-over-year.

Speaker 3: with total outstanding loan balance reaching $99.6 billion as of December 31, 2022, representing an increase of 16.6% year-over-year.

Speaker 3: Total revenue reached $3.1 billion, representing an increase of 38.7% year-over-year, with net income reaching $301 million, representing an increase of 17.9% year-over-year.

Speaker 3: Our asset quality continues to steadily improve.

Speaker 3: In addition, funding costs decreased to 6.8% from 7.0 in the third quarter. Our net profit margin increased substantially from 4.8% in the first quarter of 2022 to 9.9% this past quarter.

Speaker 3: From our fourth quarter numbers, we can see that Lixin has clearly produced three consecutive quarters of steadily improving profitability, realizing a V-shaped recovery.

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Speaker 3: To be more specific, there were three main highlights for the past quarter. First, the continued improvement in asset quality.

Speaker 3: Second, the ability of our installment e-commerce platform service business to deliver growth against a weak backdrop and breakthroughs in our tech empowerment service sector, which achieved its first quarterly profit. And third, notable results in reducing operating costs and in increasing efficiency.

Speaker 3: On asset quality, although we were affected by the COVID outbreak, Leshin was able to continue our stable and upward trajectory in asset quality.

Speaker 3: which was accomplished through our focus on continuous improvement to our risk management capability.

Speaker 3: and our progress in refining our operations. And this can be seen from our existing and our new customers.

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Speaker 4: We took the following two steps.

Speaker 3: First, we improved our ability to identify prime customers from our data and through deeper data mining of the information available with Lixing's ecosystem. We refined our ability to identify different customer segments.

Speaker 3: In particular, we continue to data mine and obtain valuable information from the PBOC's credit data.

Speaker 3: This allowed us to more deeply and comprehensively to improve our customer risk assessment related profiles.

Speaker 3: in multiple dimensions, including customer risk profile, income level information, asset information, and existing customer liability.

Speaker 3: In the application of our models, we were able to finalize the joint modeling of over 10 data loops.

Speaker 3: Building an accurate ROI evaluation framework in the progress.

Speaker 3: Improvements in our ability to identify prime customers allowed us to dedicate greater resources towards serving this customer segment.

Speaker 3: while also expediting the reduction of high-risk segments.

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Speaker 3: Second, we applied our Tian-den-Tian-Mian policy, which refines our operating strategy by improving our ability to identify different customer groups and segments via more accurate segmentation capabilities.

Speaker 3: enabling us to dig deeper to meet and satisfy the needs of different customer cohorts and improve our customer satisfaction rates and customer retention. form

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Speaker 3: In the fourth quarter, loan contributions from our prime customers increased by 60% year over year, while loan contributions from our high risk customers decreased by 13%.

Speaker 3: So prime customers as a percentage of loan increased from 72% in the fourth quarter of 2021 to 82% in the fourth quarter of 2022.

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Speaker 3: We continue to expand our data set and the use of our models.

Speaker 3: We have built a complete end-to-end RTA processing model, which has significantly improved our post-customer acquisition conversion rate by over 50%.

Speaker 3: We have improved the efficiency and accuracy of our customer identification capabilities by 20% through pre-landing and in-landing channel model iterations.

Speaker 3: We have also constructed a new operational matrix to continuously increase and improve the retention rate and the activity rate for both new and existing customers.

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Speaker 3: In the fourth quarter, the percentage of new prime customers with approved credit lines increased by 18.2%, with average ticket sizes for new customers increasing by 16.7 quarter over quarter. In the fourth quarter, the percentage of new customers with approved credit lines increased

Speaker 3: Online advertising costs to convert credit lines into active borrowers from the time of granting of the credit line to the time of the use of credit decreased by 25.9% over quarter over quarter for prime customers.

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Speaker 3: The second highlight was the ability of our installment e-commerce platform service business to deliver growth against a weak backdrop and outbreaks in our tech empowerment service sector.

Speaker 3: We should achieve its first quarterly profit.

Speaker 3: Our installment ecommerce platform service business, under a weak backdrop of poor overall consumption throughout the last year, was able to achieve $1.4 billion in GMB for the fourth quarter. Ok, we'll wrap that up and then we'll do ourAddictiveproof TO

Speaker 3: an increase of 40.2% year over year.

Speaker 3: Younger, more fashion-focused, non-electronic device disconsumption scenarios such as cosmetics, apparel, and footwear favored by younger demographics became our main driver, demonstrating notable increases in growth.

Speaker 3: further enhancing our competitive advantages in consumption scenarios and consumer demographics in the process.

Speaker 3: For the year 2022, our ecommerce platform Spen Qilu's total number of merchants grew by 103% year-over-year.

Speaker 3: with average ticket prices increasing by 39% year over year.

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Speaker 4: In addition, our tech empowerment service business is...

Speaker 3: Design for small and medium size banks has also made significant progress.

Speaker 3: Our service enables the digital transformation of our financial institutional partners by providing five core services.

Speaker 3: product development, customer acquisition channel co-building, joint risk management, customer life cycle management, and intelligent customer services, enabling our partners to achieve breakthroughs in their businesses.

Speaker 3: Our partners have been steadily growing wherever the cooperation has come online.

Speaker 3: And all new launches in the fourth quarter have progressed to scale.

Speaker 3: enabling our tech empowerment service business to achieve profitability for the quarter.

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Speaker 4: These two businesses are both critical components of our ecosystem, forming a mutually reinforcing cycle and linking with our main credit.

Speaker 3: consumption scenario as well as technological capabilities.

Speaker 3: will in time become our core competitive advantage, differentiating ourselves from our competition and establishing our sustainable long-term core competitive advantages.

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Speaker 3: for the fourth quarter were RMB 660 million, down 2.1% sequentially. In particular, GNA expenses decreased by 7% quarter over quarter to about RMB 97 million.

Speaker 3: Total expenses as a percentage of the outstanding loan balance have continued to decline in the second quarter of 2022.

Speaker 3: In addition, in the fourth quarter, we restructured some functions and downsized the headcount to further stimulate the overall vitality of the company and to improve organizational efficiency.

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Speaker 4: He hasn't forgotten hissoft group of colleagues and people with such amazingly smart relationships. He's increases the success of the company. We figured, we begin with emphasis on good creating business and making the best as a firm owner, as a firm, research firm, and as an estate firm. Thank you for watching.

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Speaker 3: Behind the aforementioned operational achievement is the continued enhancement of our data and technological capability.

Speaker 3: R&D expenses for the fourth quarter was approximately R&D 136 million, which represents a leading position in the industry. Sloane's unique smart business engine has integrated digital and intelligent capabilities into every key aspect of our daily operation and enterprise.

