Q2 2023 LexinFintech Holdings Ltd Earnings Call
Speaker 2: Hello and welcome to the Lushin FinTech Second Quarter 2023 earnings conference call.
Speaker 2: At this time, all participants are in a listen-only mode.
Speaker 2: After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 111 on your telephone.
Speaker 2: You will then hear an automated message advising that your hand has been raised. Please be advising that today's conference is being recorded. It is now my pleasure to introduce I.R. Director Mendi Dong. Thank you. Hello everyone. Welcome to Luo Xin's second quarter, 2023, Ernest Conference Call.
Speaker 3: Our results were issued earlier today and can be found on our IR website. Join me today on our CEO , Jay Xiao, President, Jerry Zhu, and CFO , Jin Zheng.
Speaker 3: Before we get started, I'd like you to remind you of our safe Hubbers statement in our Ernest Press release, which also applies to this call.
Speaker 3: During the call, we may refer to business outlook and forward-looking statements, which are based on our current plans, estimates, and projections. The actual results may differ materially, and we undertake no obligation to update any forward-looking statements.
Speaker 3: But unless otherwise stated, all figures mentioned are in RMB.
Speaker 3: Jay Weilfers provides an update on our overall performance.
Speaker 3: James will cover the financial results in more details, and lastly, Jared will then discuss with the management. I will now tend to call over to Jay. His remarks will be in Chinese, and the English translation will follow.
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Speaker 3: Hello everyone, it's my pleasure to share with you our performance for the second quarter of 2023.
Speaker 3: In the current macroeconomic environment, we have achieved another strong quarter result by adopting a prudent business approach.
Speaker 3: Long volume for the second quarter was RMB, 63.9 billion, up 30, 30 percent, yet over yet.
Speaker 3: Once again exceeding the high end of our guidance.
Speaker 3: Long balance reached RMB, 114.1 billion. Up to 32% yet over yet.
Speaker 3: Revenue was RMB 3.1 billion up 27% yet over yet.
Speaker 3: Net profit was RMB, 356 million, up 112% year-over-year.
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Speaker 3: In the second quarter, we adhere to the two main focuses of risk and data, pushed forward, more refined operations. It relatively upgraded user risk identification system and improved the quality of new assets.
Speaker 3: The e-commerce business grew rapidly and the synergies with the man-consumer finance business got further enhanced.
Speaker 3: We have achieved solid business growth for the five consecutive quarters with profitability and cash flow improving significantly.
Speaker 3: In addition, we attached great importance to compliance capability building and successfully completed the stage by stage credit reform, which was to disconnect with financial institutions in Chinese, flanjilian, at scheduled in accordance with the June 30 and day compliance requirements.
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Speaker 3: There were three highlights of the second quarter results.
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Speaker 3: We further refined operations to optimize access structure and increase the proportion of high quality customer segments. In the second quarter, we continued to iterate and home our models to strengthen our risk identification capabilities and improve the accuracy of user identification.
Speaker 3: find operations to optimize asset structure and increase the proportion of high quality customer segments. In the second quarter, we continued to iterate and home our models to strengthen our risk identification capabilities and improve the accuracy of user identification in terms of existing customer operations.
Speaker 3: Thanks to our improving capabilities, marketing efficiency reached a higher level. In the second quarter, marketing efficiency increased by 16%, while telemarketing causes decreased by 39% sequentially.
Speaker 3: In terms of the operation of settled users, the older rate of the re-approved user in the same month increased from 40% to 90% and they want the link-uncured rate decreased by 20%, which manifested our notable operation improvement.
Speaker 3: In terms of new customer operations, the number of new active user increased by 14.9% in the second quarter compared to Q1. While customer acquisition costs remained basically flatish.
Speaker 3: Continue the refinement of operations, also brought us a steadily improvement in asset quality.
Speaker 3: The proportion of new loans contributed by high-quality users rose to 92% from 80-80 in the second quarter of last year.
Speaker 3: Why are the Z1 delinquency rate in the second quarter fell by nearly 10% on a quarter of a quarter sequential basis?
Speaker 3: Although the asset quality of existing loans fluctuated slightly due to a specific industry event and macroenvironment, we believe overall asset quality will continue to improve as we acquire more and more high quality users.
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Speaker 3: Secondly, we saw the rapid growth of our e-commerce business and the further enhanced the synergies among different business segments in our Lu Xing consumption ecosystem.
