Q1 2025 LexinFintech Holdings Ltd Earnings Call
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Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today will turn head of capital markets. Please go ahead.
Speaker Change: Thank you operator, Hello, everyone welcome.
Speaker Change: First quarter plenty plenty of five earnings conference call.
<unk> 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 overall performance and the strategy of our business.
Speaker Change: Our CFO Mr. Mr. Amin somewhat and Joe will then provide more details on our risk management initiatives and updates.
Speaker Change: Our CFO Mr. Jim.
We'll discuss our financial performance.
Before we continue I would like to refer you to our safe Harbor statement in our earnings press release, which also applies to this call as we will be making forward looking statements last. Please note that all figures are presented in renminbi terms and all comparisons are made on quarter over quarter basis.
Unless otherwise stated.
Speaker Change: Please kindly note Jay and oven will give their whole remarks in Chinese first then the English version will be delivered by Jason and Arvind AI based the voices.
Speaker Change: With that I'm now pleased to turn over the call to Mr. J, J, <unk>, chairman and CEO of Louis Please.
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Operator: I would now like to hand the conference over to your speaker today, Will Tan, Head of Capital Markets. Please go ahead.
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Will Tan: Thank you, operator.
Will Tan: Hello, everyone. Welcome to the first quarter 2025 earnings conference call. Our results were released earlier today and are currently available on our IR website.
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Wenjie Xiao: Today, you will hear from our chairman and CEO, Mr. Zheng, Wenjie Xiao, who will provide an update on overall performance and the strategies of our business.
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Armin Zhanwen Qiao: Our CFO, Mr. Armin Zhanwen Qiao, will then provide more details on our risk management initiatives and updates.
James Zeng: Lastly, our CFO, Mr. James Zeng, will discuss our financial performance.
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Will Tan: Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which also applies to this call, as we will be making forward-looking statements. Last, please note that all figures are presented in RMB terms, and all comparisons are made on quarter-over-quarter basis, unless otherwise stated.
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Will Tan: Please kindly note Jay and Arvind will give their whole remarks in Chinese first, then the English version will be delivered by Jay's and Arvind's AI-based voices.
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Wenjie Xiao: With that, I am now pleased to turn over the call to Mr. J. Wenjie Xiao, Chairman and CEO of Lexin, please. Hello everyone, I am very happy to share with you the results of the first quarter of 2025.
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Speaker Change: Thanks for joining us today for our first quarter 2025 earnings call.
Speaker Change: Despite ongoing macroeconomic uncertainties, our GAAP net profit reached $430 million a record high in 13 quarters, representing quarter over quarter growth of 18, 6% and year over year growth of 113%.
Wenjie Xiao: 面对宏观环境的万步不确定性,今年一季度,GAP金利润大幅增长,创下13个季度来新高,达4.3亿元,完毕增长18.6%,同比增长113.7% The performance of the first quarter has shown that the company has persisted in taking risks and data in the past two years, and has successfully achieved a strategic transition to optimize operations. We are now in a new phase of high-quality development by completing this difficult transition. The change of the ability to upgrade will bring continued value emanation in the future. 完成业绩充满信心 Over the past two years, we have been focusing on data-driven strategic transformation. We are committed to prioritizing risk, upgrading business underlying capabilities, and adopting a life-cycle operation strategy such as wind control, marketing, and operations.
Speaker Change: Our first quarter results demonstrate the success of our three year transformation centering on building a model driven by data analytics risk management and refined operations, having completed this challenging transformation. We have entered a new phase of high quality development, the fundamental enhancements of our core capabilities.
Speaker Change: We will drive sustained value creation moving forward and we remain confident in delivering our full year performance targets over the past two years of transformation, we have adhered to a risk first approach comprehensively upgrading our core business capabilities.
Speaker Change: We are iterating and optimize the full lifecycle strategy covering risk management marketing and operations, while also strengthening our system infrastructure to achieve effective coordination between risk management and business development by far we have completed the upgrade of our risk management framework and.
Wenjie Xiao: At the same time, we have strengthened our system capabilities to achieve an effective system of risk and business.
Wenjie Xiao: So far, we have completed the upgrade of the new risk system and the construction of risk-based facilities, and Xigui Zheng, Unknown Executive, Wenjie Xiao, Yada Li, Mandy Dong, Zhanwen Qiao, Huanan Zhou, Yuying Zou, Will Tan, Zhuhan Wang, Lexinfintech Holdings Ltd. Lexin's multi-business ecosystem has made good progress. Personal consumer-oriented business through the model decision-making pre-manufactured traffic allocation the customer ability and efficiency are significantly enhanced. In terms of differentiation pricing in the first quarter, we launched a range of products such as flexible ring, flexible ring, and Lezinka Lezhou轉. The optimization margin, interest rate, and deadline make OPPO more competitive.
Speaker Change: <unk> robust risk management infrastructure. Furthermore, we have built a comprehensive quantitative business analysis framework that supports differentiated credit assessment and pricing strategies tailored to various customer segments. These initiatives have resulted in significant enhancements to our refined.
Speaker Change: <unk>.
Speaker Change: <unk> has also achieved significant progress across multiple ecosystems businesses for our online consumer finance business, we have notably enhanced customer acquisition capabilities and efficiency by implementing model based decision, making upfront at the traffic allocation stage.
Wenjie Xiao: In addition, retail business has built an independent risk system, upgraded supply chain, and widened the business boundary for users. For different users, we match differentiated products and separate services. In the first quarter, the rate of separation is significantly increased. The scale of the transaction has increased by 16.2%.
Speaker Change: <unk> on our differentiated pricing strategy, we launched the on demand credit products in flexible loan in the first quarter, featuring flexible use of credits and repayment the new product together with our existing products.