Speaker 3: specifically in terms of system capabilities we further apply the indicator variation and intelligent attribution system to the core notes of our transaction and risk management systems.

Speaker 3: We built a unified event management platform covering all internal and external events related to products and technology, greatly improving our data efficiency and accuracy.

Speaker 3: In terms of model applications, we continue to improve our life cycle model and have developed and iterated more than 30 targeted marketing models.

Speaker 3: among which our model matrix of customer intent and customer reaction is able to cover scales of

Speaker 3: 10 million users per month and has achieved meaningful results.

Speaker 3: For specific customer groups, after using our models, order rates have increased by 30%, with our pool and profits increasing by over 50%.

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Speaker 3: Finally, I would like to update you on Lixin's corporate social responsibility initiatives.

Speaker 3: In the first half of 2022, we launched a specific program called Xiaogian Yanghuo to help relieve small and microenterprise with their cash liquidity problems.

Speaker 3: In the fourth quarter, we continue to provide assistance, enabling the total amount of small and microloans to reach 5 billion for the quarter.

Speaker 3: In February of this year, a follow-up program called Chen Yu Xiaofei Fu Fu Hing Zong was launched, which aims to promote a recovery in consumption through our nine initiatives and three directives.

Speaker 3: promoting individual consumption, facilitating merchant growth, and enabling the recovery of small and micro-sized businesses.

Speaker 3: In addition, to better protect customers, we are currently instituting a 24-7 customer protection hotline, which will also further enhance our customer satisfaction rate.

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Speaker 3: Going forward, we see an accelerated pace of recovery for domestic consumption and improved tobacco economic environment.

Speaker 3: So we remain cautiously optimistic about the prospects for business growth this year.

Speaker 3: In 2023, we will make sustainable profitability, which is Laotian's main objective.

Speaker 3: For comfort staff, which we'll take towards this goal are.

Speaker 3: First, it's to continue to strengthen our risk management systems and build our core capabilities.

Speaker 3: further improving our asset quality in the process.

Speaker 3: Second, is to focus on refining our customer operations by improving our ability to identify and manage our prime customers from our existing ones.

Speaker 3: adjusting policies for our new customers based on the economic conditions, capturing the opportunities presented by the consumption recovery through investing in customer acquisition at the opportune time.

Speaker 3: continuing to both improve our customer quality and quantity and improving asset quality in the process.

Speaker 3: Third, it's to strengthen Leqing's unique business ecosystem, including online consumer finance, offline pukui team, installment e-commerce platform service, tech empowerment service, and more, allowing our multiple and diverse businesses to become mutually supportive and mutually reinforcing.

Speaker 3: generating a virtuous cycle. Fourth is to continue to reduce costs and improve efficiency, increasing our ability to generate sustainable profits in the process.

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Speaker 3: In the fourth quarter of 2023, our Chengzhou Long balance exceeded RMB 100 billion, marking another milestone in a company's growth and development.

Speaker 3: With the exception of the beginning of the first quarter, which was negatively impacted by the tail end of the COVID outbreak,

Speaker 3: All risk management related metrics have started to recover since February , and we expect both our loan originations and profitability for the first quarter of 2023 to improve from levels achieved in the fourth quarter of 2022.

Speaker 3: In addition, we expect to continue double-digit growth in both our loan origination and net profit for the year 2023.

Speaker 3: Let me now hand over the call to our CFO for the financial update. Thank you. Okay. I will now provide more details on our financial results. Please note that all numbers are in RMB terms unless otherwise stated.

Speaker 2: In the fourth quarter, we continued our third consecutive quarter of recovery, both in our overall business and in our financial numbers. This was in spite of the impact of COVID and weaker economic conditions.

Speaker 2: Our continued recovery was the result of the management's continuous efforts in overhauling our risk management, focusing on better quality user segments, upgrading our technology and operational capabilities, as well as our new cost-restructive initiatives. But first...

Speaker 2: Please let me explain at a high level what happened in the quarter as compared to the same quarter of 2021.

Speaker 2: Total loan originations for the quarter reached 56.1%, an increase of 29% year-over-year in spite of the COVID outbreak and meeting the high end of our guidance.

Speaker 2: Revenue grew by 38.7% year-over-year to reach 3.1 billion for the quarter, which was mainly driven by the GMB growth.

Speaker 2: The weighted average APR stood at approximately 24% for the fourth quarter, with close to two percentage points lower than a year ago.

Speaker 2: Loans with APR under 24% now make up more than 83% of all loans.

Speaker 5: Partially offsetting the negative impact from the lowered APR.

Speaker 5: on our loans was a decrease in our cost of funding from 7.7% a year ago to 6.8% in the fourth quarter.

Speaker 5: Long tenors increased to 13.9 months versus 10.3 months a year ago.

Speaker 5: Importantly, we have been relentless in our focus on overhauling our risk management. This includes a focus on better credit user segments and rebuilding the team, the systems, and the infrastructure.

Speaker 5: Jared will elaborate more on this shortly. The improved results from our efforts can be partially seen in our 90-day plus delinquency rate, which was at 2.53% in the fourth quarter as compared to 2.66% in the third quarter.

Speaker 5: The 30-day plus delinquency rate was at 4.62%, basically remaining stable as compared to third quarter, in spite of the rapidly deteriorating COVID situation in December .

Speaker 5: At the same time, we have launched a new initiative to restructure our costs by benchmarking against the industry. We have seen some early improvements to operating expenses, specifically processing and servicing costs, sales and marketing, research and development, and G&A expenses combined.

Speaker 5: as the percentage of average loan balance are at about 1.2% as compared to 1.3% in the third quarter.

Speaker 5: GNA expense as a percentage of average loan balance stood at 0.1% versus 0.12% in Q3.

Speaker 5: Of course, we realize this is only a very small start, but we will be sure to fully explore all the opportunities to improve our operational efficiency in the future.

Speaker 5: As a result of the aforementioned, we are able to report net income of $301 million, an increase of 18% year-over-year. This is not an easy achievement in light of the severe impact of the COVID outbreak and the weak macroeconomic conditions.

Speaker 5: Apart from the above year-over-year analysis, I would also like to elaborate a little bit more on the progress achieved through some quarterly comparisons.

Speaker 5: Total GMV was 56.1 billion, almost flat from Q3, as we have generally taken a more prudent approach towards scale in terms of the uncertainty around COVID for all of 2022.

Speaker 5: However, total Q4 revenue grew 13.4% quarter over quarter due to an improved take rate of 2.59% versus 2.55% in Q3.

Speaker 5: The upgrade is the result of an overall improvement in asset quality and lowered funding costs.

Speaker 5: which has continued to improve since the beginning of the year.

Speaker 5: Operating expenses declined by 2.1% quarter over quarter as a result of our cost of destruction initiatives and this in turn led to a sequential growth in net income of 9.3%.

