LexinFintech Holdings Ltd. Q1 2023 Earnings Call
Speaker 2: quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be question and answer session.
Speaker 2: To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded.
Speaker 2: I would like to hand the conference over to Ms. Jamie Wang, IR manager. Please go ahead ma'am.
Speaker 2: Thank you. Hello everyone. Welcome to Laxin's first quarter 2023 earnings conference call. With us today on the line today are CEO Jay Chow, President Jared Wu, and CFO James Tseng. We are excited to announce the winner of the 2020 Laxin conference title.
Speaker 3: 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 assumptions as of today.
Speaker 3: The actual results might differ materially and we undertake no obligation to update any forward-looking statements.
Speaker 3: 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'm now going to call over to Jay. His remarks will be in Chinese and the English translation will follow. Jay, please.
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Speaker 3: Good morning and evening everyone. It's my pleasure to speak with all of you again. In the first quarter, with the gradual recovery of consumption post-pandemic and the continued improvement of the overall macro environment, consumer finance started its moderate growth. As we've maintained growth through a two-wheel drive strategy, risk upgrading and data-driven optimization will achieve another quarter.
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Speaker 3: 60.9 billion RMB in long origination volume of 41.0% year over year. Total outstanding balance at 107 billion RMB of 28.0% year over year. At 2,980 million RMB of 74.0% year over year.
Speaker 3: 4.8% in the first quarter of last year, and has grown steadily for the fourth consecutive year, and various operating indicators are moving in a positive direction.
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Speaker 3: Let me elaborate in more detail. There were three major operational highlights in the first quarter. First, as we enhanced our user risk assessment capabilities, we accelerated our pace in reducing high-risk user segments and therefore improved the overall asset quality. Second, we continued to refine operations and further optimize operational efficiency.!--
Speaker 3: Third, we have been implementing cost efficiency initiatives. As a result, our profitability has been steadily rebounding.
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Speaker 3: First, in terms of asset quality, we further pushed ahead on overhauling our risk management system, focused on maintenance and operation of high quality existing customers, and gradually eliminated more high risk users.
Speaker 3: We have iterated and upgraded the user assessment system, the risk-rending model, which automatically integrates a variety of risk models along with the combination of multidimensional risk factors into an overall user risk assessment scheme.
Speaker 3: These upgrades help us to conduct more comprehensive risk assessments and therefore make more accurate decisions on users.
Speaker 3: After being put into use, the new loan volume in the first quarter contributed by prime investors increased to 88.0% from 77.0% a year ago.
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Speaker 3: our users into more detailed and various categories based on the underlying customer tagging system and over 10 evaluation models of users' borrowing willingness, marketing preferences, responsiveness, offer satisfaction, and etc.
Speaker 3: For some certain customer groups, the application of this new detailed separation of user segment model pushed up the operating profit of that specific customer group by 70.0%.
Speaker 3: On this basis, we sorted out the marketing strategy decision tree structure and launched marketing strategies accordingly, which significantly boosted users' activities.
Speaker 3: Under this new optimized operational system, in the first quarter, our telemarketing capability has been significantly strengthened.
Speaker 3: And the low volume contributed by the telemarketing trend grew by 92.0% sequentially. At the same time, the cost significantly decreased in a quarter. With telemarketing cost per sale fell 49% year over year, we expected to save 25.0% of the original annual telemarketing cost.
Speaker 3: In front of reactivating paid off customers, the conversion rate increased 15.0% quarter over quarter. Long-volume from those converted customers grew 15.0% quarter over quarter.
Speaker 3: Additionally, these results were achieved with half of the marketing cost.
Speaker 4: Third, we have enhanced profitability attributing to our continuous efforts in cost optimization initiatives and a further reduction in financing costs.
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Speaker 3: Funding costs further dropped to 6.6%, which is 0.2% percentage point lower than last quarter and 1.6 percentage point lower from a year ago. It's worth noting that this is a historic load of funding costs during the past three years. In April , we successfully resumed our annual financial partners conference, which got suspended for the first time in the last three years.
Speaker 4: Thank you for watching.
Speaker 3: We remain committed to investments in research and development as we firmly believe in technology is the core engine of our business growth.
Speaker 3: In the first quarter of 2023, research and development investments reached $130 million, maintaining one of the highest technology input levels amongst our peers.
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Speaker 3: On the data front, we have put tremendous effort in data mining and analysis of our entire data.
Speaker 3: Accordingly, we are able to find links and correlations amongst various datasets.
