Q4 2024 LexinFintech Holdings Ltd Earnings Call
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Speaker Change: The ultimate that message advising you had these rates. Please be advised that today's conference is being recorded I would now like to hand, the call over to your host today. Mr. Real time. Please go ahead.
Jay: Thank you operator, Hello, everyone welcome to our fourth quarter 2024 earnings Conference call. Our results were released earlier today and are currently available on our IR website. Today, you will hear from our chairman and CEO, Mr. Jay <unk>, who will provide an update on our overall performance in the.
Speaker Change: Our strategies are.
Speaker Change: Mr. <unk> will then provide more details on our risk management initiatives and update lastly, our CFO Mr. Jim will discuss our financial performance before we get started I'd like to remind you of our safe Harbor statement in our earnings press release, which also applies to this call during the <unk>.
Speaker Change: We may refer to business outlooks and forward looking statements, which are based on our current plans estimates and projections.
Speaker Change: Actual results may differ materially and we do not assume any obligations to update any forward looking statement, except as required under applicable law.
Speaker Change: Please note that all figures are presented in RMB terms and all comparisons are made on quarter over quarter basis, unless otherwise stated.
Speaker Change: Please kindly note Jay and urban will give their whole remarks in Chinese first then the English version will be delivered by <unk> and <unk> AI based the voices.
Speaker Change: With that I'm now pleased to turn over the call to Mr. Jay When Jay Shah Chairman and CEO of little sheep piece.
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Tom: Hello, Amit cell tissue.
Tom: Joining us today.
Tom: 2024 earnings call in the fourth quarter, we maintained a prudent operating strategy focusing on expanding high quality asset and optimizing profitability.
Tom: Driven by enhanced risk management system, and advanced data analytics capabilities, we further reduced overall portfolio risk and delivered consistent profit growth.
Tom: As of quarter end, our outstanding loan balance stood at 110 billion during the fourth quarter. Our GMP was 52 billion revenue was $3 7 billion and non-GAAP profit was $390 million.
Tom: <unk> has been improving for multiple consecutive quarters and both revenue and profit.
Tom: Clearly a growth trajectory.
Tom: Now I'd like to share a few key highlights of our performance.
Tom: First new loans facilitated have consistently maintained high quality.
Tom: <unk> and a continued decline in overall portfolio risk and sequentially improving profitability compared to the third quarter, leading risk indicators for new loans first payment. Therefore, SPD over seven days improved by 8% and SPD over 30 days decreased by about 9% on total loan portfolio.
Tom: So day, one delinquency ratio decreased by 4% 90 days delinquency ratio decreased by 3% improvement in risk performance is primarily attributed to a long term and continuous investment and risk identification capabilities and risk management tools.
Tom: In terms of risk identification capabilities, we introduced multi dimensional third party data develop tailored data systems and identification models for segmented customer groups strengthened real time user risk identification and leverage the latest pig model technology to improve model stability as a result.
Tom: The accuracy of risk identification improved by 15% compared to the previous quarter profitability improved by 10% on the risk management tools front, we establishing risk control laboratory for intelligent risk testing in the fourth quarter, creating a new paradigm of small scale experiments.
Tom: Testing long term observation and dynamic strategy evolution. This approach ensures that every risk management decisions and strategy iteration is grounded in data driven insights and robust analytical support in the fourth quarter with significantly enhanced our efforts and targeting and managing high quality custom.
Tom: Segment.
Tom: And the customer acquisition channels and scenarios by developing scenario based models and revamping the lifecycle strategy framework, leading to continuous growth in new active users. Meanwhile, we upgraded and optimize the credit line decision, making system based on our rapid testing and validation approach.
Speaker Change: <unk> enhancing the accuracy of risk and credit line matching thanks to these initiatives the competitiveness and profitability of our high quality customer segment.
Tom: Yes.
Tom: In the fourth.
Tom: High quality assets increased substantially and the steady growth of our prime customer base further strengthens its stability and sustainability of our business. Our CR Arvind will provide further details regarding our risk management initiatives. Later, the second highlight is the improved efficiency and quality of our refined.
Tom: Operations further strengthened our differentiated competitive advantage during.
Tom: During the fourth quarter business lines in our ecosystem consumer Finance E Commerce, inclusive finance and overseas business made notable progress.
Tom: For online consumer finance business, we deepened our exploration of customer acquisition and operations segmented customer groups and developed tailored outreach strategies.
Tom: E Commerce business, we revamped our risk management system for installment E Commerce platform, leveraging real time risk control order level risk management, and then upgraded product supply chain to better meet consumers' needs for installment payments and hassle free shopping as a result e-commerce profit entered a fast growth.