Speaker 5: In summary, we have made great progress during the fourth quarter of past year from both a year-over-year and a quarter-over-quarter perspective.

Speaker 5: If you take a look at the four year 2022 numbers, total GNV was $204.6 billion, a decrease of only 4.3% year over year, with the total loan balance reaching $99.6 billion, an increase of 15.9% year over year. So the revenue was $9.9 billion.

Speaker 5: a decline of 13.3% year over year. Obviously, like most other companies, we have been negatively impacted by the weak macro environment.

Speaker 5: However, since hitting the lowest point in earnings in first quarter of 2022, we have since seen a continuous recovery in profitability, and the fourth quarter represents the third consecutive quarter of this recovery.

Speaker 5: This demonstrates the resilience and the sustainability of our business.

Speaker 5: We fully realize that, even when we turn around, we still have a long way to go, but the fourth quarter of 2022 should mark the end of three years of macro-related uncertainty, with the ending sounding on a bit of a positive note.

Speaker 5: Next, let's take a detailed look at the financials. As mentioned, our total operating revenue for the fourth quarter was 3.1 billion, representing an increase of 13.4% quarter over quarter and 38.7% year over year.

Speaker 5: Revenue from credit facilitation service was approximately $2.0 billion, representing a 17.9% increase quarter over quarter and an over 71.4% increase year over year.

Speaker 5: Revenue from tech empowerment service was $413 million, representing a 17.4% decrease quarter over quarter and 34.6% year over year, which was mainly due to the COVID impact, where both the volume and rev-share percentage were lowered.

Speaker 5: Revenue from installment e-commerce platform service was $674 million, representing an increase of 28.4% from the last quarter and an increase of 59.3% year-over-year, which can be attributed to a single-day shopping festival.

Speaker 5: Moving on to the expense side of this quarter, sales marketing expense decreased by 0.4% quarter over quarter, which was mainly due to our scaled-down approach to new user acquisition in a time of macro uncertainty.

Speaker 5: Recently, however, we have noticed an improvement in user credit quality as well as improved economic activity.

Speaker 5: We will continue to closely monitor this and other macro indicators, and we will be sure to seize on the right opportunities to invest in new user acquisition when conditions are favorable.

Speaker 5: Research and development expenses decreased by 3.5% quarter over quarter, and decreased 17.1% year over year to 136 million.

Speaker 5: General and administrative expenses decreased by 7% quarter over quarter at 17.9% year over year to $97 million.

Speaker 5: While our top-line revenue continued a promising upward trajectory this year, G&A expenses remained very stable and decreased on a quarter-over-quarter basis for three consecutive quarters, demonstrating the continuous improvements to our operating efficiency, which we expect to continue in the future.

Speaker 5: Their profit was approximately 301 million in the fourth quarter, a 9.3% increase quarter over quarter, and a 17.9% year over year in line with our expectation.

Speaker 5: Next, some updates on our shared repurchase program and our convertible notes.

Speaker 5: First, on our share repurchase program, in March 2022, the company's board authorized a $50 million share-slash-ADS repurchase program. And in addition, in November 2022, the company's board authorized a second share repurchase program.

Speaker 5: under which the company could purchase up to an aggregate of $20 million of its shares slash ADS over the next 12 months. As of December 31, 2022, the company had repurchased a total of approximately 22 million ADS for about $48 million.

Speaker 5: Le Xing's management remains open to making further repurchases in the future. Separately, on our convertible notes.

Speaker 5: We have entered into an amendment agreement with PAG regarding our existing convertible notes in the amount of 300 million US dollars.

Speaker 5: According to the original payment schedule, the company was potentially expected to pay the principal plus interest in one lump sum in September 2023. With the amendment, we are able to begin the repayment ahead of the original schedule and complete the installment payment plan over a 14-month period.

Speaker 5: ending in April 2024. The notes remain convertible into fully paid Class A ordinary shares of the company or ADS at the original conversion price of $14 per ADS at the holder's option. At the end of 2022, the company had a cash position of $4.1 billion on hand from Kurlick and Stone, India.

Speaker 5: and a net equity position of 8.6 billion. Although Leshin has a strong balance sheet and sufficient cash reserves to meet the original terms of the convertible notes agreement.

Speaker 5: We see the new arrangement as more beneficial for the company as it will allow us to smooth out the cash flow impact from the repayment as opposed to a single lump sum payment.

Speaker 5: This will give us more time and flexibility to efficiently plan and utilize capital in pursuing business growth opportunities.

Speaker 5: Finally, I would like to discuss our outlook for the first quarter of 2023.

Speaker 5: Based on the company's preliminary assessment of current market conditions, total loan originations for the first quarter of 2023 are expected to be around 60 billion RMB, representing an increase of 39% on a year-over-year basis. These estimates reflect the company's current expectations, which is subject to change.

Speaker 5: For 2023, as Jay mentioned earlier, we remain cautiously optimistic about China's macroeconomic recovery, consumption outlook, and a stabilized regulatory environment.

Speaker 5: Currently, we can see that our turnaround is well underway.

Speaker 5: as we continuously improve and revamp ourselves to be able to better meet the new challenges and address new opportunities ahead.

Speaker 5: We are looking forward to establishing a more solid and sustainable foundation for our future growth and profitability.

Speaker 5: With that, I would like to turn the call over to our president, Jared Wu, who will discuss our risk management.

Speaker 5: With that, I would like to turn the call over to our president, Jared Wu, who will discuss our risk management. Jared, please go ahead.

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Speaker 3: on stable risk policies and proven customer acquisition, as well as the use of our previously built COVID risk monitoring system and refined management mechanisms, we were able to mitigate the short-term impact. At the end of the fourth quarter, we were able to hold our 30 plus day delinquency rate quiet.

Speaker 3: compared to the third quarter at 4.62%. With our 95 state delinquency rate continuing a steady decrease to 2.53%, down 13 basis points quarter over quarter. As a result of the trends that we're observing right now, with a recovery in China's social and economic activities after the Chinese New Year, we are seeing all our credit metrics recovering

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Speaker 3: In the fourth quarter, increasing the overall percentage of our prime customers was our top priority. With our focus on this goal throughout the past year, we have worked on continuously improving our overall risk management in the following areas.

Speaker 3: First, we focus on our prime customers by restructuring our user tiering system. This new system enables us to target the prime customer group in a more focused manner.

Speaker 3: Second, to further improve our core risk management capability, we invested heavily in the acquisition and utilization of complaint external.

Speaker 3: compliant external data sources and have substantially improved our ability to data mine such data to further segment users with different risk profiles.

Speaker 3: In particular, we put heavy emphasis on the credit data from the EEOC, with our mining and usage of this data increasing dramatically.