Speaker 3: and links between low-level fundamental data sets and business models all at the foundation of Lishing's data-driven and intelligent decision-making approach.
Speaker 3: Furthermore, we developed a simulation predicting model, attribution model of normality.
Speaker 3: AB testing platform, and et cetera. All of which empowered management to steer business in a more data-driven and intelligent manner.
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Speaker 4: We have been continuously exploring the utilization of new technologies in optimizing operation efficiency and users experience.
Speaker 3: In the first quarter of 2023, we expanded the application of our AI large language model in our business at a faster pace. We saw a noticeable improvement in efficiency among the application areas including coding assistant tools, initiatives of design, telemarketing, and smart customer services.
Speaker 3: For example, the application of this AI model in our telemarketing scenario pushed a credit line approval rate by 70% versus...
Speaker 3: the technology service supplied by vendors, and also boosted order placing rates on the exact date that borrowers are granted with credit lines by 10%.
Speaker 3: Looking ahead, we'll also comprehensively apply the model to the areas of risk management, anti-fraud, and etc.
Speaker 4: Thank you.
Speaker 3: In addition, we further enhanced our existing unique lotion ecosystem.
Speaker 4: First, e-commerce business reached 1.13 billion GMV. Second, e-commerce business reached 1.13 billion GMV. First, e-commerce business reached 1.13 billion GMV.
Speaker 3: an increase of 69.0% from last year. Cumulative customers grew by 71.0% compared to last year. The robust growth of GMV and users in e-commerce business effectively fuel the engine of the Lixin consumption ecosystem. These webINCs provide and promote homeschool teaching activities.
Speaker 3: Tangible progress therefore won't be recognition from various financial partners, including local commercial banks with AUM over trillion RMB, regional urban and rural banks.
Speaker 3: The Technology Empowerment Service facilitates our cooperation with financial partners and deepens our business relations.
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Speaker 3: Third, we plan to expand our offline sales team and leverage our expertise in direct sales channels in light of the gradual recovery of China's economic activities.
Speaker 3: Our offline acquisition channels bring more first-hand user information, hence more accurate credit assessment, and eventually creating a unique competitive advantage.
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Speaker 3: It is also due to our continued refining of operations and cost reduction initiatives.
Speaker 3: As for the second quarter, we understand the economic recovery and resuming consumption is a long process. We will continue to undertake a more prudent approach. Based on our preliminary estimation, long volume in the second quarter is expected to reach 63 to 63.5 billion RMB.
Speaker 3: a 20% to 29% growth year over year.
Speaker 3: Next, I'll hand over the call to our CFO James to share more detailed financials. Thank you.
Speaker 4: Thank you, Jay. I will now provide more details on our financial results. Please note that all numbers are in RMB unless otherwise stated.
Speaker 4: In the first quarter, we continued our fourth consecutive quarters of recovery, both in our overall business and in our financial numbers.
Speaker 4: We expected this trajectory of turnaround to continue in light of the rebound of China's economy and our dedicated efforts in optimizing operations.
Speaker 4: The strong performance in the first quarter was a result of the management's continuous efforts in overhauling our risk management.
Speaker 4: focusing on better quality user segments, upgrading our technology and operational capabilities.
Speaker 4: as well as our new cost restructuring initiatives.
Speaker 4: First, please let me explain at a high level what happened in the quarter, as compared with the same quarter of 2022.
Speaker 4: The long originations for the quarter reached 60.9 billion, an increase of 41% year-over-year, beating Q1 guidance we gave earlier.
Speaker 4: Revenue grew by 74.2% year over year to reach around 3.0 billion for the quarter, which was mainly by the GMB growth and an increased loan balance.
Speaker 4: which reached $107 billion. The weighted average APR stood at approximately a little over 24% for the fifth quarter, close to around 1% points lower than a year ago.
Speaker 4: Loans with APR under 24% now make up more than 80% of all loans.
Speaker 4: Partially offsetting the negative impact from the lowered APR on our loans was a decrease in our cost of funding from 8.2% a year ago to 6.6% in Q1.
Speaker 4: It's worth noting that this is a historical law of funding costs during the past three years.
Speaker 4: Long tenors increased to 15.1 months versus 12.3 months a year ago.
Speaker 4: As we emphasized last quarter, overhauling risk management remains our top strategy for the year.
Speaker 4: We continue to focus on upgrading to better credit user segments and rebuilding the risk team, the systems, and the process, and the infrastructure.