Wenjie Xiao: In the face of small micro-small micro-small micro-small micro-small micro-small Xigui Zheng, Unknown Executive, Wenjie Xiao, Xigui Zheng, Xiaoxiong Ye, Yada Li, Mandy Dong, Zhanwen Qiao, Huanan Zhou, Yuying Zou, Will Tan, Zhuhan Wang, Lexinfintech Holdings Ltd. The way of quantification, interaction, and artificial integration precisely matches the user's priority. While reducing the risk, the market competitiveness of the product has been improved. As we continue to increase the sales of low-tier cities, small and medium-sized enterprises, and individual business owners, and strengthen the digitalization of operations, the trading volume in the region below Line 4 and Line 5 has increased by more than 70%.
Speaker Change: No.
Speaker Change: Arms, a competitive product matrix, our overall product offering features optimized credit lines rates and tenant, making our financial solutions more competitive in the market for our installment E. Commerce business, we have revamped the risk management system upgraded the e-commerce supply chain.
Wenjie Xiao: Profit has increased rapidly. In terms of overseas business, in order to complete the upgrade of financial products in Mexico and Indonesia, to improve the China-Taiwan risk system, to improve the operation of cargo channels, the cost of low-tier cargo has reduced by 19%. Overall, the profit has been achieved. With mature wind control technology and mid- and late-stage capability, we can expand more overseas business. With the maturity and development of each business, Lexin's business ecology will gradually become our unique core competitiveness.
Speaker Change: And expanded the boundary of user development.
Speaker Change: We match different users with tailored installment services.
Speaker Change: As a result approval rate of installment applications increased significantly in the first quarter driving ecommerce GMP to increased by 16, 2%.
Speaker Change: For our offline inclusive finance business targeting small and micro business owners quantitative assessment of combined with manual review to accurately determine the credit lines granted for high quality users in the first quarter, our offline inclusive finance business not only saw lower risk, but also higher.
Wenjie Xiao: In the future, we will focus on the following aspects of work. First, we want to focus on users, improve customer experience, promote long-term, stable growth of high-quality users, and increase the construction of decentralized products, provide competitive offers and flexible payment methods, enhance user-to-user connectivity, and build better products and services Pay attention to the construction of security, optimize users, focus on service experience, and improve customer satisfaction. Second, we want to strengthen ecological business cooperation, continue to build a unique, diversified competitive advantage, use diversified products and services to match different users, cover users, all-life cycle, easy consumption, flexible turnover, and trust needs.
Speaker Change: Our product competitiveness as we continued to increase penetration of small and micro business owners in lower tier cities and strengthen localized operations.
Speaker Change: <unk> from tier four tier five and lower region has accounted for over 70% of our inclusive finance GMB and the first quarter alongside sequential profit growth for our overseas business. We have completed the upgrading of financial products in the Mexico, and Indonesia markets improve.
Wenjie Xiao: Increase retail business, differentiate the needs of people with different risk performance, improve the commodity supply chain, stimulate the consumption potential of different levels of customers. to improve the trading performance of high-quality users and play the role of customers and live customers. In the face of small and micro enterprises, the shareholding financial business plays the role of offline direct customer team and precise one-on-one service. It goes deep into the low-end cities, industrial zones and professional markets to explore and improve more business models, strengthen digital management and penetration, improve the performance of high-quality small and micro customers.
Speaker Change: The risk management system, and enhance the operational capabilities of customer acquisition channels.
Speaker Change: In the first quarter customer acquisition cost decreased by 19% quarter over quarter and the overseas business has achieved profitability.
Speaker Change: Our mature risk management capabilities technological strength and back office support enable us to expand into more overseas markets. As these businesses developed and mature <unk> ecosystem will gradually become our unique competitive edge moving forward, we will focus on the following areas.
Wenjie Xiao: Personal consumption-oriented business will focus on expanding high-quality customer channels, explore the potential of cooperation with large platforms, broaden the business boundaries of the company, and maintain a moderate scale of growth.
Wenjie Xiao: Third, increase technical investment, especially investment in AI, so that AI can be used in various business scenarios. To improve competitiveness, through localization and deployment of mature, performance-excellent AI models, to speed up business processes, improve operating efficiency, reduce service costs, explore AI smart objects that have financial adaptation capabilities, and apply them in the field of money transfer strategy and auxiliary production. Through autonomous decision-making and task execution, to promote customer, operation, control, and other scenarios.
Speaker Change: Firstly, we will maintain a user centric approach focusing on enhancing user experience and promoting the steady growth of high quality customers. Our strategy involves strengthening our product portfolio with more competitive offers and flexible repayment methods designed to boost user loyalty throughout.
Speaker Change: The entire customer lifecycle. Additionally, consumer protection will remain a priority we will continue to optimize customer engagement and service experiences in order to increase overall customer satisfaction seconds.
Wenjie Xiao: of Xigui Zheng, Unknown Executive, Wenjie Xiao, Yada Li, Mandy Dong, Zhanwen Qiao, Huanan Zhou, Yuying Zou, Will Tan, Zhuhan Wang, Lexinfintech Holdings Ltd. In 2025, in the face of the fluctuations in the macroeconomic environment, changes in the industry, and the uncertainty of geopolitics, thanks to the increasing manpower and the unique multi-business ecological advantage, our management ability and management tenacity have been greatly improved. We are confident that our profits will continue to grow in 2025.
Speaker Change: Secondly, we will strengthen synergies across our ecosystem businesses to further build our unique and differentiated competitive advantage, we will match diverse products and services to different user segments.
Speaker Change: Dressing their demands for carefree consumption and flexible liquidity throughout their entire lifecycle for the installment E. Commerce business, we will improve the merchandise supply chain to meet the differentiated demands of users with varying risk profiles.
Wenjie Xiao: Therefore, I reiterate that in 2022, we will do our best to The company has always valued the returns of shareholders and has striven to return the value to shareholders in various ways. As of November last year, we announced that the share share ratio of the company's cash dividend will be increased by 20% to 25% from the net profit from 2025. According to the board of directors, we will increase the share share ratio again. Starting in the second half of 2025, the share share ratio of the company will be further increased to 30% of net profit.
Speaker Change: This will help unlock consumption potential across different customer tiers and increase DMV from high quality users enhancing customer engagement and acquisition for the inclusive finance business, we will leverage our in house offline team's capabilities in customer acquisition and personalized.