Speaker 3: We put heavy emphasis on the credit data from the EEOC, with our mining and usage of this data increasing dramatically. 3.

Speaker 3: Due to the improvement on our capacity to handle data, we are able to more quickly perform higher iterations of our user identification models to target different customer segments, and we have made significant strides in user risk recognition.

Speaker 3: As a result of the above improvements, we are seeing notable increases in the rate of improvement in our asset quality, which is being demonstrated in our fourth quarter and in our first quarter risk performance metrics of the 2023.

Speaker 3: Since the beginning of the year, we have noticed that our day one delinquency rate has followed a downward trend. On the basis of our continuous investment and the current trend, we are confident that in 2023, our risk management capabilities will make additional improvements and breakthroughs.

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Speaker 3: macroeconomic conditions and trends, we will remain cautiously optimistic, adhering to a policy of putting risk management first and focusing on laying a solid ground for the healthy, sustainable, long-term and balanced worlds of the company. Thank you. This concludes our prepared remarks. Operator, we're now ready to...

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Speaker 7: Then I'll do the translation. Hello, management. This is Yadao from CSDC and thanks for taking my question.

Speaker 7: My question is, from the user demand side after the COVID, currently are we experiencing a notable recovery? And I was wondering what's the guidance on loan growth in the coming quarters and the full year 2023 and 2024. That's all. Thank you. Thank you. Thank you.

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Speaker 3: Okay, we can feel for ourselves the fast recovery of the consumption of the entire nation actually, especially on individual consumption, say for example, offline restaurants.

Speaker 3: touring spots, you can see people lining up for restaurants, waiting. And me, myself, for the past three years during the COVID, you know, time, while I myself was driving, there never was much of the traffic, even in Shenzhen, but right now we are seeing traffic jams literally everywhere. As for our company, Luqing, itself,

Speaker 3: For the ticket side of our scale, we were not terribly affected by the overall consumption scenario. Our risk is that the ticket side of our scale is not terribly affected by the overall consumption scenario.

Speaker 3: risk alone was actually better alongside with the recovery of the consumption, especially after Chinese New Year we're seeing a better risk indicators with the macroeconomic revival and recovery of the entire nation.

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Speaker 3: So as far e-commerce platform, as we mentioned earlier, it actually saw a growth a little bit against the overall e-commerce trend as our nation's economy not being a little bit hit by the overall COVID restrictions and all the policies, all that for the past several years, especially past year. The credit needs actually grew.

Speaker 3: And for us, we are a little bit different from other e-commerce platforms. We are still mostly mainly credit driven. So in a way, when the macro economy is not as good as before, our suddenly was actually

Speaker 3: we are a little bit different from other e-commerce platforms. We are still mostly mainly credit driven. So in a way when the macro economy is not as good as before, our suddenly was actually it actually went higher.

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Speaker 4: So, if you want to see more of our videos, please subscribe to our channel. And if you want to see more of our videos, please subscribe to our channel. Thank you for watching!

Speaker 4: for the end of the session. Thank you for joining us. Now, we'll make a change in the YouTube video. Please, like and subscribe. Thank you for watching.

Speaker 3: So for the full year guidance for 2023, well overall we are confident on the recovery of the overall consumption of the country, but we, like we said before, we are continuously to remain prudently optimistic.

Speaker 3: we still put sustainable development, especially on the profitability first. And we are, we will take actions when the time is right to invest in S&M.

Speaker 3: And we actually do believe it will be a good year for Lishing to develop, especially after the last year, which was 2022. We had a turnaround, we had a strategic adjustment of the company. In terms of the full year loan guidance, we expected as of right now,

Speaker 3: Under current situation on our speculation, it should be around $245 billion to the top line of $255 billion.

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Speaker 3: And also this year our installment e-commerce platform services as well as tech empowerment service business will be both of our other two growth drivers as well.

Speaker 2: Thank you for the questions. One moment for the next questions.

Speaker 2: Next question is from Alex Yale of UBS. Please go ahead.

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Speaker 6: Q and A I have two questions. First one is on the S-Accordy. Management has mentioned that various indicators have shown that multiple improvements at the beginning of the year. I'm wondering if you can share any color on

Speaker 6: What's the expectation in 1023 in terms of the magnitude of improvement versus last year? For example, in terms of the vintage charge of ray and the annualized credit cost perspective. Second question is on the loan pricing and funding cost. I'm wondering what extent we expect them to decline in this year and their implications for our tech-free outlook. Thank you.

Speaker 4: Okay. Thanks, everybody. A couple more questions. Maybe we know how to prepare my

Speaker 4: If you want to learn more about the assistance of Chinese people, you can visit our website at www.xiong.com If you want to learn more, you can visit our website at www.xiong.com SHOW THE Um,

Speaker 4: that we have China's I hope you enjoyed this video. Please subscribe to my channel. See you soon.

Speaker 4: Just had another take and yield in a gener generis hand. You know, without know, you already mention a, got a, E got a, you dynam, you come down. So now at a we might going into a just a quiring moment. And you get A. what moment? In Ghana, just a y talkp and the positive V, the R C like.

Speaker 4: So, we are going to try to find out what is the most important thing. So, we will try to find out what is the most important thing. So, we will try to find out what is the most important thing.

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Speaker 3: Okay, in terms of the asset quality, for the year 2023, as I mentioned earlier, we are still confident in the macro environment. We are still confident in putting our risk management.

Speaker 3: as one of our priority and also the optimization of our customer segmentation as well as the mixing of the matrix and modeling. We expect to continue our risk indicator to continue to decrease in risk level, especially with the percentage of our R123 prime customers in our new loan.

Speaker 3: continue to increase and we target to expedite to shrink down the size of the R628, which are less high risk customers. As the new loan structure gets better, the overall structure gets utilized and optimized. The overall structure of the outstanding loan gets better. Our risk management can show...

Speaker 3: to the pricing level to be around this range.

Speaker 3: In terms of take rate, as our risk level gets better, like I mentioned earlier, the funding costs continue to decrease. As you might have heard earlier in my script, we mentioned that this quarter, for the fourth quarter of 2022, our funding costs actually lowered comparatively, sequentially, even quarter over quarter. Since this year, US 214 has been out of thechuxt NC amid the are jaw-w Coll crushing themes

Speaker 2: Thank you. Hope that answers your question, Alex. Thank you for the questions. One moment for the next questions. Next, we have Zoe Zhou from CLSA. Please ask your question.

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Speaker 8: to achieve the full compliance in terms of all the existing long price below 24%. And second, with our business strategy between capital life and capital heavy model going forward. Thank you. Thank you.