Speaker 5: The curators will elaborate more on this shortly.
Speaker 5: The improved results from our efforts can be partially seen in our 30-day plus delinquency rate, which improved to 4.57% in the first quarter as compared to 4.62% in the fourth quarter of last year. The 90-day
Speaker 5: plus this increase in rate stood at 2.53%, basically remaining stable as compared to the previous quarter.
Speaker 5: This was due to 90-day plus the new sequencing rate metric is a more lagging indicator than 30-day plus metric. In Q1, we have been pushing ahead a series of cost-restruction initiatives that we launched last year. We have seen some further improvements to operating expenses.
Speaker 5: Total operating related costs and expenses including processing and serving costs, sales and marketing, R&D, and G&A as a percentage of average loan balance stood at 1.16% versus 1.28% in Q1 of last year. Total cost optimization happened despite of a slight pickup of Whole consequences andinarMON volunteers, Des Welsh the owner of the stock, Grow Tony.
Speaker 5: As a result of the affirmation, we are able to report net income of $327 million, an increase of 302% year-over-year.
Speaker 5: The net margin improved to 11% versus 4.8% in Q1 last year.
Speaker 5: This clearly presents a steady upward trajectory of our operation result, with each quarter improving over a year ago.
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 quarterly comparisons.
Speaker 5: Total GMB was $60.9 billion, an increase of 8.7% quarter over quarter, as we grew the business with a prudent approach and put risk management as the top priority.
Speaker 5: In the first quarter, we saw the GNV on our e-commerce platform came down slightly from boosted high level during single day shopping festival in Q4 last year.
Speaker 5: If we carve out the revenue from e-commerce business
Speaker 5: Total Q1 revenue grew by 4.5% quarter over quarter.
Speaker 5: Considering the impact of e-commerce business seasonality, total revenue for the whole group stays at about 3 billion, almost flat on a quarter-over-quarter basis.
Speaker 5: Take rate fell slightly to 2.5% from 2.6% last quarter.
Speaker 5: The minor fluctuation in take rate is a blended result of the more booking of provisions due to longer tenor loans and the continuous improvement in asset quality and the reduction in funding costs.
Speaker 5: Operating expenses stayed almost flat by a minor 1.6% increase quarter over quarter, contributing to pickup of sales marketing related costs in user growth.
Speaker 5: As a result of affirmation, we achieved a sequential growth in the net income of 8.7% and a boosted net margin to 11% from 9.9% in last quarter.
Speaker 5: To summarize.
Speaker 5: We have delivered a noticeable improvement during the first quarter from both a year-over-year and a quarter-over-quarter perspective. This marks the fourth consecutive quarter of V-shaped recovery, both in top line and bottom line, since we hit the lowest point of operational results in Q1 last year.
Speaker 5: As we mentioned last quarter, although we are fully aware we have a long way ahead in our turnaround, the year of 2023 unfolds with a good start indicating we are well on track.
Speaker 5: Next, let's take a detailed look at the financials.
Speaker 5: As mentioned, our total operating revenue for the first quarter was $3 billion, representing a decrease of 2.2% quarter over quarter due to the seasonality of e-commerce business and an increase of 74.2% year over year, mainly driven by the credit facilitation services and the e-commerce business. Revenue from credit facilitation service was approximately-.
Speaker 5: quarter over quarter and a 26% decrease year over year, which was primarily due to the change of product mix among various tech empowerment services.
Speaker 5: Revenue from installment e-commerce platform service was $499 million, representing a decrease of 25.9% from the last quarter and an increase of 56.6% year-over-year, which is due to the seasonality of e-commerce business.
Speaker 5: Moving on to the expense side of the quarter. Self-marketing expense increased by 4% quarter over quarter, which was mainly due to our stepped-up investment in acquiring better quality users.
Speaker 5: Our goal is to upgrade to better quality customer groups and obtain higher LTV. While we are taking a prudent new acquisition strategy now, we will keep on closely monitoring macro data as China's economy is gradually recovering and achieve the growth opportunity when the right timing comes.
Speaker 5: Research and development expenses decreased by 4.5 percent quarter over quarter and decreased 15.1 percent year over year to 129 million due to efficiency.
Speaker 5: G&A expenses stay almost flat on a quarterly basis and a decrease of 17% year-over-year to $97 million.