Tom: We track in the fourth quarter for offline inclusive finance business, we refined our sales management system, focusing on serving small businesses owners in lower tier cities by enhancing one on one services for our core customer groups loans originated from fourth and fifth tier cities and below accounted for over 65.
5% of the total GMB, our inclusive finance business has now been profitable for three consecutive quarters.
Tom: Our overseas business, we strengthened fundamental capabilities in risk management and mid to back office support while per monetizing localized operations and exploring new customer acquisition model. This.
Tom: This led to a significant drop in new customer acquisition costs and improved operating continuity and stability.
While overseas business is still in the early phase we remain committed to driving its steady growth during the quarter. Our intelligence credit platform ICP gained further traction with its share of GMB continued to rise. This model has enabled effective collaboration with financial partners.
Tom: Leveraging complementary strength to drive sustained growth in both revenue and net profit.
Tom: Thanks to the consistent improvement in our overall asset quality our assets have gained greater acceptance among financial institutions. This has diversified and strengthened our funding sources and structure while Greg.
Tom: Our overall funding cost the third highlight is technology, we place a strong emphasis on research and development and it's practical applications.
Tom: In the fourth quarter, we invested 151 million RMB in research and enhance our industry leading competitive edge.
Tom: A key focus has been on AI Big models, we have completed our localized deployment of leading large models such as <unk>.
Tom: And developed our proprietary large model singularity singularity model is deeply embedded in our daily operations enhancing efficiency across customer service telemarketing collections coding and data analysis.
Tom: In research and development is now fully adopted by our development teams assisting and generating code 860000 times monthly and offering 210000 quality improvement suggestions in 2024, boosting coding efficiency by approximately 35% Adil.
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Tom: On the new avenues for applications in risk management operating refinement and workforce efficiency.
Tom: We believe AI holds immense potential to strengthen our core capabilities and we will continue to invest in AI to maintain our competitive edge and drive greater value.
Tom: In addition to the above mentioned highlights.
Tom: Vice protection is always a core competitive advantage and key strength.
Tom: Fourth quarter, we further enhanced digital and systematic development of consumer protection leveraging tools like AI large models, we optimized product service touch points identified service gaps in real time, and refined communication mechanisms to improve the overall consumer experience, earning <unk>.
Tom: Greater trust from our customers and supporting small and micro businesses, we actively uphold the principles of inclusive finance through continuous innovation in products and services, we have improve the accessibility and convenience of our financial services, helping small businesses address challenges and financing.
Tom: Throughout the year, we facilitated over 30 billion RMB loans for small and micro business.
Tom: Looking ahead to 2025, and then the current macro and industry environment. We will continue to adhere to prudent operating strategy prioritizing risk management and driving further de risking and asset structure optimization.
Tom: We are confident in achieving significant profit growth this year.
Tom: We will strengthen our differentiated offerings in credit lines and pricing and refine our operating systems to meet the diverse financial needs of our customers at all levels delivering high quality services throughout their lifecycle.
Tom: Additionally, we will proactively broadened our business boundaries to foster consistent growth of our business performance. Starting this year, we will increase our dividend payout ratio to 25% of net profit.
Tom: As profit continues to grow we plan to further enhance dividends consistently boosting shareholder returns.
Speaker Change: Now I will turn the call over to our C. R. <unk>.
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Diana Chang: Thanks, Jay next I will provide a review of our key initiatives and achievements in risk management for the fourth quarter and the fourth quarter. We remained committed to our strategy of prioritizing asset quality, focusing on scale stability and profitability enhancement through <unk>.
Diana Chang: Key initiatives and have achieved solid results compared to the third quarter, leading risk indicators for new loans first payment default SPD over seven days declined by about 8% in the fourth quarter on total loan portfolio day, one delinquency ratio decreased by 4%.
Diana Chang: And 90 days delinquency ratio decreased by 3% quarter over quarter. The continued declining rates was achieved by the following key initiatives. We've taken first to enhance the accuracy and stability of risk identification, we have introduced new high quality data sources.
Diana Chang: While conducting deeper data mining and joint modeling with our existing core data sources to improve model performance at the same time, we have ramped up the development of dedicated scoring models for different business lines products and customer segments.
Diana Chang: <unk> to general models dedicated models use more targeted modeling samples, which significantly improved prediction accuracy in terms of model stability, we have addressed uncertainties and module predictions caused by factors such as missing data and noise by employing algorithms to quantify the specific.
Diana Chang: Uncertainties.
Diana Chang: Thereby enhancing predictions stability.