Speaker 3: In the second quarter, the e-commerce business achieved a transaction volume of RMB, 1.49 billion, up 31.6% Q&A, and 34.5% year-over-year. Exceeding the 10.7% year-over-year growth rate of total retail sales of consumer goods.
Speaker 3: And the e-commerce business achieved a 44-year-over-year growth rate of transaction volume during the June 18th drop-in festival period.
Speaker 3: The number of users also grows substantially. In the second quarter, the number of active users in the e-commerce business grow 24.2% Q&Q and 36.4% year-over-year.
Speaker 3: The e-commerce business has been focusing on high quality and high-growth young consumer groups who fancy new Chinese goodies.
Speaker 3: With more more merchants and product categories introduced on our e-commerce platform, a large number of existing users has been the revitalized.
Speaker 3: Resorting in the synergy between e-commerce and consumer finance business.
Speaker 3: During the June 18th dropping that the low period, the significant growth in the e-commerce consumer traffic led to a rise in the number of quality active users in the consumer finance business, with an increase of approximately 4% in June compared to April .
Speaker 3: At the same time, the active user in consumer finance business have further stimulated the e-commerce consumption without hitting a mutually reinforced loop in the business ecosystem.
Speaker 3: We have seen further reinforce the synergies between e-commerce platforms and consumer finance in terms of acquiring new customers and boosting existing users' activities.
Speaker 3: Attributing to our unique Luo Xin consumption ecosystem. In July , we want a word of best digital customer ecosystem initiative in China by the industry renowned Asian bankers.
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Speaker 3: Thirdly, we have successfully delivered five consecutive quarters of solid business growth and a strong cash flow.
Speaker 3: In the second quarter, our net margin rose to 11.6%, a 4.7% increase, or a year-over-year basis.
Speaker 3: Cash flow remains strong and increased by 30.2 compared to the year end of fiscal year 2022.
Speaker 3: We have always taken a firm stance to implement a two-wheel drive strategy of risk and data.
Speaker 3: which essentially fuelled the turnaround of our business since the later in the Q2 of 2022.
Speaker 3: The second quarter in 2023 is the fifth growing quarter in a row, and we expect the momentum to continue.
Speaker 3: Taking the above mentioned into consideration, the board approved and decided to distribute recurring cash dividends, aiming to improve return to our shareholders and express our full confidence in the business prospects in the long run.
Speaker 3: Starting from the second fiscal quarter of 2023, we will distribute a recurring cash dividend, semi-annually, at an amount equivalent to approximately 1615% to 330% of the company's net profit in the previous six months period.
Speaker 3: starting from the second fiscal quarter of 2023. We will distribute a recurring cash dividend, semi-annually, at an amount equivalent to approximately 15.15% to 33.0% of the company's net profit in the previous six months period, all at by the bot.
Speaker 3: In Q3, we will distribute a dividend of US$5.8 per ordinary share or US$11.6 per ADS. For the 6 month period ended June 30, 2023.
Speaker 3: Representing approximately 20 to 0% of net profit for the period of the first half 2023.
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Speaker 3: It is our continuous implementation of a two-wheel drive strategy that effectively boasts the steady growth of our business.
Speaker 3: on the front of technology investment. In Q2, research and development expenses reached RMB 120 million, maintaining the industry in level.
Speaker 3: It's worth noting that we accelerated the development of the use case of AI large language models in finance sector. This model has been incorporated into our CAD robots that are used in the daily operation of telecell, market-smart service and operation inspection.
Speaker 3: Thanks to the application, we saw ongoing improvements in our operational efficiency and refined user experience.
Speaker 3: For example, in terms of customer service application, percentage of cases solved without human intervention increased to 91.5%, which got 8.2% higher on a year-over-year basis.
Speaker 3: Regarding the use case in Smart Assistant Service, in addition to coding assistant tools and initiative of design, we talk about in last quarter. We further affine to data analysis, the design, and optimization of risk management database, which boosts the analysis efficiency and the reduced employees workload.
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Speaker 3: Plus, but not least, let me give you an update on our progress in social responsibility.
Speaker 3: Since we launched, small-store supporting projects focusing to facilitate the financing needs of SME, we have helped over 100,000 SME owners in over 300 cities and 30 provinces.
Speaker 3: In addition, on the front of customer protection, we worked together with regulators, the police, lawyers, and industry association and the financial institutions.
Speaker 3: Our capability in terms of data security got further recognition from national level institutions, such as the China Academy of Information and Communication Technology and the China Cybersecurity Industry Alliance.