Speaker 5: It's a noticeable cost-efficiency achievement that G&E extends remained at almost the same level on a quarter-over-quarter basis, while our top-line GMB maintained an upward momentum due to a series of cost initiatives. Going forward, we plan to step up efforts in this regard.
Speaker 5: Net profit was approximately $327 million in the first quarter, an 8.7% increase quarter over quarter, and a 302% increase year over year, which beat the high end of our initial expectations.
Speaker 5: At the end of the first quarter, the company had a cash position of around $6.5 billion on the long hand and a net equity position of $9 billion.
Speaker 5: Finally, I would like to discuss our outlook for the second quarter of 2023.
Speaker 5: As we know, economic and consumption recovery usually will take time.
Speaker 5: as evidenced by the ongoing current quarter's modest growth.
Speaker 5: Therefore, we remain cautious and are monitoring closely on the overall macro and consumption outlook.
Speaker 5: Based on the company's preliminary assessment of the current market conditions, total loan originations for the second quarter of 2023 are expected to be around 63 to 63.5 billion, representing an increase of 28 to 29% on a year-over-year basis. These estimates reflect the company's current expectation, which is subject to change.
Speaker 5: The strong results of first quarter demonstrate clearly that our turnaround is well underway.
Speaker 5: In the long run, our dedicated efforts in risk management, cost initiatives, as well as new user acquisitions, will establish solid foundations for our long-term goal of sustainable growth.
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.
Speaker 4: Thank you James. Good morning and good evening everyone. It's my pleasure to speak with all of you again.
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Speaker 4: Next, I'd like to elaborate a bit more regarding our risk management measures and improvements for the past quarter.
Speaker 3: Ever since the beginning of the year 2023, we saw a gradual recovery of China's economy. Accordingly, at the company level, we continue to implement our unwavering focus on risk management and the continuation of a prudent risk management and customer acquisition approach.
Speaker 3: In addition, we have been allocating more resources and putting more effort to better serve and favor our client customers.
Speaker 3: In terms of our risk modeling, we have been continuously iterating our top four models and enhancing our user risk assessment capabilities. In the first quarter of 2023, the day one delinquency continues to drop and overall asset quality got improved. With 30 plus days delinquency down 5 bits, quarter over quarter at 4.5...
Speaker 3: We will continue to hold risk management as one of the top priorities in business operations.
Speaker 4: and we expect the overall extra quality to continue to maintain a positive upward momentum.
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Speaker 3: Thus, we continue to work on upgrading our risk management system, including the following key initiatives. We continue to work on upgrading our risk management system, including the following key initiatives.
Speaker 3: First, we continue to iterate and upgrade our risk management system under the business strategy of risk driving operations.
Speaker 3: improve the granularity and the overall efficiency of risk management.
Speaker 3: further refining our customer segment and increasing the depth and width of our user identification capabilities, while continuing to review pilot customers and optimize our asset structure.
Speaker 3: Second, we put heavy emphasis on investing in the coverage of PBOT credit data and strengthen the utilization of credit data.
Speaker 3: In the meantime, we continue to introduce more compliant data sources combined with the thorough usage of internal conceptual behavioral data to ensure that we can identify customer credit profile more accurately by further refining customer segmentation accordingly.
Speaker 3: Third, we continue to iterate and upgrade Model Matrix for different customer segments.
Speaker 3: And our ability to assess customer credit profile has also got further improved.
Speaker 3: which is the most essential pillar for us to increase the proportion of prime customers and will be one of the most key projects in which we continue to invest.
Speaker 4: We believe that in the remainder of 2023, we will make more breakthroughs in our user identification capabilities.
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Speaker 3: 2023 is a year of economic recovery in China. We are committed to upgrading our core risk management capabilities and accelerating the strengthening of our refined risk management systems. As Jay and James mentioned earlier, we maintain a cautious view of the macroeconomic impact of the economy.
Speaker 3: can continuously generate sustainable long-term returns for all shareholders.
Speaker 3: long-term returns for all shareholders.
Speaker 3: This concludes our prepared remarks. Operator, we're now ready to take questions. Thank you.
Speaker 2: We will now begin the question and answer session. To ask a question, please press star 1 on your telephone and wait for your name to be announced.
Speaker 2: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Once again, let's start, 1-1 for questions.
Speaker 2: Our first question comes from the line of Frank Chen from Credit Suisse.
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Speaker 4: Please check the description box for links to the previous video. Please check the description box for links to the previous video.