Speaker Change: One on one service, we will deepen our presence in industrial clusters in specialized markets in lower tier cities explore and refine various business models and strengthen localized operations and deepen market penetration to increase the share of quality micro business owner customers for it.
Will Tan: Next, I will give the floor to our CIO, Eric.
James Zeng: Thank you. Thanks for joining us today for our first quarter 2025 earnings call. Despite ongoing macroeconomic uncertainties, our gap net profit reached $430 million, a record high in 13 quarters, representing quarter-over-quarter growth of 18.6%, and year-over-year growth of 113%. Our first quarter results demonstrate the success of our two-year transformation centering on building a model driven by data analytics, risk management, and refined operations.
Speaker Change: The online consumer finance business, we will focus on expanding high quality customer acquisition channels tapping into the potential of large platform partnerships and broadening our business boundaries to maintain sustainable growth and scale thirdly, we will increase investment in technology, particularly in.
Speaker Change: Applying AI to empower various business scenarios and enhance the company's competitiveness by.
Speaker Change: By locally deploy in mature and high performance large AI models.
James Zeng: Having completed this challenging transformation, we have entered a new phase of high-quality development. The fundamental enhancement of our core capabilities will drive sustained value creation moving forward, and we remain confident in delivering our full-year performance targets. Over the past two years of transformation, we have adhered to a risk-first approach, comprehensively upgrading our core business capability. We have iterated and optimized the full life cycle strategy, covering risk management, marketing and operations, while also strengthening our system infrastructure to achieve effective coordination between risk management and business development. By far, we have completed the upgrade of our risk management framework and established robust risk management infrastructure.
Speaker Change: We will reshape business processes improve operational efficiency and reduced service costs.
Speaker Change: We will explore the application of AI agents with financial adaptive capabilities in the pre lending process too.
Speaker Change: Two autonomous decision, making and task execution.
Speaker Change: We will promote process automation and decision intelligence and scenarios, such as customer acquisition operations and risk management further enhancing the companys operational refinement, despite the volatile macroeconomic environment evolving industry landscape and yielding uncertainties our operation.
Speaker Change: Resilience has significantly improved thanks to our continuously enhanced capabilities and unique ecosystem advantage.
Speaker Change: Therefore, we are confident in achieving sustained growth in net profit for full year 2025, we are affirming our full year 2025 profit guidance of substantial year over year growth. The company has always attached great emphasis on shareholder returns and remains committed to deliver.
James Zeng: Furthermore, we have built a comprehensive, quantitative business analysis framework that supports differentiated credit assessment and pricing strategies tailored to various customer segments. These initiatives have resulted in significant enhancements to our refined operations.
Speaker Change: Bring value to our shareholders through various channels in November 2024, we announced to increase our cash dividend payout ratio from 20% to 25% of total net profit starting from 2025. The board of directors has approved to further increase the dividend payout ratio to 30% of net profit.
James Zeng: Leqing has also achieved significant progress across multiple ecosystem businesses. For our online consumer finance business, we have notably enhanced customer acquisition capabilities and efficiency by implementing model-based decision making up front at the traffic allocation stage. Building on our differentiated pricing strategy, we launched the on-demand credit product, Linghuojie Flexible Loan, in the first quarter, featuring flexible use of credit and repayment. The new product, together with our existing products, Lejingka and Lezhouzhuan, forms a competitive product matrix. Our overall product offering features optimized credit lines, rates, and tenors, making our financial solutions more competitive in the market. For our installment, e-commerce business, we've revamped the risk management system, upgraded the e-commerce supply chain, and expanded the boundary of user development.
Speaker Change: Effective from the second half of 2025.
Speaker Change: Now I would like to give the floor to our CRO Arvind. Thanks.
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James Zeng: We match different users with tailored installment services. As a result, approval rate of installment applications increased significantly in the first quarter, driving e-commerce GMV to increase by 16.2 percent. For our offline inclusive finance business, targeting small and micro business owners, quantitative assessment is combined with manual review to accurately determine the credit lines granted for high-quality users. In the first quarter, our offline inclusive finance business not only saw lower risks but also higher product competitiveness as we continued to increase penetration of small and micro business owners in lower tier cities and strengthen localized operations. GMV from Tier 4, Tier 5, and lower regions has accounted for over 70% of our inclusive finance GMV in the first quarter, alongside sequential profit growth.
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James Zeng: For our overseas business, we have completed the upgrading of financial products in the Mexico and Indonesia markets, improved the risk management system, and enhanced the operational capabilities of customer acquisition channels. In the first quarter, customer acquisition costs decreased by 19% quarter over quarter, and the overseas business has achieved profitability. Our matured risk management capabilities, technological strength, and back office support enable us to expand into more overseas markets. As these businesses develop and mature, Lexin's ecosystem will gradually become our unique competitive edge.
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James Zeng: Moving forward, we will focus on the following areas. Firstly, we will maintain a user-centric approach, focusing on enhancing user experience and promoting the steady growth of high-quality customers. Our strategy involves strengthening our product portfolio with more competitive offers and flexible repayment methods designed to boost user loyalty throughout the entire customer lifecycle. Additionally, consumer protection will remain a priority. We will continue to optimize customer engagement and service experiences in order to increase overall customer satisfaction. Secondly, we will strengthen synergies across our ecosystem businesses to further build our unique and differentiated competitive advantage. We will match diverse products and services to different user segments, addressing their demands for carefree consumption and flexible liquidity throughout their entire life cycle.
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James Zeng: For the installment e-commerce business, we will improve the merchandise supply chain to meet the differentiated demands of users with varying risk profiles. This will help unlock consumption potential across different customer tiers and increase GMV from high-quality users, enhancing customer engagement and acquisition. For the inclusive finance business, we will leverage our in-house offline team's capabilities in customer acquisition and personalized one-on-one service. We will deepen our presence in industrial clusters and specialized markets in lower-tier cities, explore and refine various business models, and strengthen localized operations and deepen market penetration to increase the share of quality micro-business owner customers.