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Speaker 3: for the 14 platforms are more on the decoupling, disconnecting from the banks. And also it's worth noting that we are both simultaneously in discussion with Baihang as well as Pudao. Especially with Pudao, we are expect as of right now, based on the progress.

Speaker 3: to have the trial run by or before June 30th. But right now, as far as we know, with all the adjustment as well as all the changes with the regulators, the ratification and the actual deadline, it's possible to be delayed.

Speaker 3: and also with the new structure, the regulator structure being adjusting, the date, there is the possibility of a postpone of a date and the regulators foundation might need time to cohort itself, put themselves together in a more formal and regulated way to actually proceed.

Speaker 5: Basically, you're asking about the capital line model. Right now, the revenue share model with the financial partners basically accounts, you know, about, in terms of revenue, accounts roughly about 20 to 30%. So, you know, the revenue share model, you know, is about $2.5 million. So, you know, the revenue share model, you know, is about $2.5 million. So, you know, the revenue share model,

Speaker 5: I think this will continue to be our target for the remaining of the year. Obviously, this is the balance between the risk you are taking versus the profitability, right? So if we increase the risk taking on the business side, obviously this will increase the price.

Speaker 5: gradually increase the capitalized model. And what will help us in this regard is that we have the tech empowerment business that we have with the medium to smaller sized banks. And with increase of that business, obviously, we will increase the rev share with the financial partners. Eventually, this will lead to a gradual increase in capitalized capitalization.

Speaker 5: of the capitalized model. Hope this answers your question.

Speaker 2: Thank you very much. With that, I'd like to hand the call back to the management for closing remarks. Thank you.

Speaker 3: Thank you again, everyone, for joining us today. If you have further questions, please contact us via our contact information available on our IR website. Thank you.

Speaker 3: Thank you again, everyone, for joining us today. If you have further questions, please contact us via our contact information available on our IR website. Thank you. Thanks. Bye-bye. Thank you.

Speaker 2: Conclude today's conference call. Thank you for your participation. You may now disconnect.

Speaker 9: Thank you..

Speaker 1: The conference will begin shortly. To raise and lower your hands.

Speaker 1: The F and F P.

Speaker 1: I have.

Speaker 2: To ask a question during the session, you need to press star 11 on your telephone. This is the advice that today's conference is being recorded. I'd now like to turn the conference over to your first speaker today, Mr. Jamie Wong, IR manager. Thank you. Please go ahead.

Speaker 3: Thank you Desmond. Hello everyone. Welcome to Leshin's fourth quarter and full year 2022 Earnings Conference call. With us on the line today are our CEO Jay Shao, President Jared Wu and CFO James Jung. Before we get started, I'd like to remind you that the call and presentation containing Business Outlook and forward looking...

Speaker 3: more detail. And lastly, Jared will then discuss risk management.

Speaker 3: I'll now turn the call over to our DOJ. His remarks will be in English and the, sorry, his remarks will be in Chinese and the English translation will follow. Okay.

Speaker 4: President Xi and Faith,, Thanks for the invitation. We will continue to ice perfectly on this topic every hour. Thank you.

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Speaker 3: year with total outstanding loan balance reaching $99.6 billion as of December 31, 2022, representing an increase of 16.16% year-over-year. Total revenue reached $3.1 billion, representing an increase of 38.7% year-over-year.

Speaker 3: with net income reaching $301 million, representing an increase of 17.9% year over year. Our asset quality continues to steadily improve.

Speaker 3: From our fourth quarter numbers, we can see that Lixin has clearly produced three consecutive quarters of steadily improving profitability, realizing a V-shaped recovery.

Speaker 4: To be more specific, there were three main highlights for the past quarter. My fairly close friends all hell that you guys said when you saw my photo.

Speaker 3: The continued improvement in asset quality. Second, the ability of our installment e-commerce platform service business to deliver growth against a weak backdrop. And breakthroughs in our tech empowerment service sector, which achieved its first quarterly profit. And third, notable results in reducing operating costs and in increasing efficiency. Thank you for your attention.

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Speaker 3: First, we improved our ability to identify prime customers from our data and through deeper data mining of the information available with Lu Xing's ecosystem, we refined our ability to identify different customer segments. In particular, we continued to data mine and obtain valuable information from the PBOC's credit data. We evaluated the

Speaker 3: This allowed us to more deeply and comprehensively to improve our customer risk assessment related profiles.

Speaker 3: in multiple dimensions, including customer risk profile, income level information, asset information, and existing customer liability. In the application of our models, we were able to finalize the joint modeling of over 10 data loops.

Speaker 3: building an accurate ROI evaluation framework in the progress. Improvements in our ability to identify prime customers allowed us to dedicate greater resources towards serving this customer segment.

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Speaker 4: and improve our customer satisfaction rate and customer retention. Please HeatherMusic. slip and technical volunteeringetting, please Together forwarding Ho happens, Feather contributive communication, Narfl Division of Public Education in the fourth quarter in October 2018

Speaker 3: loan contributions from our prime customers increased by 60% year over year, while loan contributions from our high risk customers decreased by 13%.

Speaker 3: So prime customers as a percentage of loan increased from 72% in the fourth quarter of 2021 to 82% in the fourth quarter of 2022.

Speaker 4: For our new customers, we continue to expand our data set and the use of our models.

Speaker 3: We have built a complete end-to-end RTA processing model, which has significantly improved our post-customer acquisition conversion rate by over 50%. We have improved the efficiency and accuracy of our customer identification capabilities by 20% through pre-landing and in-landing channel model iterations.

Speaker 5: We have also constructed a new operational matrix to continuously increase and improve the retention rate and the activity rate for both new and existing customers. We have also constructed a new operational matrix to continuously increase and improve the retention rate and the activity rate for both new and existing customers.

Speaker 3: In the fourth quarter, the percentage of new prime customers with approved credit lines increased by 18.2%. With average ticket sizes for new customers increasing by 16.7, quarter over quarter, the percentage of new customers with approved credit lines increased by 18.2%. With average ticket sizes for new customers with approved credit lines increased by 18.2%,

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Speaker 3: which achieve its first quarterly profit.

Speaker 3: Our installment ecommerce platform service business, under a weak backdrop of poor overall consumption throughout the year last year, was able to achieve $1.4 billion in GMB for the fourth quarter. Our ecommerce platform service business, under a weak backdrop of poor overall consumption throughout the year last year, was able to achieve $1.4 billion in GMB for the fourth

Speaker 3: an increase of 40.2% year over year. Younger, more fashion focused, non-electronic device disconsumption scenarios such as cosmetics, apparel, and footwear favored by younger demographics became our main driver, demonstrating notable increases in growth.

Speaker 3: further enhancing our competitive advantages in consumption scenarios and consumer demographics in the process.