Speaker 6: Thank you management for taking my questions. This is Frank from Credit Suisse. My first question is regarding the supply and demand dynamics most recently. In the first quarter and second quarter today, how would you describe the recovery of credit demand? And on the supply side, is there any change in terms of risk appetite?
Speaker 6: On the other hand, could the management provide some more color on the strategic or operational focus for the rest of the year? Thank you very much.
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Speaker 4: Okay, so I'll do the translation. Thank you, Frank. In terms of demand side, as you can see from our first quarter's results,
Speaker 3: Our overall long volume has increased, and we actually saw the rebound of the overall demand in the first quarter. It was mainly attributed by a couple of factors. The first one was the COVID and the lockdown quarantine being over. There was a spike in consumption needs and also the overall poverty.
Speaker 3: Second, it was mainly due to our refined operations, as well as the capabilities in risk assessment being increased. We were able to better recognize customers, to better serve the right customers, and the good existing customers. This is that most of you already knew that we have a very large existing customer pool. With our improved risk assessment capabilities, we are able to better pay for the services
Speaker 3: relatively strong.
Speaker 3: And in that sense, we also have different products. We have our own ecosystem. We have the e-commerce, a very special consumption scenario. When the lending need is relatively not as strong as the previous quarter, we have another option to create demand, which is the discount on products.
Speaker 3: to attract our customers, whether it's new, whether it's the existing ones, to make consumptions and to create demand. So the second quarter as of right now, we are preparing the 618 Festival, which would be a great opportunity to generate more demand, thanks to our unique ecosystem. But when it comes to the funding cost side, I'd say the supply is still relatively strong and sufficient right now.
Speaker 3: showed the willingness to make the cooperation deeper. And also, as you can see, our funding costs actually lowered in the first quarter, and the overall supply is still relatively strong. I hope that answers your question, Frank. Thank you. I'll make it. Thank you.
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Speaker 4: Okay, in terms of our key strategies, there are four main ones.
Speaker 3: The first one is the risk management capability upgrading. We have been undergoing certain strategies to upgrade our infrastructure and to lower risk level. We are preparing the risk management 2.0 system and when it's ready, we will get the upgrade and capabilities in risk management.
Speaker 3: Hence, we are actually doing it step by step to adjust and to operate when it's ready. Our capabilities in risk management and identifying in user risk will be significantly upgraded.
Speaker 3: And also we continue to do the elimination of high-risk users, and we are in the progress of making it a common operational thing to do the routine elimination of the high-risk users.
Speaker 3: Secondly, we'll try to continue to differentiate ourselves from others in customer acquisition. Like I said earlier, we have different scenarios like e-commerce scenario and we have a very strong offline pool-way team. These are the advantages that will help us to strengthen our own capabilities.
Speaker 3: And third, we'll continue to do the refined operations to further increase the customer's LTV as well as the operational efficiency. Fourth, we'll continue to undergo the cost efficiency initiative. As you can see, in the first quarter, it shows some prominent results. The percentage of our operational costs criminality is anything above 3,000uah per year. For more information on this, visit
Speaker 3: over the outstanding loan balance actually decreased, and our net margin increased to 11%. And for the rest of the year, we aim to continue to increase our own profitability. That answers your question Frank.
Speaker 2: All right, thank you. Our next question comes from the line of Alex Yeh from UBS. Please go ahead, Alex. Hi, Elizabeth. Wow.
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Speaker 6: So we'll see how she does it We like to be with everyone I like to be with everyone Thank you very much.
Speaker 6: First is on the low volume run rate in April and May. Could you share with us how has the sequential movement been so far? And how does the growth you have seen now compare to your previous expectations? Second question is on your asset-worthy trend. How has the growth you have seen so far in April and May compared to your previous expectations? Second question is on your asset-worthy trend. Could you share with us how has the growth you have seen so far in April and May compared to your previous expectations?
Speaker 6: I do share with us some of the early assets for the indicators, the trend in April and May. And do we expect further input from here? Thank you. am super glad I am here in the audience.
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Speaker 3: So as you heard already, for the second quarter, our guidance for the long volume was 63 to 63.5 billion, but I could share some month-over-month in the first quarter results with you. The numbers of application-wise, there was a minor peak in volume after the Chinese New Year. In the month of February , it showed a...
Speaker 5: seeing a little bit slow down in demanding, a bit enduring the second quarter, but it's still in line with our management team's expectation. if we have been halving one Trinity charms to the next,
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Speaker 4: Okay, in terms of risk, we are seeing the first quarter's risk being stable, stable decrease. And then, we are seeing the second quarter's risk being stable, stable decrease. So, we are seeing the first quarter's risk being stable, stable decrease.