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Jay: Thanks, Jay next I will provide a review of our key initiatives and achievements in risk management for the first quarter in the first quarter, we remain committed to our strategy of prioritizing asset quality, focusing on scale stability and profitability enhancement.
Jay: Specifically, we focused on improving risk identification capability, optimizing risk strategy system, and developing smart risk tools as well as actively exploring the application of large models and risk management. Thanks to the initiatives, we've taken who asks about new and overall asked as Meinie.
James Zeng: For the online consumer finance business, we will focus on expanding high-quality customer acquisition channels, tapping into the potential of large platform partnerships, and broadening our business boundaries to maintain sustainable growth and scale. Thirdly, we'll increase investment in technology, particularly in applying AI to empower various business scenarios and enhance the company's competitiveness. by locally deploying mature and high-performance large AI models. We will reshape business processes, improve operational efficiency, and reduce service costs. We will explore the application of AI agents with financial adaptive capabilities in the pre-lending process. to Autonomous Decision Making and Task Execution. We will promote process automation and decision intelligence in scenarios such as customer acquisition, operations and risk management, further enhancing the company's operational refinement.
Jay: <unk> the downward trend in the first quarter, leading risk indicators for new loans first payment default SPD over seven days in the first quarter declined by about 5% compared to the previous quarter on total loan portfolio day, one delinquency ratio decreased by about 11%.
Speaker Change: <unk> and 90 days delinquency ratio decreased by 9% quarter over quarter I will introduce in detail. The key initiatives, we have taken for the first quarter. Firstly in terms of risk identification capabilities. We've continued to improve the performance of our risk identification models, we built a multimodal fusion.
Speaker Change: Model integrating different types of heterogeneous data, including textual time series numerical and graph features which help further improve the risk identification capabilities by 10%. Meanwhile, we deployed a two stage modeling structure.
James Zeng: Despite the volatile macroeconomic environment, evolving industry landscape and yielding uncertainties, our operational resilience has significantly improved thanks to our continuously enhanced capabilities and unique ecosystem advantage. Therefore, we are confident in achieving sustained growth in net profit for fully year 2025, reaffirming our fully year 2025 profit guidance of substantial year-over-year growth. The company has always attached great emphasis on shareholder returns and remains committed to delivering value to our shareholders through various channels. In November 2024, we announced to increase our cash dividend payout ratio from 20% to 25% of total net profit starting from 2025.
Speaker Change: Standard model was used to identify the mid to long tail customer groups. We then optimize the data samples and what additional data sources to conduct more granular risk identification for these customers further improving the risk differentiation capabilities.
Speaker Change: Besides for customers from different channels, we conducted deep joint modeling with our channel partners. This allowed us to fully leverage both partner channel data and our own internal data to improve model performance.
James Zeng: The Board of Directors has approved to further increase the dividend payout ratio to 30% of net profit, effective from the second half of 2025.
Speaker Change: We also strengthened risk management through preventative and proactive approaches regarding high risk assets, we adopted a preventative approach.
Will Tan: Now, I would like to give the floor to our CRO, Arvind.
Speaker Change: Specifically for customers, who have borrowings across multiple platforms exhibit weaker repayment capabilities.
Arvind: Thanks. Thank you. Next, I will report on the work and progress of risk management in the first quarter. In the first quarter, we continue to stick to the strategy of controlling risk and maintaining a stable scale of profit, focusing on the improvement of risk recognition ability, continuous optimization of risk strategy system, and the application of smart wind control tools and active exploration of large models in the field of wind control. As a result, the risk of our new assets and all assets continues to decline in the first quarter, which is four quarters of the 24th year.
Speaker Change: Volatile risk profiles, we reduced or suspended their credit lines. Additionally, we optimized repayment reminders and enhanced the auto debit repayment functionality both on an after the due date to minimize the formation of overdue assets.
Speaker Change: Regarding high quality assets.
Speaker Change: We conducted a proactive approach we promoted the growth of high quality assets by strengthening the competitiveness of offers to customers.
Speaker Change: These concerted efforts have collectively contributed to reducing risks optimizing our asset mix and enhancing asset quality in the second quarter, we will respond.
Arvind: In the first quarter, the FPT area of the new assets decreased by about 5%, and the interest rate of all assets decreased by about 11%, and the bad rate of 90% of all assets decreased by about 9%.
Speaker Change: The market dynamics and asset quality performance fully leveraging a combination of proactive and preventative risk management approaches and tools to ensure the continued decline in asset risk levels.
Arvind: Next, I will introduce to you the key risk management measures we have taken in the first quarter. First of all, in terms of model recognition ability, we have continued to improve the performance of various risk recognition models in the first quarter. First of all, by establishing a multi-modal integrated model, a better integration of text-based, continuous, digital, and image characteristics, we have further improved the model's risk recognition ability. Secondly, through two-stage modeling, we have identified medium- and long-term customers for standard models. Through sample optimization, additional three-party data is introduced, further increasing the risk distribution of this particular customer.
Speaker Change: Thirdly, we continue to ramp up the development and application of intelligent risk management tools, which significantly increase the accuracy and time efficiency of credit line and pricing decision, making we have developed credit line robot and pricing robot and gradually applied them in various businesses.
Speaker Change: Areas.
Speaker Change: Our <unk> testing results demonstrate that these robot tools substantially helped improve the effectiveness and time efficiency and decision, making over the past year, our efforts in enhancing risk identification capabilities building, a more robust risk management framework and applying.
Arvind: Finally, for customers from different K1 channels, we have conducted a deep joint modeling with the channel side, fully utilizing channel side data and free data to improve model performance.
Speaker Change: Intelligent risk management tools comprehensively have contributed to a sustained decline in risk levels for both new and total assets for four consecutive quarters. Looking ahead to the second quarter of 2025 amid increased volatility in the external environment and evolving industry dynamics.
Arvind: Secondly, we will strengthen the government's risk management. On the one hand, we will strengthen and speed up the reduction of the drop in the number of customers and the risk fluctuation of the large number of customers, as well as optimize the remittance reminder, improve the smartness of the order date and expiration date, reduce the production of bad molecules, and on the other hand, optimize and improve the offer of high-quality customers, promote high-quality asset growth, jointly promote the reduction of risk, and continue to improve the structure and health of the assets. In the second quarter, we will speed up the risk management according to the market situation and asset risk performance, and ensure that the level of asset risk continues to decline.