Diana Chang: This optimization measures have led to about a 15% improvement and risk identification accuracy and a 10% increase in model stability second we have upgraded our credit line management capabilities by adopting the test and learn approach.
Diana Chang: <unk> our strategy laboratory, we conducted credit line experiments across different customer segments to identify the optimal fit among credit line borrower risk and user conversion. This approach has enabled us to optimize credit lines for various user groups improve the accuracy of credit allocation.
And balance business growth and risk control, which is ultimately helped drive scale growth driven by more competitive credit line for high quality customers and mitigate risks from reducing credit lines for high risk customers.
Diana Chang: Third we have optimized and restructured our risk identification and decision making system for API scenarios, we developed dedicated risk identification models for each core API scenario and enhanced risk screening upfront through joint modeling with API scenarios.
Diana Chang: Furthermore, based on the customer characteristics and profiles of different channels, we have implemented a differentiated full suite of strategies covering admission transactions credit amount and pricing. This enables us to meet the credit needs of customers from various traffic platform, while effectively keeping risk.
Diana Chang: Within our preferred range. Thanks to these upgrades GMB of our API channels increased by about 23% quarter over quarter, while risk of new assets declined by 10% compared to the prior quarter fourth we implemented differentiated produced a reminder, strategies tailored to groups with different power.
Speaker Change: Mobility is a default.
Speaker Change: Meanwhile, for customers with repeated delinquencies, we launched a dedicated project focusing on optimizing repayment settings, increasing the binding rate of frequently use bank cards and improving the rate of auto debt agreements as the share of new assets from Prime plus customers continued to grow day one delinquent.
Speaker Change: The ratio of the total portfolio has continued to decline consistently flat.
Speaker Change: Last but not least in terms of risk control tool development. We have completed the construction of our risk control laboratory and fully applied it into our operations advancing our risk management approach towards a combination of risk prediction and risk experimentation.
Speaker Change: The new risk controlled laboratory has established an end to end process covering experiment design credit allocation dynamic adjustments result evaluation with our laboratory, we cannot only directly experimental variables such as admission rules tearing of credit line and price.
Speaker Change: <unk> models, but can also generate different strategies with one click which significantly reduces deployment time.
Speaker Change: Also the risk control laboratory supports intelligent traffic segmentation and dynamic sample isolation, enabling real time, Midland second traffic distribution as well as multi layered experiment isolation at the user device and request levels.
Mark through dynamic pocketing algorithm based on user profiles and risk stratification. The laboratory insurance the independence of samples between experimental and control groups effectively avoiding data contamination.
Speaker Change: In 2025, we will continue to improve our risk management capabilities comprehensively covering risk identification risk decision, making and risk tool development. This will drive continued decline in risk improvement in profit and stable growth in scale next I will handover to.
Speaker Change: Two our CFO James to provide a review of the company's financial performance for the fourth quarter.
James: Thanks, Alvin I will now provide a detailed overview of our fourth quarter financial results.
James: Please note that all comparisons are made on a quarter over quarter basis, unless otherwise stated.
James: In the fourth quarter, we advanced our business transformation efforts, maintaining a prudent operating strategy, while strengthening our risk management framework and driving business optimization.
James: We are pleased to report the key performance metrics continued their upward trend from the third quarter aligning with our expectations and delivering steady growth. These results underscore the effectiveness of our strategic direction and highlight the progress we've made in executing our initiatives.
James: During the quarter driven by a decline in credit costs, including the provisions in the fair value changes of financial guarantee derivatives. Our net income increased by 17% to $363 million, even though the total GMB remained relatively stable.
James: Net income increased by 54% compared to net income adjusted for the investment losses in the same period of last year.
James: The net income take rate calculated as the net income divided by the average loan balance increased from 1.09% in the third quarter to 131% in the fourth quarter advancing by 22 basis points.
James: We are on track of our profit margin expansion roadmap.
James: Before delving into the financial line items I would like to share some highlights that contributed to this sustainable and in line growth result.
James: First.
James: Increased overall take rate due to continued asset quality improvement.
James: In the fourth quarter, we achieved revenue take rate of six point.
James: Two 2%.
James: 836 basis improvement from 586% in third quarter, even though the overall APR charged to users actually decreased by more than 100 basis point as we focused more on high quality customers.
James: The weighted average APR for loans now stands at 23 eight.
James: 88%.
This take rate was calculated as the sum of revenue from credit facilitation and it take empowerment services and net of funding and our credit cost divided by the average loan balance.
James: The primary driver of this increase in take rate was continued improvement in asset quality.
James: Our credit costs, which include all provisions and the changes in fair value of financial guarantee derivatives and loans at fair value.