Speaker 3: And for the second quarter as of right now, certain early indicators is stable right now. But from the new loan perspective, the structure, the overall structure is actually better. Whether it's the R1 to 3, the percentage of R1 to 3 being increased, the R6 to 8 percentage being decreased.
Speaker 3: from the new loan perspective, they are overall better. And with the monthly new loan structure being continually improved, our overall risk level will be improved in the future. And there are still some optimizing new rooms when it comes to the overall risk level.
Speaker 2: Hope that answers your question, Alex. Right, thank you. Our next question comes from the line of Yada Li from CICC. Please go ahead, Yada.
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Speaker 7: And my first question is regarding the choice of the lending model. And could you please give us more color on the trend of the credit facilitation and the risk sharing model or tech empowerment services in the future? And will there be any plans to increase the unbalanced facilitation? Secondly, I was wondering about the recent updates and outlook of Fenxi Lu and other new consumption businesses. That's all. Thank you.
Speaker 5: So I will take a crack at the first part of the question, and Jay will answer the second part of your question. The first part of the question is related to risk-taking and profitability. Obviously, at the company level, we always try to achieve the balance. Obviously, it makes sense that if risks improve, we will be able to achieve the balance.
Speaker 5: then I want to do a little bit more so that I increase the profitability. If somehow the risk is worsening, obviously I don't want to do more, right? I want to do less so that I can retain my profitability. So that has been our kind of attitude.
Speaker 5: The result out of this basically is reflected here in terms of the proportion of the business where we take risks, that is in the loan facilitation business and in rev-share business reflected in our tech empowerment part of the business. Right now the rev-share business, basically we don't take much risks in this part. It accounts for roughly 26% or so.
Speaker 5: And in the last year, several quarters has been hovering between, say, 20 to 30 percent also. So we are working very closely on the overall macroeconomic data and our overall risk indicators. If the overall macro data continues to improve and our asset quality continues to improve, obviously...
Speaker 5: the overall credit situation is improving, then it doesn't recruit us from really taking a bit more risks so that we increase the overall profitability for the company. So basically that's our thinking, if you will, to run the business.
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Speaker 3: So as you know, we have our own launching ecosystem. E-commerce wise, the overall increase has been very strong, especially with other e-commerce peers or others in the industry being in the very heavy competition. As I shared already, in the first quarter, not only the volume in GMB increased year over year, but also the revenue as well as the cumulative trading customers.
Speaker 3: They are only larger than our main business or other business within the company. They are exponentially larger than the overall increased speed in the industry.
Speaker 3: So the customers that we serve in our e-commerce areas are mostly customers with actually credit consumption needs. Under the current situation right now, the overall macro economy and environment, with APR requirements being a little bit higher, the requirements being a little bit higher, actually gives the e-commerce sector a bit more opportunity to increase and expand a little.
Speaker 3: Furthermore, e-commerce could actually help us with the customer acquisition and as well as the customer retention with our main business, which is a loan facilitation business in the future. Next is our offline poohui team. Our offline poohui team mainly relies on the offline BT operations, which right now the economy being resumed, being in recovery. The team actually helps with customer acquisition costs as well as the online poohui team. So, we're going to go ahead and get started.
Speaker 3: understand their willingness as well as to keep them in retention.
Speaker 3: Especially with the existing customers' competitions, we get to know them better via Poohui Team and we will continue to increase the investment on our offline Poohui Team to help us to differentiate when it comes to customer acquisition front to better acquire better customers.
Speaker 3: In another business I'd like to mention is our tech empowerment SaaS business. It's pretty much a cumulated experience of 10 years of standardized capabilities. We already got into cooperation with a relatively sizable volume with five to six of our banking partners and our funding partners.
Speaker 3: It's pretty much a monetization of our past experience. We use our experiences and capabilities to help them and in return, they strengthen the cooperation in our main business, helping us with a relatively lower funding cost than the current average funding cost.
Speaker 3: So I think this is a very unique system that Lushi has. We believe the cooperation between acclimation business will be strengthened and will be more interrelatable in the future to help us to differentiate ourselves among our peers. Hope that answers your question, Yara. Thank you. I'm sure you know for the questions. I'd now like to turn the conference over to our next speaker,
Speaker 2: For today's conference call, thank you for participating. You may now disconnect.