Speaker Change: We will continue to strengthen our capabilities in automated high risk assets screening and resolution further refine credit approval and lending management and swiftly identify and address potential high risk assets.
Speaker Change: These measures are aimed at ensuring that key risk indicators remain on a downward trajectory.
Speaker Change: Next I will hand over to our CFO James to provide a review of the company's financial performance for the first quarter.
James: Thanks, everyone I will now provide a detailed overview of our first quarter financial results. Please note that all figures are presented in renminbi terms and all comparisons are made on a quarter over quarter basis, unless otherwise stated.
Arvind: Thirdly, we will continue to strengthen the smart wind tunnel tool construction and application. We can significantly improve the production and construction of modular decision-making and fixed-price decision-making accuracy and feasibility of modular robots and fixed-price robots, and gradually introduce and apply them in all business scenarios. Through A and B test comparison, the use of robot strategy development tools can significantly improve the effect of decision-making and feasibility of decision-making.
Speaker Change: Our first quarter performance marked another strong leap forward.
Speaker Change: We're on track on our profit growth roadmap.
Speaker Change: During the quarter, our net income increased by 18, 6% to $430 million and 113, 4% year over year, even though the overall new loan volume in the loan balance declined slightly due to the Chinese new year seasonality.
James Zeng: 通过过去一年实现风险能力提升,风控体系完善和智能化风控工具全面应用, 帮助我们实现了连续四个季度新增资产和全量资产风险的持续下降, 当前外部环境和行业波动加大, 二季度我们将继续提升和运用风险自动巡检和处置能力, 加强准入交易管理快速识别和处置高风险客户,保障各关键风险指标继续保持下降趋势。 下面有请CFO James介绍公司一季度的财务表现情况。 Thanks, Jay.
Speaker Change: Our net income margin increased to 13, 9% from nine 9% last quarter.
Speaker Change: Net profit take rate calculated as the net income divided by the average loan balance increased to 158% from 131% from last quarter and six 6% a year ago.
Speaker Change: Advancing by 27 basis points sequentially.
Speaker Change: The net income net income margin and the net take rate or reached the highest level in the last three years.
James Zeng: Next, I will provide a review of our key initiatives and achievements in risk management for the first quarter. In the first quarter, we remained committed to our strategy of prioritizing asset quality, focusing on scale stability and profitability enhancement. Specifically, we focused on improving risk identification capability, optimizing risk strategy system, and developing smart risk tools, as well as actively exploring the application of large models in risk management. Thanks to the initiatives we've taken, risks of both new and overall assets maintained the downward trend in the first quarter, leading risk indicator for new loans, first payment default, FPD, over seven days of the first quarter, declined by about 5% compared to the previous quarter.
Speaker Change: A solid foundation for future profit expansion.
Speaker Change: From unit Economics perspective, the 27 basis points net profit take rate improvement quarter over quarter is led by a 47 basis point increase of revenue take rate, which is calculated by dividing the sum of credit facility specific patient service.
Speaker Change: And the Tech empowerment service income.
Speaker Change: After deducting the funding and liquidity costs.
Speaker Change: Average loan balance.
Speaker Change: During the quarter the revenue take rate increased from six 2% to 669% of the previous quarter.
James Zeng: On total loan portfolio, day one delinquency ratio decreased by about 11%, and 90 days delinquency ratio decreased by 9% quarter over quarter.
Speaker Change: The improvement of revenue take rate reflects our ongoing risk centered business transformation, which resulted.
Speaker Change: Asset quality, and therefore, a lower credit and funding costs and a refined business operations.
James Zeng: I will introduce in detail the key initiatives we've taken for the first quarter. Firstly, in terms of risk identification capabilities, we've continued to improve the performance of our risk identification models. We built a multimodal fusion model, integrating different types of heterogeneous data, including textual time series, numerical, and graph features, which helped further improve the risk identification capabilities by 10%. Meanwhile, we deployed a two-stage modeling structure. A standard model was used to identify the mid to long tail customer groups. We then optimized the data samples and brought additional data sources to conduct more granular risk identification for these customers, further improving the risk differentiation capabilities.
Speaker Change: The specific business execution involved focus on retaining prime customers through competitive loan offers including low oil prices and improved center and then migrating subprime borrowers to capital light model via intelligent credit platform ICP to reduce the risk.
Speaker Change: <unk> optimized profitability.
Speaker Change: Next I will provide more details in the following highlights.
Speaker Change: First reduction in credit costs, driven by continued improvement in asset quality.
Speaker Change: The reduced credit costs reflected our sustained improvements in asset quality, driven by our enhanced risk management capability.
James Zeng: Besides, for customers from different channels, we conducted deep joint modeling with our channel partners. This allowed us to fully leverage both partner channel data and our own internal data to improve model performance.
Speaker Change: The following key risk indicators demonstrated improvement.
Speaker Change: <unk> balance site day, one delinquency rate declined by 11% and 90 day delinquency ratio declined by nearly 33 basis points from three 6% to three 3%.
James Zeng: Secondly, we also strengthened risk management through preventive and proactive approaches. Regarding high-risk assets, we adopted a preventative approach. Specifically for customers who have borrowings across multiple platforms, exhibit weaker repayment capabilities, or present volatile risk profiles, we reduced or suspended their credit lines. Additionally, we optimized repayment reminders and enhanced the auto-debit repayment functionality both on and after the due date to minimize the formation of overdue assets.
Speaker Change: On the new loan side on quarterly basis, the first payment default rate over seven days decreased by about 5%.
Speaker Change: With higher quality, new loans gradually replacing matured vintage loans, we expect to see continued asset quality improvement contributing to our profit expansion.
Speaker Change: Meanwhile, our provision coverage ratio, which is calculated as the total outstanding provisions divided by the total outstanding loan balance between 90 and 180 days.