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Speaker 3: Looking ahead in the face of the complex and uncertain natural environment, we will remain the prudent business approach. Continuously push ahead strategies of risk management integrating and customer-based upgrading and deliver higher quality growth.
Speaker 4: Thank you
Speaker 3: Next, I will pass to our CEO Boothfins for financial updates.
Speaker 4: Thank you, Jay. I will not provide more details on our financial results. Please note that all numbers are in R&B unless otherwise stated.
Speaker 4: The second quarter marked our fifth consecutive quarter of rebound since we bottomed out from the 12th in Cuban of last year.
Speaker 6: We delivered another quarter of healthy growth, both in operating and financial numbers.
Speaker 4: This is not an easy achievement amidst the relatively mild consumption recovery in the second quarter.
Speaker 6: thanks to our continuous efforts on reconstructing risk management capabilities, upgrading to a better customer base, refining the operations, and cost optimization initiatives.
Speaker 6: We believe we have planted the right seeds.
Speaker 4: By undertaking the above-miss strategies, they expect to reap more benefits of such improvements in the coming quarters.
Speaker 4: First, please let me elaborate at a high level on what happened in this quarter as compared with the same quarter of 2022.
Speaker 4: Total loan originations for the quota reached 63.9 billion and increased of 30.1% year-to-year, beating the high end of Q2 guidance we gave earlier.
Speaker 6: Revenue grew by 26.6% year-of-year to reach around 3.1 billion for the quarter, which was mainly driven by the GNV growth and increased low balance.
Speaker 4: which reached 114 billion. As a result of our customer base upgrading, better quality customers usually generate larger ticket size loads.
Speaker 6: Hence contributing the G&B growth.
Speaker 6: The strong revenue growth was achieved despite the fact that the winning average APR fell below 24% in Q2, around 1% point lower than a year ago.
Speaker 4: Lones with APR and the 24% now made up over 86% of all loans.
Speaker 4: More than 5% higher than when year ago.
Speaker 6: Another contributing factor was the funding cost, which stood at 6.6% during this quarter, a decrease from 7.2% a year ago. As the corporations with new funding partner banks continue to roll out, we expect lower funding costs in the coming quarters.
Speaker 6: In addition, the long tender was 14.7 months versus...
Speaker 6: 12.8 months in Q2 last year.
Speaker 4: also contributing to the revenue wealth.
Speaker 6: However, amidst the increased macro-uncensities, we have started to optimize the tenor structure earlier this year to reduce the potential exposures.
Speaker 4: We continue to sharpen our focus on iterating and refining risk management capabilities in the second quarter, upholding risk management as our top-vidence priority.
Speaker 6: As the quality steadily traded better, first is...
Speaker 4: Day one, Delegancy Rate got lower. We also further improved accuracy of credit profiling and risk management efficiency.
Speaker 6: Due to the short term turnmoyle in the post loan collection industry caused by some certain company's specific incident.
Speaker 6: Our 30-day plus delinquency rate and a 90-day plus delinquency rate fluctuated a bit, but still better than when you go. Standing at 2.59% at 4.6%
Speaker 6: 1% respectively.
Speaker 6: versus 63% and a 4.85%.
Speaker 6: In Q2, as we continue to push ahead cost efficiency initiatives.
Speaker 6: Total operating related costs and expenses.
Speaker 4: including processing and servicing costs, self-marketing, R&D, and GNA as a percentage of average loan balance.
Speaker 4: dropped notably to 1.01%.
Speaker 6: versus 1.43% in Q2 of last year.
Speaker 6: Indicating a 42 basis point of cost reduction.
Speaker 6: On the going forward basis, we are fully committed to continue the cost optimization initiatives as one of the long-term strategies.
Speaker 6: As a result of the aftermentioned, they're able to report a net income of $356 million, an increase of 112% year over year.
Speaker 4: The net margin improved to 11.6% versus 6.9% in Q2 last year.
Speaker 4: We have seen substantial improvements in operational efficiency and profitability compared to one year ago, which clearly serves as a strong testament of our ability to sustain the V-shaped rebound.
Speaker 6: Apart from the above year-over-year analysis, I would also like to share some perspectives through our quarterly comparisons.
Speaker 6: In Q2, total 163.9 billion, an increase of 4.9% quarter over quarter, as we maintained a prudent growth approach, considering the weary consumer spending.
Speaker 4: It's worth mentioning that we fully leveraged our lursing consumption ecosystem and well captured the growth opportunity during the June 18th Shopping Festival.