Speaker 3: For the year 2022, our e-commerce platform, Spengilu, total number of merchants grew by 103% year-over-year.

with average ticket prices increasing by 39% year over year.

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In addition, our tech empowerment service business, designed for small and medium size banks, has also made significant progress. Our service enables the digital transformation of our financial institutional partners by providing high-performance services.

customer acquisition channel co-building, joint risk management, customer life cycle management, and intelligent customer services, enabling our partners to achieve breakthroughs in their businesses.

Our partners have been steadily growing wherever the cooperation has come online.

And all new launches in the fourth quarter have progressed to scale, enabling our tech empowerment service business to achieve profitability for the quarter.

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Luching's ecosystem, which is integrated with different businesses in various consumption scenarios, as well as technological capabilities, will in time become our core competitive advantage, differentiating ourselves from our competition and establishing our sustainable long-term core competitive advantages.

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The third highlight is related to the notable results in reducing operating costs and increasing efficiency. Total expenses for the quarter were RMB 660 million, down 2.1% annually.

In particular, GNA expenses decreased by 7% quarter over quarter to about RMB 97 million. Total expenses as a percentage of the outstanding loan balance have continued to become in the second quarter of 2022. In addition, in the fourth quarter, the total expenses increased by 7% quarter over quarter

We restructured some functions and downsized the headcount to further stimulate the overall vitality of the company and to improve organizational efficiency.

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twent to 13, coaching in moting Co anuities and pendo sciens poular to onuities and T top of endors. Behind the aforementioned operational achievement is the continued enhancement of our data and technological capability.

R&D expenses for the fourth quarter was approximately R&D 136 this year, which represents a leading position in the industry. Slooshin's unique smart business engine has integrated digital and intelligent capabilities into every key aspect of our daily operation and enterprise.

Specifically, in terms of system capabilities, we further apply the indicator variation and intelligent attribution system to the core nodes of our transaction and risk management systems. We built a unified event management platform covering all internal and external events related to products and technology, greatly improving our data efficiency and accuracy.

In terms of model applications, we continue to improve our life cycle model and have developed and iterated more than 30 targeted marketing models.

among which our model matrix of customer intent and customer reaction is able to cover scales of

10 million users per month and has achieved meaningful results. For specific customer groups, after using our models, order rates have increased by 30%, with our pool and profits increasing by over 50%.

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Finally, I would like to update you on Lu Xing's corporate social responsibility initiative.

In the first half of 2022, we launched a specific program called Xiaogian Yanghuo to help relieve small and micro-enterprise with their cash liquidity problems.

In the fourth quarter, we continue to provide assistance, enabling the total amount of small and microloans to reach 5 billion for the quarter.

In February of this year, a follow-up program called Chen Yu Xiaofei Fu Fu Hing Zong was launched, which aims to promote a recovering in consumption through our nine initiatives and three directives.

promoting individual consumption, facilitating merchant growth, and enabling the recovery of small and micro-sized businesses. In addition, to better protect customers, we are currently instituting a 24-7 customer protection hotline.

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Going forward, we see an accelerated pace of recovery for domestic consumption and improved agricultural environments.

So we remain cautiously optimistic about the prospects for business growth this year.

In 2023, we will make sustainable profitability, which is Li Zhejing's main objective. Our concrete steps, which we will take towards this goal are...

First, it's to continue to strengthen our risk management systems and build our core capabilities, further improving our asset quality in the process.

Second, it's to focus on refining our customer operations by improving our ability to identify and manage our prime customers from our existing ones. Adjusting policies for our new customers based on the economic conditions, capturing the opportunities presented by the consumption recovery through investing in customer acquisition at the opportune time.

Continuing to both improve our customer quality and quantity and improving asset quality in the process.

Third, it's to strengthen Leqing's unique business ecosystem, including online consumer finance, offline pukui team, installment e-commerce platform service, tech empowerment service, and more, allowing our multiple and diverse businesses to become mutually supportive and mutually reinforcing.

generating a virtuous cycle. Fourth is to continue to reduce costs and improve efficiency, increasing our ability to generate sustainable profits in the process.

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In the fourth quarter of 2023, our total long balance exceeded RMB 100 billion, marking another milestone in a company's growth and development.

With the exception of the beginning of the first quarter, which was negatively impacted by the tail end of the COVID outbreak, all risk management related metrics have started to recover since February , and we expect both our long originations and profitability for the first quarter of 2023.

to improve from levels achieved in the fourth quarter of 2022. In addition, we expect to continue double-digit growth in both our loan originations and net profits for the year 2023.

Let me now hand over the call to our CFO for the financial update. Thank you. Okay. I will now provide more details on our financial results. Please note that all numbers are in RMB terms unless otherwise stated. In the fourth quarter, we continued our third consecutive quarter of recovery, both in our overall business.

upgrading our technology and operational capabilities, as well as our new cost-resurrective initiatives.

First, please let me explain at a high level what happened in the quarter as compared to the same quarter of 2021.

Total loan originations for the quarter reached 56.1 billion and an increase of 29% year-over-year in spite of the COVID outbreak and meeting the high end of our guidance. Revenue grew by 38.7% year-over-year to reach 3.1 billion for the quarter, which was mainly driven by the GMV growth. The weighted average APR stood at approximately 24% for the fourth quarter.

close to two percentage points lower than a year ago. Loans with APR under 24% now make up more than 83% of all loans.

Partially offsetting the negative impact from the lowered APR on our loans was a decrease in our cost of funding from 7.7% a year ago to 6.8% in the fourth quarter. Long tenors increased to 13.9 months versus 13.9 months.

10.3 months a year ago. Importantly, we have been relentless in our focus on overhauling our risk management. This includes a focus on better credit user segments and rebuilding the team, the systems, and the infrastructure.

months a year ago. Importantly, we have been relentless in our focus on overhauling our risk management. This includes a focus on better credit user segments and rebuilding the team, the systems, and the infrastructure. Jared will elaborate more on this shortly.

The improved results from our efforts can be partially seen in our 90-day plus delinquency rate, which was at 2.53% in the fourth quarter as compared to 2.66% in the third quarter.

The 30-day plus delinquency rate was at 4.62%, basically remaining stable as compared to third quarter, in spite of the rapidly deteriorating COVID situations in December . At the same time, we have launched a new initiative to restructure our costs by benchmarking against the industry. We have seen some early improvements to operating expenses.

Specifically, processing and servicing costs, self-marketing, research and development, and G&A expense combined as a percentage of average loan balance are at about 1.2% as compared to 1.3% in the third quarter. G&A expense as a percentage of average loan balance stood at 0.1% versus 0.2% in the

0.12% in Q3. Of course, we realize this is only a very small start, but we will be sure to fully explore all the opportunities to improve our operational efficiency in the future.