James Zeng: Regarding high quality assets we conducted a proactive approach. We promoted the growth of high quality assets by strengthening the competitiveness of offers to customers. These concerted efforts have collectively contributed to reducing risks, optimizing our asset mix, and enhancing asset quality.
Speaker Change: Sufficiently at 268% the highest level since the second quarter of 2024.
Speaker Change: Second decrease in funding costs.
Speaker Change: Funding costs for new loans, and the capital heavy model dropped by nine basis points to 393%.
James Zeng: In the second quarter, we will respond more quickly to market dynamics and asset quality performance, fully leveraging a combination of proactive and preventative risk management approaches and tools to ensure the continued decline in asset risk levels. Thirdly, we continue to ramp up the development and application of intelligent risk management tools, which significantly increase the accuracy and time efficiency of credit line and pricing decision making. We have developed credit line robot and pricing robot and gradually applied them in various business scenarios. Our A-B testing results demonstrate that these robot tools substantially helped improve the effectiveness and time efficiency of decision making.
Speaker Change: Further boosting our revenue decrease.
Speaker Change: What we've already achieved relatively low funding cost we expect to maintain this advantage through improving asset quality strengthening partnerships with funding partners and in diversifying our funding sources.
Speaker Change: Third capital light model volume growth.
Speaker Change: During the quarter, we have optimized our risk bearing arrangements by shifting more high risk volumes through the captive <unk> model through our intelligent credit platform ICP.
Speaker Change: We don't take principal risks for customers with risk ratings beyond our preferred range.
Speaker Change: Total volume and as the capital light model increased by 43% quarter over quarter and accounted for 28% of the total GMB up from 20% of last quarter.
James Zeng: Over the past year, our efforts in enhancing risk identification capabilities, building a more robust risk management framework, and applying intelligent risk management tools comprehensively have contributed to a sustained decline in risk levels for both new and total assets for four consecutive quarters, looking ahead to the second quarter of 2025. Amid increased volatility in the external environment and evolving industry dynamics, we will continue to strengthen our capabilities in automated high-risk assets screening and resolution, further refine credit approval and lending management, and swiftly identify and address potential high-risk assets. These measures are aimed at ensuring that key risk indicators remain on a downward trajectory.
Speaker Change: And as a capital heavy model, we have improved competitiveness of our offering with lower pricing and improved the tenor to attracted prime customers.
Speaker Change: The API was lowered about 100 basis points from 23, 9% down to 22, 6% for the last quarter.
Speaker Change: At the same time, the user quality has improved as evidenced by the Super Prime customers, taking a higher percentage of new loans.
Speaker Change: With the capital light model, we migrated more subprime customers to the ICP platform offering risk based pricing and shortened long tenor to reduce overall risk exposure as a result, the overall tenor for new loans in the boat capital heavy and capital light model.
James Zeng: Next, I will hand over to our CFO James to provide a review of the company's financial performance for the first quarter. Thanks, Arvind. I will now provide a detailed overview of our first quarter financial results. Please note that all figures are presented in renminbi terms and all comparisons are made on a quarter-over-quarter basis unless otherwise stated. Our first quarter performance marked another strong leap forward and a well-earned crack on our profit growth roadmap. During the quarter, our net income increased by 18.6% to $430 million and 113.4% year-over-year, even though the overall new loan volume and the loan balance declined slightly due to the Chinese New Year seasonality.
Speaker Change: <unk> slightly decreased quarter over quarter.
Speaker Change: To summarize the above three highlights.
Speaker Change: Due to the improvement of credit cost and funding cost our net profit take rate increased from 131% to 158% last quarter. Additionally, the capital light model volume growth has lowered the risk exposure for our bins enabled <unk>.
Speaker Change: <unk> risk based pricing for high risk users.
Speaker Change: Enhanced.
Speaker Change: Risk adjusted returns and a sustained offer competitiveness for hot for high quality customers.
Speaker Change: Next let's go through some key financial items.
James Zeng: Our net income margin increased to 13.9% from 9.9% last quarter. Net profit take rate calculated as the net income divided by the average loan balance increased to 1.58% from 1.31% from last quarter and 0.66% a year ago, advancing by 27 basis points sequentially. The net income, net income margin, and the net pay grade all reached the highest level in the last three years, laying a solid foundation for future profit expansion. From Unitec's perspective, the 27-basis-point net profit take rate improvement quarter over quarter is led by a 47-basis-point increase of revenue take rate, which is calculated by dividing the sum of credit facilitation service and the tech empowerment service income after deducting the funding and the credit cost by the average loan balance.
Speaker Change: Total revenue from lending related businesses, which include credit facilitation reserves income and a tech empowered service income combined decreased by 15% quarter over quarter. There are three factors contributing to the change one lower APR of loans and the capital heavy model.
Speaker Change: Our effort to attract better quality customers as mentioned earlier.
Speaker Change: To.
Speaker Change: Increased early payoffs due to more flexible early payoff terms.
Speaker Change: We will offer our competitiveness and customer satisfaction.
Speaker Change: <unk> the <unk> volume shift to capital light model, where the revenue is booked net of related credit cost. While in comparison ended the capital heavy model gross revenue and credit costs are booked in two separate lines.
Speaker Change: Loan volume originated and kept a heavy model decreased by 11% quarter over quarter and accounted for 72% of total GMB down from the 80% in the first in the previous quarter as a result.
Speaker Change: Credit facilitation services income primarily associated with the capital heavy model decreased by 19% quarter over quarter.
James Zeng: During the quarter, the revenue takeaway increased from 6.22% to 6.69% of the previous quarter. The improvement of Gravity Takeaway reflects our ongoing risk-centered business transformation, which resulted in better asset quality and therefore a lower credit and funding cost and a refined business operation. The specific business execution involved focus on retaining prime customers through competitive loan offers including lower prices and improved tenor and migrating subprime borrowers to cap-to-life model via Intelligent Credit Platform, ICP, to reduce the risk exposure of the optimized probability.