James: Increased by 5% or 73 million to one 5 billion in the fourth quarter, reflecting enhanced risk performance.
This improvement stems from our risk management initiatives initiatives previously highlighted by Jay in oven.
James: Our key risk indicators show continued improvement in the fourth quarter, specifically on the loan balance site day, one delinquency rate declined by 4% and a 90 day delinquency ratio declined by 3%.
James: The risk performance of new loans aligned with our expectations with the first payment default rate over seven days decreasing by about 8% and FPV over 30 days decreasing by almost 9%. Additionally, we shortened the long duration from 13, 2%.
James: Four months to 31 three months.
James: Scented further decrease in funding cost.
James: As another driver of our take rate improvement our funding cost for new loans facilitated decreased by 26 basis points.
James: Encouraged by our improved risk performance, our funding partners have been highly supportive offering favorable terms in both funding cost and supply.
James: We also expanded and diversified our funding sources with a number of financial partners growing to 63 in the fourth quarter looked.
James: Looking ahead, we expect that the continued improvements in asset quality.
Deeper collaborations our funding partners and more diversified funding mix will lead to further optimization in funding costs, although it may not be as significant as before.
James: Third more balanced and healthy revenue mix.
James: Our revenue structure was optimized through several initiatives, including lower APR increase the capital light loan volume and the diversification of business lines.
James: In the fourth quarter as we continue to execute our strategy to optimize risk exposure, we focus on acquiring high quality customers.
James: Each led to decrease in APR for the newly originated loans and a corresponding decline in the credit facilitation service income however.
James: However, this decline was offset by a 57% increase in tech empowerment service income, which.
James: Each of them represents income from our capital light model and other services.
James: The tech empowerment income accounted for 16% of our total income up from 11% in the previous quarter.
James: The growth in Tech empowerment income was primarily driven by increased volume from our intelligent credit platform ICP platform.
James: As an important component of our capital light model ICP was designed to match borrowers with the risk rating beyond our preferred range with financial institutions and other platforms through a trust traffic redistribution platform.
James: In the fourth quarter the loan origin originations ended the ICP model increased to 14% of total new loan volume.
James: Furthermore to enhance customer experience and provide more comprehensive services, we facilitated insurance products as well as facilitate certain royalty programs and the retention effort.
James: Revenue from these initiatives also contributed to the growth in the Tech empowerment service income.
James: Last but not least our installment e-commerce platform income.
James: A complementary components of our core credit facilitation service.
James: <unk> grew by 12% quarter over quarter and account for 9% of total income.
James: Fourth <unk>.
James: The improvement in customer acquisition efficiency.
James: In addition to affirmation.
James: With increased funding cost decrease and revenue mix enhancement.
James: We are committed to optimizing our sales and marketing expenses by improving customer acquisition efficiency.
James: By leveraging advanced risk identification and management systems combined with our deep expertise in traffic distribution.
James: We have strengthened our ability to target users more accurately identify potential customers and to deliver better user acquisitions with higher approval rates.
James: As a result, new active users excluding the ICP business.
James: Grew by 23% quarter over quarter, while the cost per active user decreased by 21%.
James: We will continue to invest capital to acquire more users for the long term sustainable growth.
James: Now I'll go through our key financial line items.
James: On the revenue side credit facilitation service income decreased by 9% quarter over quarter, mainly driven by the decrease in the new loan pricing.
James: The APR for the new loans originated in Q4 decreased by more than 100 basis points.
James: The turnkey empowerment service income increased by 57% driven by increased volume from our capitalized ICP and income generated from value added services like insurance products and user royalty programs.
James: E Commerce business revenue increased by 12% due to the increase in the <unk> momentum.
James: On the cost and expenses side.
James: Credit costs, including the provisions in the fair value changes of financial guarantee derivatives and loans at fair value decreased by 5% quarter over quarter due to the consistent improvement in our asset quality.
James: Total operating expenses, which include processing servicing costs sales and marketing R&D and G&A expenses.
James: Relatively stable at a $1 3 billion.
James: Driven by the aforementioned factors our net profit in the fourth quarter increased by 17% to 363 million. Our net profit margin as a percentage of total revenue increased from eight 5% to nine 9%.
James: For balance sheet items as of year end of 2024, our cash position, which includes cash cash equivalents and restricted cash was approximately $4 1 billion.
James: Shareholders' equity remained solid at about $10 7 billion.
James: Our provision coverage ratio remains sufficient at approximately 255% at the end of fourth quarter.
James: As Jay mentioned, we are committed to providing sustainable value to our shareholders. We are pleased to announce the board of directors has approved a cash dividend of U S dollars point.