Speaker 4: As a result, we were able to deliver a faster than expected, 31.6% quota-over-corder group, G&B growth on e-commerce platform.
Speaker 4: We also expanded product offerings and introduced the more high margin SKUs in order to boost the growth profit of e-commerce spin slide.
Speaker 6: Consumer Finance take rate fell slightly to 2.3% from 2.5% of last quarter.
Speaker 4: The slight fluctuation in take-weight is a combined result of the lowered APR.
Speaker 6: which stood at 23.6%.
Speaker 4: versus 24.4% into one.
Speaker 4: and more bookings of provisions due to the overall market uncertainty.
Speaker 2: and the shortened tenor.
Speaker 4: The 10 days now at 14.7 months versus 15.1 months of the previous quarter.
Speaker 4: Consequently, the total operating revenue for Q2 booked an increase of 2.4% of the quarter. Among which revenue from Tech Empowerment Service registered a 6.5% increase quarter over quarter.
Speaker 4: and the revenue from the installment e-commerce recorded an increase of 5.5% quarter over quarter.
Speaker 4: The e-commerce revenue growth was lower than G&B growth due to the increased platform service or pop business. Instead of the company directly sourcing and selling the merchandising, therefore, more revenue is booked on the net basis.
Speaker 4: Overall operating expenses stayed almost flat despite 3% growth in sales marketing related driven by the user growth.
Speaker 6: Offsetting the sales and marketing cost increase is the decrease in GNA and R&D expense due to efficiencies.
Speaker 4: Therefore, we achieved a sequential growth in that income of 8.6% and further intense the net margin to 11.6% from 11% in the last quarter.
Speaker 4: To conclude, we have registered a strong improvement during the second quarter from both year over year and the quarter over quarter perspective.
Speaker 4: This solid result was achieved and the current macro uncertainties and its slowing economic recovery.
Speaker 4: At the end of second quarter, the company had cash position of around 5.5 billion on hand and net equity position of 9.4 billion.
Speaker 6: In view of the healthy cash flow situation, the board approved the SEMA and your dividend plan.
Speaker 4: The cash flow from operations is improving and robust to sustain a future growth, thanks to increasing profitability.
Speaker 4: Multi-fishing guarantee deposit required for the long facilitation business.
Speaker 4: This also demonstrates our confidence in the overall business to continuously produce shareholder returns.
Speaker 4: Finally, I would like to update our outlook for the second half of 2023.
Speaker 4: Based on the company's preliminary assessment of the current market conditions and the macro situation, the company reaffirms the early of the year guidance of annual G&V amount of $245 to $255 billion, which represents a 20 to 25% year-over-year growth.
Speaker 4: Therefore, for the second half of the year, we're expecting the high single digit to mid-teens percentage growth year over year.
Speaker 6: These estimates reflect and the company's current expectation, which is subject to change.
Speaker 4: In Section 1, Section 2, the second quarter results represented the fifth consecutive quarter of continued rebounding both in operating metrics and the financials. It further solidifies our commitment to continue the turnaround journey despite possible more headwinds from the macro uncertainties.
Speaker 6: With that, I would like to turn the call over to our president, Jerry Wu, who will discuss our wrist management. Jerry, let's go ahead.
Speaker 4: turn the call over to our president, Jared Wu, who will discuss our risk management. Jared, let's go ahead.
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Speaker 3: In the second quarter, we continued to promote our strategies of focusing on risk management and upgrading customer growth and achieved notable results in several aspects. The award, say one, the win-win-win rate, continues to drop down nearly 10%, compared to PIL1.
Speaker 3: The 30 days and 90 days, they make you wait where you step to where you stabilize within a manageable range.
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Speaker 3: In terms of data mining and model iteration, we continued to increase the utilization of PBOC data, third-party data, and internal data from our Lewisine consumption ecosystem, and upgraded the model matrix of each business line. As a result, we managed to improve the accuracy of identifying user risk levels and cred in needs.
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Speaker 3: On the front of IT infrastructures, we successfully developed a simulation system for operational decision-making, empowered by AI technology.
Speaker 3: The system can generate operation decisions for monthly order within one minute, with over 95% accuracy, which essentially bolstered our business decision making through big data and AI models.
Speaker 3: To pursue and optimize the balance between risk and return, we started to adjust our tender structure of overworld portfolios and a generation plan for long-tenor loans.
Speaker 3: Thus, the average tender of new loans steadily declined and we expected to trans-shorter in KIL-3.