Speaker Change: In contrast to the decline in the credit Facilitation service income the tech empowered empowered service income, which is primarily associated with our capital light model increased by 4% quarter over quarter. This revenue now accounted for 20% of total revenue up from 16% last quarter.
Speaker Change: Mainly driven by the increased volume.
Speaker Change: Volume from the capital light model and partially offset by increased provision driven by our polluted provision estimation.
Speaker Change: Similar to the revenue side of the story total credit cost, including to provision total provisions and a fair value change of financial guarantee derivatives and loans at fair value decreased by 40% quarter over quarter. This is partially due to the net roughly accounting method as well as.
James Zeng: Next, I will provide more details in the following three highlights. First, reduction in credit costs driven by continuous improvement in asset quality. The reduced credit costs reflected our sustained improvements in asset quality driven by our enhanced risk management capability. The following key risk indicators demonstrated improvement. On the low balance side, day 1 delinquency rate declined by 11%, and the 90-day delinquency ratio declined by nearly 33 basis points from 3.6% to 3.3%. On the new loan side, on a quarterly basis, the first payment default rate over 7 days decreased by about 5%. With higher quality new loans gradually replacing matured vintage loans, we expect to see continued asset quality improvement contributing to our profit expansion.
Speaker Change: The contribution from the asset quality improvement.
Speaker Change: As a cross reference we can take a holistic view to App total revenue a credit cost and both the capital heavy and capital light models together.
Speaker Change: Revenue from lending with 80 basis.
Speaker Change: Net of total cost was about $18 2 billion increased by five 6% or $97 million.
Speaker Change: $17 2 billion last quarter.
Speaker Change: Separately <unk>.
Speaker Change: So on the E Commerce platform service income decreased by 16, 4% <unk> grew by 16, 2% quarter over quarter. Similarly. This differential difference was caused by accounting difference due to the volume mix shift between the third party sellers and accompany direct source.
Speaker Change: <unk>.
Speaker Change: For third party sellers only platform service condition is.
James Zeng: Meanwhile, our provision coverage ratio, which is calculated as the total outstanding provisions divided by the total outstanding loan balance between 90 and 180 days. built sufficiently at 268%, the highest level since the second quarter of 2034.
Speaker Change: Is recognized as revenue rather than the entire transaction amount under the direct sourcing model.
Speaker Change: This structure volume mix change is evidenced by the sales of rail volume from third parties.
Speaker Change: Accounting for 56% of the total E Commerce <unk> in the first quarter up from 36% in the last quarter.
James Zeng: Second, decrease in funding costs. Funding costs for new loans and the capital-heavy model dropped by 9 basis points to 3.93%. Further boosting our revenue take-away. While we've already achieved relatively low funding costs, we expect to maintain this advantage through improving asset quality, strengthening partnerships with funding partners, and diversifying our funding sources.
Speaker Change: As a result.
Speaker Change: Our installment E. Com's platform service income decreased despite total e-commerce <unk> increased from $970 million to $1 1 billion.
Speaker Change: Furthermore, it is worth highlighting that the gross profit from E Commerce business.
Speaker Change: More than doubled in the first quarter.
Speaker Change: As a priority within our integrated this ecosystem will keep growing our e-commerce business moving forward.
James Zeng: Third, Capture Light Model Volume Growth During the quarter, we have optimized our risk-bearing arrangements by shifting more high-risk volumes to the cap-to-life model through our Intelligent Credit Platform, ICP, where we don't take principal risks for customers with risk ratings beyond our preferred range. Total volume and the capital line model increased by 43% quarter over quarter and accounted for 28% of the total GMB up from 20% of last quarter. Under the capital heavy model, we have improved competitiveness of our offering with lower pricing and improved tenor to attract prime customers. The APR was lowered about 100 basis points, from 23.9% down to 22.6% for the last quarter, while at the same time the user quality has improved, as evidenced by the super client customers taking a higher percentage of new loans.
Speaker Change: By developing tailored financial solutions that actively stimulate and fulfill the evolving consumption and financing needs across diverse customer segments. We aim to diversify our revenue structure and eventually enhance the overall operational resilience and profitability.
Speaker Change: Total operating expenses, which include processing and servicing costs sales and marketing expenses research and development expenses and general and administrative expenses remained relatively stable at $1 3 billion.
Speaker Change: Driven by the aforementioned factors our net income in the first quarter increased by 18, 6% quarter over quarter from 363 million to $430 million and our net income margin increased from nine 9% to 13, 9%.
Speaker Change: For balance sheet items as of March 31.
Speaker Change: Our cash position, which includes cash cash equivalents and restricted cash was approximately 5 billion renminbi shareholders equity remained solid at about $11 2 billion.
James Zeng: With the Capital Light model, we migrated more subprime customers to the ICP platform, offering risk-based pricing and shortened loan tenure to reduce overall risk exposure. As a result, the overall tenure for new loans under both Capital Heavy and Capital Light models slightly decreased quarter over quarter.
Speaker Change: Looking ahead, despite challenging macroeconomic environment evolving industry landscape and geopolitical uncertainties.
Speaker Change: Management remains confident in achieving a significant year over year growth in net income reaffirming our full year earnings guidance.
James Zeng: To summarize the above three highlights. Due to the improvement of credit cost and funding cost, our net profit take rate increased from 1.31% to 1.58% last quarter. Additionally, the cap-to-line model volume growth has lowered the risk exposure for our business, enabled differentiated risk-based pricing for high-risk users, enhanced risk-adjusted returns and sustained our offer competitiveness for high-quality customers.
Speaker Change: This concludes our prepared remarks for today, operator, we're now ready to take questions.
Speaker Change: Thank you.
Speaker Change: A reminder to ask a question. Please press star one on your telephone.
Speaker Change: Wait for your name to be announced and please translate your question to English and mute yourself. After your question to.
Speaker Change: Your question. Please press star one again.
Speaker Change: These standby as we compile the Q&A roster.
Speaker Change: Yeah.
Speaker Change: Just a moment so first question please.