James: One one per ads for the second half of 2024 equip.
James: Equivalent to approximately 20% of total net profit for the second half of 2024.
James: As a reminder, as we announced last quarter effective from January one this year, our cash dividend payout will be raised to 25% of net income.
James: <unk> will be announced in August when we announced Q2 result.
James: In the future we are open to increase the cash payout ratio as appropriate to align with the growth of profitability.
James: Looking ahead, while our performance continues to show positive momentum.
James: We remain prudent in light of ongoing macroeconomic uncertainties.
James: Therefore, we expect Q1 Q1 <unk> to be flat with Q4 also due to the Chinese new year seasonality.
James: For 2025, all year, we expect flat to single digit year on year GMB growth, depending on the macro alongside a significant rise in net profit driven by profit margin expansion and depend primarily by continuous asset quality improvement and our overall.
James: Our business transformation.
James: This concludes our prepared remarks for today operator, we're now open to take questions. Thank.
James: Thank you.
Speaker Change: To ask a question you need to press star one on your telephone please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Wang from Goldman Sachs. Please go ahead.
Wang: Thank you.
Speaker Change: Please go ahead.
Wang: Thank you Sheila.
Wang: Thank you.
Wang: Maybe I should go away.
Wang: Michael.
Wang: Thank you guys.
Wang: And the answer to you.
Wang: Yes.
Wang: Thank you Tricia.
Wang: Yes.
Wang: Great.
Speaker Change: Okay. Thank you my question. The first question is with our business plan for items, maybe five and the second thing is what is our.
Wang: EMEA out.
Specific applications of technology, such as boutique.
Wang: What our future plans.
Wang: King.
Wang: Okay.
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Wang: And listen to them because under the Guadalajara to go.
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Wang: So we see a woman sorry opinions and good day.
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Wang: <unk> formula going to you're going to choose a woman with yoga well below their hurdle or could it change in both user and local consulting.
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President <unk>.
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Wang: Let me translate the project.
Wang: Thank you plan in 2025, our strategy remains prioritizing asset quality focusing on profitability enhancement with a priority on asset quality, we aimed to profitability enhancement and the scale stability in terms of risk. We will continue to upgrade our risk management system the new notes.
Wang: We facilitated this quarter.
Wang: Credit performance is in line with our expectation and we will drive the continuous decline of key risk indicators in the future in terms of profitability. We are committed to driving significant growth in net income by leveraging continuous enhancement in risk performance optimize the funding structures and costs and improved <unk>.
Wang: Operational efficiency in terms of scale. Our goal is to achieve stable growth by improved efficiency of customer acquisition through our high quality client engagement and enhanced synergies with our partners and platforms offline inclusive finance and E Commerce business.
Wang: We also will increase our investment in customer acquisition. This year to further enhance the improved the efficiency of customer acquisition.
Wang: Despite the overall positive momentum our performance <unk> experienced volatility due to macro economic headwinds and seasonality fluctuations, we will adjust our growth strategies in real time based on the evolving environment.
Wang: Sorry.
Wang: Users have been a woman.
Speaker Change: So it is a woman so honeymoons results so young woman Sonya.
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Speaker Change: They are doing.
Speaker Change: Total PCL kinds of waste tonnes or John can do that is with the unions are function Google.
Speaker Change: The pundits political season function one is <unk>.
Speaker Change: Let me translate.
Speaker Change: As reported flourishing is one of the first the financial platforms in China to implement deep take model. Following the deployment of deep Sea <unk> in May 2023, nursing have recently upgraded to <unk> by leveraging over a decade of industry expertise and the data accumulation.
Speaker Change: We have conducted a pre training and localize the deployment on deep seek and developed singularity AI our own financial large model.
Speaker Change: We have deeply applied AI technology to improve research and the development efficiency boost innovation and business enablement or.
Speaker Change: Our large model has been fully deployed in core operation workflows, including telemarketing customer service and collections.
Speaker Change: Through continued optimization of dialogue flow trees, and the user conversion we have demonstrated substantial.
Speaker Change: Substantial improvement in both operational efficiency and customer experience.
Speaker Change: Also we applied this.
Speaker Change: Advanced technology into our collection process as Robin just mentioned that we use this to improve the collection efficiency for.
Speaker Change: Delinquency delinquency customers in the future, we will strategically intensified technology investment with a primary focus on advancing deployment of deep seek are one we will implement comprehensive process optimization across all business segments explore its application in key areas of risk.
Speaker Change: Management and leverage technology to further enhance our risk management capabilities.