As a result of the aforementioned, we are able to report net income of $301 million, an increase of 18% year-over-year. This is not an easy achievement in light of the severe impact of the COVID outbreak and the weak macroeconomic conditions.

Apart from the above year-over-year analysis, I would also like to elaborate a little bit more on the progress achieved through some quarterly comparisons. Total GMV was 56.1 billion, almost flat from Q3, as we have generally taken a more prudent approach towards scale.

in terms of the uncertainty around COVID for all of 2022. However, total Q4 revenue grew 13.4% quarter over quarter due to an improved take rate of 2.59% versus 2.55% in Q3.

The uptake rate is the result of an overall improvement in asset quality and lowered funding costs which has continued to improve since the beginning of the year.

Operating expenses declined by 2.1% quarter over quarter as a result of our cost restructuring initiatives and this in turn led to a sequential growth in net income of 9.3%.

In summary, we have made great progress during the fourth quarter of the past year from both a year-over-year and a quarter-over-quarter perspective.

If you take a look at the four year 2022 numbers, total GNV was $204.6 billion, a decrease of only 4.3% year over year, with the total loan balance reaching $99.6 billion, an increase of 15.9% year over year. So the revenue was $9.9 billion.

a decline of 13.3% year over year. Obviously, like most other companies, we have been negatively impacted by the weak macro environment. However, since hitting the lowest point in earnings in first quarter of 2022, we have since seen a continuous recovery in profitability.

and the fourth quarter represents the third consecutive quarter of this recovery. This demonstrates the resilience and the sustainability of our business. We fully realize that, you know, we turned around, we still have a long way to go, but the fourth quarter of 2022 is a long way to go.

should mark the end of three years of macro-related uncertainty, with ending sounding on a bit of a positive note. Next, let's take a detailed look at the financials. As mentioned, our total operating revenue for the fourth quarter was $3.1 billion.

representing an increase of 13.4% quarter over quarter and 38.7% year over year. Revenue from credit facilitation service was approximately $2.0 billion, representing a 17.9% increase quarter over quarter and an over 71.4% increase year over year.

Revenue from tech empowerment service was $413 million, representing a 17.4% decrease quarter over quarter and 34.6% year over year, which was mainly due to the COVID impact, where both the volume and the rev share percentage were lowered. Revenue from installment e-commerce platform service was $9.2 million, which was mainly due to the COVID impact. Revenue from e-commerce platform service was $9.2 million,

was $674 million, representing an increase of 28.4% from the last quarter and an increase of 59.3% year-over-year, which can be attributed to a strong single-day shopping festival. Moving on to the expense side of this quarter.

sales marketing expense decreased by 0.4% quarter over quarter, which was mainly due to our scaled-down approach to new user acquisition in a time of macro uncertainty.

Recently, however, we have noticed an improvement in user credit quality as well as improved economic activity. We will continue to closely monitor this and other macro indicators and we will be sure to seize on the right opportunities to invest in new user acquisition when conditions are favorable. Research and development expenses decreased.

by 3.5% quarter over quarter and it decreased 17.1% year over year to 136 million. General administrative expenses decreased by 7% quarter over quarter at 17.9% year over year to 97 million.

While our top-line revenue continued a promising upward trajectory this year, G&A expenses remained very stable and decreased on a quarter-over-quarter basis for three consecutive quarters, demonstrating the continuous improvements to our operating efficiency, which we expect to continue in the future.

Their profit was approximately 301 million in the fourth quarter, a 9.3% increase quarter over quarter, and a 17.9% year over year in line with our expectation. Next, some updates on our shared repurchase program and our convertible notes. First, on our shared repurchase program, in March 22, 2020,

2022, the company's board authorized a $50 million share slash ADS repurchase program. And in addition, in November 2022, the company's board authorized a second share repurchase program under which the company could purchase up to an aggregate of $20 million of its shares slash ADS over the next 12 months. As of December 31st, 2022, the company had repurchased a total of approximately 22 million ADS.

for about 48 million US dollars. L

Separately, on our convertible notes, we have entered into an amendment agreement with PAG regarding our existing convertible notes in the amount of $300 million. According to the original payment schedule, the company was potentially expected to pay the principal plus interest in one lump sum in September 2023.

With the amendment, we are able to begin the repayment ahead of the original schedule and complete the installment payment plan over a 14-month period ending in April 2024. The notes remain convertible into fully paid Class A ordinary shares of the company or ADS at the original conversion price of $14 per ADS at the holder's option.

At the end of 2022, the company had a cash position of 4.1 billion on hand and a net equity position of 8.6 billion. Although Le Xing has a strong balance sheet and sufficient cash reserves to meet the original terms of the convertible notes agreement, we see the new arrangement as more beneficial for the company.

as it will allow us to smooth out the cash flow impact from the repayment as opposed to a single lump sum payment. This will give us more time and flexibility to efficiently plan and utilize capital in pursuing business growth opportunities.

Finally, I would like to discuss our outlook for the first quarter of 2023. Based on the company's preliminary assessment of current market conditions, total loan originations for the first quarter of 2023 are expected to be around 60 billion RMB.

representing an increase of 39% on a year-over-year basis. These estimates reflect the company's current expectation, which is subject to change. For 2023, as Jay mentioned earlier, we remain cautiously optimistic about China's macroeconomic recovery, consumption outlook, and a stabilized regulatory environment.

Currently, we can see that our turnaround is well underway as we continuously improve and revamp ourselves to be able to better meet the new challenges and address new opportunities ahead.

We are looking forward to establishing a more solid and sustainable foundation for our future growth and profitability. With that, I would like to turn the call over to our president, Jared Wu, who will discuss our risk management.

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Thank you James, good morning and good evening everyone. It's my great pleasure to be with all of you.

I'll elaborate more on our risk management measures and related progress. The impact of the COVID outbreak in December brought some pressure on our risk management, which in turn led to some short-term deterioration in our early risk metrics. But thanks to our continuous focus on stable risk policies and proven customer acquisition, as well as the use of our previously built COVID risk monitoring system and refined management mechanisms, we were able to mitigate the short-term impact.

With a recovery in China's social and economic activities after the Chinese New Year, we are seeing all our credit metrics recurring to normal levels and continue on a positive trajectory. Thank you.

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This new system enables us to target the prime customer group in a more focused manner.

Second, to further improve our core risk management capability, we invested heavily in the acquisition and utilization of complaint external.

compliant external data sources and have substantially improved our ability to data mine such data to further segment users with different risk profiles. In particular, we put heavy emphasis on the credit data from TOC, with our mining and usage of this data increasing dramatically.

and have substantially improved our ability to data mine such data to further segment users with different risk profiles. In particular, we put heavy emphasis on the credit data from TOC, with our mining and usage of this data increasing dramatically. Third,Ir

Due to the improvement on our capacity to handle data, we are able to more quickly perform higher iterations of our user identification models to target different customer segments, and we have made significant strides in user risk recognition.