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Speaker 3: in the aspects of post-long claction operations.
Speaker 3: Due to the turmoil in the long collection industry and the impact from anti-collection criminal groups, our asset quality metrics related to post-long performance got impacted to some extent.
Speaker 3: Thanks to our prompt carrying out of countermeasures, the impact is gradually fading out.
Speaker 3: We have continuously honed our fundamental displacement capabilities this year. Therefore, we effectively improved our capability in credit profile identification and efficiency in mismanagement.
Speaker 3: As a whole, we are seeing essential progress in with management capabilities and steady improving trends in asset quality. We remain in full confidence that every endeavor we make today will certainly build more fruits in the coming quarters and lead to our qualitative leap forward on the front of the instrument and asset quality.
Speaker 3: This concluded our prepared remarks. Operator, we can now open the floor for questions.
Speaker 2: Thank you. As a reminder, to ask a question, you will need to press star 1 1 on your telephone. One moment please for our first question.
Speaker 2: And our first question comes from the line of Frank Zang with Credit Suisse.
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Speaker 7: Thank you, Magistemen, for giving me the opportunity to ask questions. I have two questions. The first one is on the outlook for virus-approoting metrics in the third quarter as well as in the second half. How is the credit demand in July and August in view of the macro-hat win? And the second question is on asset quality. As mentioned previously, due to the change in non-collection industry, there is some fluctuation as a quality. What's the impact?
Speaker 7: so far and also, can manage this year more update on future outlook of asset quality. Thank you very much.
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Speaker 4: First of all, we have to look at the whole situation. We have to face the whole situation, and we have to face the whole situation, and we face the whole situation, which is 251-255-151. I think, in the current situation, China's economy is still not a full-fledged economy, but a good economy.
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Speaker 4: We must be looking forward to more results from the nationwide competition. Also, more coverage should be seen from the nationwide competition.
Speaker 4: It is also different from the ones in restruing, specifically the number 2 record. So, we are one of these roles coaxed by a new character F1E.
Speaker 4: I'd like to add a little more. Basically, in view of the uncertainties in the macro situation, we're going to stick to our original early of the year guidance of 245 to 255 billion GMB growth that represents 20 to 25% year-of-year growth.
Speaker 4: As a matter of fact, why we have completed the first half of the year already, if you look at the numbers, we have achieved 35% of year-over-year growth up to this point. So that means if we look at the whole year of 20 to 25%, for the second half, we'll be looking at basically a GMB growth of high single digit to probably mid-keys.
Speaker 6: growth in terms of GMB. And really, this is because we're adapting a very prudent kind of approach in terms of the business growth. We would like to kind of more overlooking at the stabilizer overall scale, the overall GMB growth, but really put the risk management and also the net income, the overall profitability as the first priority when we go with our operations for the second half.
Speaker 8: Okay, so Frank, I'll just translate this for Jay. For his question, we do, like Jay said, we expect a whole year guidance to maintain within the range of 25 to 25 billion. And I think this year's SFRI now demackery recovery, it's not too optimistic as we were hoping to or expecting earlier this year. And then we're actually consciously controlling the our increasing pace. And right now, depending on demackery environment, right now we're taking a more proven business approach. We're hoping to see more on profitability as our priority. And for the second half, it's the increasing pace of our business expansion really depends on the lack of recovery conditions. And for the companies from the company's operational level, the demand growth in July and August is more or less similar to the second quarter. We don't see a very strong recovery trend, so the third quarter will be more on rhythm of growth. Again, focusing more on profitability and it will remain more or less stable.
Speaker 4: The supply change are to different components. This can answer some trouble if they are not joined by the externalgaver and owns moreidor industry. The supply change in this context is a very important part of the business based on current changes. Our current value andolla system was developed. Now we can remove new products. It has a cost based income. When the system comes together, everything is in hand! The market is in hand now.
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Speaker 8: In terms of your second question, as I mentioned before with the macro economy being down a little, it did put some pressure on our asset quality. In the second quarter, with the known industry impact from the certain collection issues having with the certain collection companies, we did bear some burden. It did impact our collection rate or our 30-day collection rate, but we are putting on more efforts, improving on our new asset quality.
Speaker 8: as we mentioned earlier in our script, the overall asset quality for our new assets are actually improving and then it in turn.
Speaker 8: reflected on a lower survey production rate. And it kind of evened out the overall data. In the future, with the macro not being in the recovery, we were kind of hoping to, there will still be some challenge on our risk level, but we're confident as we input or taking in more good quality new assets, the overall ethic quality will get better.