Speaker Change: Thanks.
Speaker Change: Operator, thank you for the questions one moment for the next question.
Speaker Change: Our next question comes from Alex here from UBS. Please go ahead.
Speaker Change: Okay great.
Speaker Change: We're not going to go on your phone.
Speaker Change: Vehicles.
Speaker Change: You can also answer it.
Speaker Change: Zach mentioned Tito <unk> from Goldman.
Speaker Change: <unk> Foundation is gen Slovak Okay gentlemen.
Speaker Change: Please go ahead Sir.
Speaker Change: Thank you.
Speaker Change: So basically <unk>.
Speaker Change: Okay.
Speaker Change: Me too.
Speaker Change: The other one is.
Speaker Change: Opinions that loans answered that one client.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: <unk> okay.
Speaker Change: Neil.
Speaker Change: Sure.
Speaker Change: Let me translate my question so.
Speaker Change: First question is about the company.
Speaker Change: Ongoing investment in your risk management capabilities.
Speaker Change: Can you share with us.
Speaker Change: More color in terms of limited progress on the achievement you have made.
Speaker Change: Essentially what's the gap versus your peers.
Speaker Change: Second question about the outlook for.
Speaker Change: Management met.
Speaker Change: One of them.
Speaker Change: Men.
Speaker Change: Target that you.
Speaker Change: To achieve this year.
Speaker Change: <unk>.
Speaker Change: Some of the.
Speaker Change: Most important indicators that you mentioned.
Speaker Change: Semiannual Greater Asia, and one is hung in there.
Speaker Change: <unk> witching elements from aluminum.
Speaker Change: Good.
Speaker Change: <unk> has achieved Ala and <unk> and do the Tinder <unk>.
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Speaker Change: <unk> so for Union lymphoma.
Speaker Change: On Linzess for sending us ophthalmia Asher Carey intent under one year.
Speaker Change: Closure of the <unk> women's from Nielsen <unk> from the distributor.
Speaker Change: Ginger.
Speaker Change: Two in India.
Speaker Change: One is on Google Guangdong and Fujian.
Speaker Change: <unk>.
Speaker Change: Turning to us, which isn't a woman can contribute.
Speaker Change: Contributing <unk> <unk>.
Speaker Change: <unk> you had further attendees income in the economy.
Speaker Change: <unk> found that format.
Speaker Change: India showed their crew from you is rule of law and the Peru.
Speaker Change: Ian ruler test and learn from home teamed up on yet.
Speaker Change: The risk.
Speaker Change: Honda.
Speaker Change: These Honda frontline <unk>.
Speaker Change: And the <unk>.
Speaker Change: <unk> seen women Cheng.
Speaker Change: Thank you <unk>.
Speaker Change: Shifting to <unk>.
Speaker Change: Pollution from Genco and included EMEA, <unk>, yes, sure, they're pushing and <unk>.
Speaker Change: <unk>.
Speaker Change: Food and wine mango, Pangu and contango short, England.
Speaker Change: <unk> foods and one of them.
Speaker Change: So we are the bulk of it.
Speaker Change: SUNS and <unk>, India.
Speaker Change: <unk> high yield some changes for TTM since youre going to the Egencia.
Speaker Change: <unk> carcinoma.
Speaker Change: Susan.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: Turning to Yokohama accountant woman.
Speaker Change: Question from.
Speaker Change: <unk>.
Therefore, the chicken shack wounds.
Speaker Change: We will ensure a woman does financed proton solutions.
Speaker Change: So with the change in Chile.
Speaker Change: Sure.
Speaker Change: China on the tender.
Speaker Change: You were main symptom the tender offer PDT for PD funding, so that we achieve targeted towards <unk>. Okay.
Speaker Change: Performing women's fashion brand in <unk>.
Speaker Change: With EMEA.
Speaker Change: Cash is key here.
Speaker Change: In terms of Kodak.
Speaker Change: So our annual <unk> per tonne from 10 to Bill Tanya.
Sung Lee: Sung Lee.
Speaker Change: Judy so addressing some neutral.
Speaker Change: China on per ton in the Tam be approved in India.
Speaker Change: Danielle <unk>.
Speaker Change: <unk> gone from 10 per tender without you.
Speaker Change: We see some good.
Speaker Change: Potentially.
Speaker Change: <unk> group issued by <unk> and you could see.
Speaker Change: Let me translate.
Speaker Change: Overall, we achieved significant improvement of risk management capability for this quarter overall, our risk management capability has reached industry level and in specific technology technical aspect, we have already added the industry leading position.
Speaker Change: We have comprehensively restructured and upgraded key risk management process, including risk identification decision, making risk pricing and post loan management.