As a result of the above improvements, we are seeing notable increases in the rate of improvement in our asset quality, which is being demonstrated in our fourth quarter and in our first quarter risk performance metrics of the 2023.

Since the beginning of the year, we have noticed that our day one delinquency rate has followed a downward trend. On the basis of our continuous investment and the current trend, we are confident that in 2023, our risk management capabilities will make additional improvements and breakthroughs.

2020 was a challenging year, but was also a year which actively raised our risk management capability to another level and rapidly implemented a more refined management system.

Going forward, as mentioned both by Jay and James, while we are encouraged by the improving macroeconomic conditions and trends, we will remain cautiously optimistic, adhering to the policy of putting risk management first and focusing on laying a solid ground for the healthy, sustainable, long-term and balanced growth of the company. Thank you. Thanks for joining us one last time. Thank you. Einstein.

This concludes our prepared remarks. Operator, we're now ready to take questions. Thank you. As a reminder to ask questions, please press star 1-1 on your telephone. To cancel requests, please press star 1-1 again. One moment for the first question.

First question comes from Li from CICC. Please go ahead. Please go ahead.

Then I will do the translation. Hello management. This is Yada from CSBC and thanks for taking my question. My question is from the user demand side after the COVID.

Currently, are we experiencing a notable recovery? And I was wondering what's the guidance on loan growth in the coming quarters and the full year 2023 and 2024. That's all, thank you. As you know, over the last seven months, minimum costs have gone down.

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We can feel for ourselves the fast recovery of the consumption of the entire nation.

the machine itself.

For the ticket side of our scale, we were not terribly affected by the overall consumption scenario. Our risk alone was actually better.

alongside with the recovery of the consumption, especially after Chinese New Year, we're seeing a better risk indicators with the macroeconomic revival and recovery of the entire nation. For the recent tax year, near physician etc, no issue.

We can think of a very basic solution in case of the second, The more information we get from gamingies, the better attention will be expressed as You may pass stabilized

So as far as e-commerce platform, as we mentioned earlier, actually saw a growth a little bit against the overall e-commerce trend as our nation's economy not being a little bit hit by the overall COVID restrictions and all the policies, all that for the past several years.

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So for the full year guidance for 2023, well overall we are confident on the recovery of the overall consumption of the country, but we, like we said before, we are continuously to remain prudently optimistic. We still put sustainable development especially on the profitability first and we are, we will take actions when the time is right to invest in S&M.

And we actually do believe it will be a good year for Le Xing to develop, especially after the last year, which was 2022, we had a turnaround, we had a strategic adjustment of the company. In terms of the four year loan guidance, we expected as of right now, under current situation on our speculation, it should be around 245 billion to the top line of 255 billion. We hope that the company will be able to develop a good year for Le Xing to develop, and we hope that it will be a good year for Le Xing to develop.

And also this year our installment e-commerce platform services as well as tech empowerment service business will be both of our other two growth drivers as well. Thank you. For the questions, one moment for the next questions. Next question is from Alex Yeh of UBS. Please go ahead.

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vintage charge-off rate, mobile, and credit costs. So I have two questions. First one is on asset quality. Manjiman has mentioned that various indicators have shown that

and to what extent do we expect them to decline in this year and their indication of our tech-grade outlook. Thank you.

leading to this refinishing of a technical sector that may not be Using or beyond the 7.9 million comes out of the Cause one, we need to think too much about a particular product. be done.

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Okay, in terms of the asset quality, for the year 2023, as I mentioned earlier, we are still confident in the future.

the percentage of our RR123 prime customers in our new loan continue to increase and we target to expedite to shrink down the size of the RR628 which are less high risk customers. On the new loan, as the new loan structure gets better, the overall structure gets utilized and optimized.

the overall structure of the outstanding loan gets better, our risk management can show a very prominent sign of decrease. In terms of APR, for this quarter, we already have over 80% mixed within 24, and for this quarter, our pricing is actually indefinitely close to 24%. In the near future, we expect the pricing level to be around this range.

In terms of take rate, as our risk level gets better, like I mentioned earlier, the funding costs continue to decrease. As you might have heard earlier in my script, we mentioned that this quarter, for the fourth quarter of 2022, our funding costs actually lowered comparatively, sequentially, even quarter over quarter. And we are, for this quarter, first quarter of 2023, seeing also lowered funding costs. So, these two factors together, we actually expect our take rate to continue to decrease.

And I will do the translation. Thank you for taking my question. This is Zoe from CSA. So the first question regarding the coupling of the right link and the right link.

We are wondering when we can target them to achieve the full compliance in terms of all the existing loan price below 24% and second, what's our business strategy between capital life and capital heavy model going forward? Thank you. ? Welchow60 accepts his commencementppy.

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So, right now we have not yet received further clear instructions. It's worth mentioning that we are not one of the 14 platforms and the consent policy that is walking behind these Spoon checks to show the purpose of this conversation. And those are a few details of whether or not we used pads and condutm! The main ones as a result of all this Mobile Did you do just to rehydration today with regard to reach out. Do you still need material so that there is buddy Can I ask you again.

are more on the decoupling, disconnecting from the banks. And also it's worth noting that we are both simultaneously in discussion with Baihan as well as Pudao. Especially with Pudao, we are expect as of right now based on the progress and Pudao, we are expect as of right now based on the progress.

to have the trial run by or before June 30th. But right now, as far as we know, with all the adjustment as well as all the changes with the regulators, the ratification and the actual deadline is possible to be delayed. And also with the new structure, the regulator structure being adjusting.

the dates, there is the possibility of a postponed date, and the regulated search foundations might need time to put themselves together in a more formal and regulated way to actually proceed. Okay, regarding your second question, I will take a shot at it. Basically, you're asking about the capital line model. Right now, the revenue share model with the financial partners basically,

in terms of revenue, roughly about 20 to 30%. I think this will continue to be our target for the remaining of the year. Obviously, this is the balance between the risk you are taking versus the profitability, right? So if we increase the...

risk-taking on the business side, obviously this will increase the probability. But if you want to be kind of more capitalized, obviously you're taking less risks than this is the balance we have to take. So I think directionally from a company perspective, we do want to gradually increase the capitalized model.

And what will help us in this regard is that we have the tech empowerment business that we have with the medium to smaller sized banks. And with increase of that business, obviously, we will increase the rev share with the financial partners. Eventually, this will lead to a gradual increase of the capitalized model. I hope this was helpful. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Q4 2022 Lexinfintech Holdings Ltd Earnings Call

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