Speaker 9: I hope that answered your question, friend.
Speaker 9: I hope to answer your question, Frank. Thank you.
Speaker 2: One moment please for our next question. And our next question comes from the line of Alex Yee with UBS.
Speaker 7: So my first question is is on the e-commerce business line. So management has mentioned in a remarks that the business line has grown rapidly in Q2.
Speaker 7: Second, there's some mentioning about the e-commerce. This is line being a part of the E-Locene ecosystem. Could you, could you, can we also get some color on the update on Locene's consumption ecosystem as a whole? Thank you.
Speaker 4: Okay, I will go over here and comment.
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Speaker 4: To, uh, truly, uh, we've been focusing on high quality and potential auditors. And for the last quarter, we have, uh, we continue to expand our categories and introduce, um, high quality merchants as well as increasing our category to fit better to our private audience. And also we've been leveraging on the six one and e-commerce shopping festivals and we've increased our, uh, operational, uh, efforts and our promotional range that which resulted in a very remarkable result.
Speaker 8: And a more fundamental reason is that we actually rooted in the consumer genes of the Lishin Group, but created a consumer ecosystem that center around good quality high potential users and the synergies between e-commerce and business and our consumer finances have been further strengthened. And they mutually encourage each other. And specifically, our e-commerce platform actually helps us when it comes to customer acquisition as well as revitalizing the already settled customers that creating such synergies between two platforms and business.
Speaker 4: Now, the quis We are not waiting for the finale ever since the ½ year day, but the year of the Castro administration, one of the Centers of Veterans. Remove all of our thoughts about promoted Potatoes, Lochins, Maltesite, Second and Consumer Equal Systems, which includes consumer finance, as a main business, accompanied by the installment e-commerce business, hookway offline and customer acquisition finance business, the SaaS business for financial up-proper-providing processes to financial institutions, and innovative business, which is a multi-business line and a whole-ground ecosystem of providing credit services to customers.
Speaker 8: And as we just introduced prior, the progress of our e-commerce business in the second quarter, our staff business for financial institutions and our PUCA offline team business, are developing steadily as expected, and according to our plan, and we believe that we will have a more scalable and more notable business, more significant results to actually share with you in the future. Hope that answers your question, Adidas.
Speaker 2: Sure, thank you. You. One moment please for our next question. Your next question comes from the line of Yada Lee with CICC.
Speaker 10: Think toüssen my question. My question is about can a management elaborate more about the reasons on approving the dividend policy on their current circumstances and other potential impacts on the company cash flow? That's all. Thank you. Okay. I'll take this question.
Speaker 4: In view of the macro economic uncertainties, obviously we are maintaining a very prudent approach in terms of business growth. So we are basically trying to look at most stabilized
Speaker 4: stabilizing the overall kind of scale, but really put the focus on risk management and the profit.
Speaker 6: So basically if you put more focus on risk management and profit, this will actually generate more profit. So we continue to see the growth in profit opportunities.
Speaker 4: Plus, we continue to take cost optimization initiatives as one of our long-term initiatives. This will also lead to higher profitability down the road. So basically, the cash flow from operation is sufficient and robust to support future business expansion. And as we announced earlier of the year, we also have kind of a restructured original, a commutable bond with a PAG. So the payment to the PAG actually is not issued for us anymore. As a matter of fact, we have paid half of the original Commutable bond amount.
Speaker 4: plus we continue to take cost optimization initiatives as one of our long term initiatives. This will also lead to higher profitability down the road. Basically the cash flow from operation is sufficient and robust to support future business expansion. As we announced earlier of the year, we also have kind of a restructured original, a commutable bond with a PAG. So the payment to the PAG actually is not an issue for us anymore. As a matter of fact, we have paid half of the original Commutable bond amount. So it's cash is sufficient.
Speaker 4: And we feel that dividend really is a more direct and tangible way to reward the shareholders at this time. So that's why the Board has approved our plan to start giving out the dividend on the semi-annual basis in the range of 15 to 30% of the net income as a recurring policy.
Speaker 4: So really this underscores the overall management's confidence in the operations of the business. So hopefully this answer your question. Yada.
Speaker 10: Well, thank you very much. Thank you.
Speaker 2: I'll now hand the call back, Brady close remarks.
Speaker 3: Okay, thank you everyone again for joining us today. If you have further questions, please contact us while our contact information available on our IR website. Thank you everyone. Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.