Speaker Change: These enhancements have significantly improved the accuracy and stability of our risk management system. Meanwhile, we have upgraded our decision, making methodologies such as tap dinner low end growth framework frameworks for credit lines and pricing decisions.
Speaker Change: And we also improved our risk tools, such as dedicated risk control laboratories, the risk of Robert to validate and to support our key risk decisions.
Speaker Change: As a result, our key risk indicators, including 90 days delinquency ratio and FTE 30 days ratio have improved for two consecutive quarters, which underscore the tangible benefits yielded by our risk management transformation efforts.
Speaker Change: Despite these achievements our overall performance still has some gifts compared to our peers, mainly triggered by legacy loss. However, as the proportion of high quality, new loan increases and the decrease of legacy loans, we expect the overall portfolio quality to further.
Speaker Change: <unk>.
Speaker Change: Hello, Hi.
Speaker Change: <unk> premium brand in Permian <unk>.
Speaker Change: <unk> will not jump in here too.
Speaker Change: More consistently.
Speaker Change: Thank you.
Speaker Change: <unk> enrollments at <unk> com.
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Speaker Change: <unk> woman that simply genre Permian takeaway Shaun.
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Speaker Change: <unk> users.
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Speaker Change: We have Amit <unk> and Samsung.
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Speaker Change: We can do the Cocos and the town halls are bound to them in that.
Speaker Change: Seasonal momentum <unk> will enter the Coca Cola the accumulation.
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Speaker Change: Permian will meaningfully tissue.
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Speaker Change: Seasonal carryover higher turnover.
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Speaker Change: So the EBIT numbers.
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Speaker Change: <unk> continues to build.
Speaker Change: The symptoms the time <unk> 17 from <unk>.
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Speaker Change: Pvt, and for PD tunnel syndrome for transplantation.
Speaker Change: So ashish.
Speaker Change: Prior quarter.
Speaker Change: The audio collegiate momentum.
Speaker Change: Okay.
Speaker Change: Let me translate.
Speaker Change: Our goal is still to prioritizing answer the quality focusing on scale stability and profit enhancement building. Upon the established risk framework. We will further optimized as follows in terms of risk detection, we will optimize asset structure by increasing the inflow of high quality.
Speaker Change: Customers.
Speaker Change: So we will refine our collection strategy through differentiation and intelligent connection tourists, ensuring a continuous decline in risks for both new loan and loan balance.
Speaker Change: In terms of scale by enhancing.
Speaker Change: Specialized customer acquisition capabilities across all channels and improving offer competitiveness, we will drive the inflow of high quality, new customers activate potential customers and expand the credit admission through our e-commerce platform, thereby promoting high quality asset growth and strengthening the company's appear.
Speaker Change: City to navigate credit cycle.
Speaker Change: In terms of profitability enhancement, we will upgrade our pricing strategies for customer segments with different risks.
Speaker Change: And we will.
Speaker Change: We will further improve third party data to further enhance our accuracy.
Speaker Change: It will improve the IRI of data costs and by utilized collection tools, such as intelligent case allocation under collection assistant to improve our collection costs.
Speaker Change: Meanwhile, we will leverage AI and large models to further enhance our efficiency and accuracy.
Speaker Change: On AI model level, we will strength, our risk identification capabilities for different customer segments and the scenarios for example by using customer retention model to predict customer that we can implement targeted retention strategies by using competitiveness model to identify users.
Speaker Change: Piedmont, we can improve offer competitiveness and effectively enhance high quality customer acquisition and potential customer activity activation.
Speaker Change: How does AI tour level, we will continue to develop our intelligent risk management capacity capabilities. For example, we will continue to leverage tools, such as strategic Robert and the decision, making laboratory to enhance the accuracy and efficiency of strategic decision, making.
Speaker Change: Regarding performance tracking in addition to 90 days delinquency ratio and SPD over 30 days ratio, which we regularly disclose we will also communicate the quarterly trend of <unk> seven seven days of new New asset ended the day, one delinquency ratio of total portfolio, which grew.
Speaker Change: To facilitate a more comprehensive understanding of our asset quality.
Speaker Change: Thank you.
Speaker Change: Operator, we're ready for next question. Thank you for the question. The final question comes from the line of Don <unk> from CIC. Please go ahead.
Speaker Change: Okay.
Speaker Change: Our house with him.
Speaker Change: Each of those.
Speaker Change: So when you go to you and that's your way.
Speaker Change: Similarly, <unk>, which enjoys even though so.
Speaker Change: John why don't you do it well that should amusement donlin chemo junction is always helpful.
Speaker Change: Well <unk> you said.
Speaker Change: You went to your attention.
Speaker Change: In Chicago, we bought from you in Q1.
Speaker Change: Thanks, Tom.
Speaker Change: Then I'll do the translation okay.
Speaker Change: Great.
Speaker Change: Okay.
Speaker Change: Go ahead.
Speaker Change: Yes go ahead.
Speaker Change: Okay. Okay.
Speaker Change: Ill do the translation. So first of all could you elaborate more about the trend of unit economics and the demand drivers.
Speaker Change: And I was wondering how to view the old tax in 2025 is probably smaller in sales and marketing expenses, we would a company become more active in customer acquisition in the following quarters.
Speaker Change: And do we expect to deliver more value to the shareholders.
Speaker Change: I know you put a plan that's all thank you.
Speaker Change: Okay I will take the first two questions and then ask Jay to answer the third question.
Speaker Change: First in terms of the unit economics, as we have been communicating with the market.
Speaker Change: If you look at the net profit margin of the company. It is calculated as the net income divided by the average loan balance it will increase significantly to reach the industry average level in the next two years.
Speaker Change: Obviously, the primary driver for the asset is the asset quality improvement, particularly for the new loans issued since the second half of last year. As an example in Q4. If you look at the provisions it was reduced by 5% compared to the previous quarter. So as you know the total loan portfolio.
Speaker Change: It is a mix of the old legacy loans and better quality new loans.
Speaker Change: As we have more better quality, new loans and the old loans will mature and lapse. Therefore, the overall asset quality will continue to improve.
Speaker Change: Which will lead to sustained profitability improvement or net profit margin expansion.
Speaker Change: That's a fact.
Speaker Change: Contributing to the improved profitability is the reduction in the funding cost as our asset quality continues to improve our asset receives a more acceptance from the financial institution partners and the funding costs declined accordingly.
Speaker Change: So as a demonstration of our.
Speaker Change: Our profitability improvement, we can take a look in the net profit margin in the last four quarters in 2024 it started from.
Speaker Change: Six 6% in Q1.
Speaker Change: 77% in Q2.
Speaker Change: 1.09% in Q3, and a 131% in Q4.
Speaker Change: So we expect the net profit margin to continue to sequentially improve in the next two years to eventually reach the industry average level will.
Speaker Change: We'll reminder of course is that we may experience certain fluctuations in the degree of the profit margin improvement from quarter to quarter due to the impacts of seasonality accounting rules or any other timing factors, but we are very confident the overall net margin expansion trajectory will not change.
Speaker Change: As for the second part of the question the Opex basically to continue to support the user acquisition and the business growth I E. The expanding new marketing channels upgraded risk control systems hiring top talent and increasing AI technology investment, we do expect the absolute amount of the companies.
Speaker Change: Our operating expenses to increase in 2025, although it will be at a slower pace than the overall company profitability improvement.
Operational efficiency improvement is another factor that contributes to the margin expansion. So we will continue to work hard to balance the need of investing for the future and also the need to sustain the sequential profitability improvement.
Speaker Change: So.
Speaker Change: The answer is if you will for the first two questions and the last one is for Jay.
Speaker Change: Hello.
Speaker Change: We will also look at OTT in shampoo.
Speaker Change: In fiscal <unk>.
Speaker Change: <unk> will then one year.
Speaker Change: Well, Linda <unk> will hold well.
Speaker Change: Duncan and somebody needs a lot of physical some take a little closer.
Speaker Change: Hesitate a little good OLED politically Bob genius of course routine fungi ohanian, while mitigating an adherent jump with after the tender will anyway.
Speaker Change: So this is.
Speaker Change: <unk>.
Speaker Change: Women Newco don't cheat item will be also used to that.
Speaker Change: Let me translate.
Speaker Change: As we announced the previous previously our cash dividend payout will be raised to 25% of net income effective from January one this year the dividend will be announced in August when we disclosed our second quarter results.
Speaker Change: We are committed to returning values to our shareholders. This year is our business and financial results hung over the year. We expect our net income will increase significantly in 2025, and we are open to increase the cash dividend payout ratio is appropriate to online.
Speaker Change: Waste shareholders' expectations.
Speaker Change: Thanks.
Speaker Change: Operator.
Speaker Change: You for the questions.
Speaker Change: No more questions from the line I would like to hand, the call back to management for closing.
Speaker Change: Thank you. This conference is now concluded. Thank you for joining today's call. If you have any more questions. Please do not hesitate to contact us. Thanks again.
Speaker Change: That does concludes today's conference call you may now disconnect.