James Zeng: Next, let's go through some key financial items. Total revenue from lending-related business, which includes credit facilitation and service income and tax-empowered service income combined, decreased by 15% quarter-over-quarter. There are three factors attributing to the change. One, lower APR of loans and capital-heavy model as our effort to attract better quality customers, as mentioned earlier. Two, increased early payoff due to more flexible early payoff terms. for offer competitiveness and customer satisfaction. 3. The GMV volume shifts to capital light model where the revenue is booked net of related credit costs, while in comparison, under the capital heavy model, gross revenue and credit costs are booked in two separate lines.
Speaker Change: Okay.
Speaker Change: Our first question comes from Matthew from.
Speaker Change: <unk> Your line is now open.
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Speaker Change: Ladies and gentlemen.
Speaker Change: <unk> should be a cost issue.
Speaker Change: We got some synergies.
Speaker Change: And dancing when Keith So how does the company address zombies external challenges such as that.
Speaker Change: The impacts of the new use on loan facilitation business and geopolitical uncertainties on the Companys listing standards.
Speaker Change: Yes, the company has any plans to conclude.
Speaker Change: No.
James Zeng: Loan volume originated under the capital heavy model decreased by 11% quarter over quarter and accounted for 72% of total GMV down from the 80% in the previous quarter. As a result, credit facilitation and service income primarily associated with the capital heavy model decreased by 19% quarter over quarter. In contrast to the decline in the credit facilitation and service income, the tech-empowered service income, which is primarily associated with our cap-to-life model, increased by 4% quarter-over-quarter. This revenue now accounted for 20% of total revenue, up from 16% last quarter, mainly driven by the increased... volume from the cap-to-life model and partially offset by increased provision driven by our prudent provision estimation.
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James Zeng: Similar to the revenue side of the story, total credit costs, including total provisions and fair value change of financial guarantee derivatives and loans at fair value, decreased by 40% QOQ. This is partially due to the net-value accounting method, as well as the contribution from the asset quality improvement. As a cross reference, we can take a holistic view to add total revenue and credit cost and both the capital heavy and capital light models together. Total revenue from lending-related business net of total cost was about $18.2 billion, increased by 5.6% or $97 million from $17.2 billion last quarter.
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James Zeng: Separately Installment e-commerce platform service income decreased by 16.4% while GMV grew by 16.2% quarter over quarter. Similarly, this difference was caused by accounting difference due to the volume mix shift between the third-party sellers and the company direct source. For third party sellers, only platform service commission is recognized as the revenue, rather than the entire transaction amount under the direct sourcing model. This structural volume mix change is evidenced by the sales volume from third-party seller accounting for 56% of the total e-commerce GAB in the first quarter, up from 36% in the last quarter.
Speaker Change: Changes in the macroeconomic environment and industry landscape.
Speaker Change: The company has delivered outstanding results hearing challenging focusing on risk management data analytics and refined operation.
Speaker Change: Although external challenges the.
Speaker Change: The company is well prepared to navigate through them and management's confidence in achieving our 2025 triple net market.
Speaker Change: Regarding the new rules on loan facilitation.
Speaker Change: We will come into play with regulators Safran and standardizing.
Speaker Change: Lastly impact on base Roes remain to be seen in the short term that is static.
Speaker Change: Compliance healthy and sustainable environment for the sector in the long run trend that particularly benefit large compliant platform license.
James Zeng: As a result... Our installment e-commerce platform service income decreased despite total e-commerce GNV increase from $970 million to $1.1 billion. Furthermore, it's worth highlighting that the gross profit from e-commerce business more than doubled in the first quarter. As a priority within our integrated business ecosystem, we'll keep growing our e-commerce business moving forward.
Speaker Change: Correct, we have the capability and resilience.
Speaker Change: To address the potential impacts of the new rules.
Speaker Change: Therefore, we are confident in achieving our full year profit target.
Speaker Change: Regarding the geopolitical uncertainty the company has proactively taking measures to prepare including exploring potentially.
Speaker Change: Different exchanges, including Hong Kong stock exchange in order to protect the interest of.
James Zeng: By developing tailored financial solutions that actively stimulate and fulfill the evolving consumption and financing needs across diverse custom segments, we aim to diversify our revenue structure and eventually enhance the overall operational resilience and profitability. Total operating expenses, which include processing and servicing costs, sales and marketing expenses, research and development expenses, general and administrative expenses, remain relatively stable at $1.3 billion. Driven by the aforementioned factors, our net income in the first quarter increased by 18.6% quarter over quarter, from $363 million to $430 million, and our net income margin increased from 9.9% to 13.9%. For balance sheet items as of March 31st, our cash position, which includes cash, cash equivalents and restricted cash, was approximately 5 billion renminbi.
Speaker Change: Shareholder.
Speaker Change: Alright, any concrete plans or significant progress materialize, we will company one.
Speaker Change: None of the information to the market in accordance with laws and regulation.
Speaker Change: Thank you just my amendments are next question. Please.
Alex: Our next question comes from Alex <unk> from UBS. Your line is now open.
Alex: Okay, Great and then go into Q&A.
Speaker Change: Yes.
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Speaker Change: I'm going to touch it on Asia to automobile.
Speaker Change: So my question.
Speaker Change: First one is progressing.
Speaker Change: Progress and development plan for your ecosystem business and second.
James Zeng: Shareholders' equity remains solid at about 11.2 billion.
Speaker Change: Can you give us more color in terms of where we are in terms of our asset quality improvement.
James Zeng: Looking ahead, despite challenging macroeconomic environment, evolving industry landscape, and geopolitical uncertainties, The management remains confident in achieving a significant year-over-year growth in net income, reaffirming our four-year earning guidance.
Speaker Change: And how to understand the strength of the current risk management capabilities.
Speaker Change: What's the plan for the next stage. Thank you.
Speaker Change: When you work with Asia.
Will Tan: This concludes our prepared remarks for today.
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Operator: Operator, we are now ready to take questions. Thank you.
Speaker Change: So you do today.
Operator: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. and please translate your question to English and mute yourself after your question. To withdraw your question, please press star 11 again.
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Operator: Please stand by as we compile the Q&A roster. That's the moment for our first question.
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Emma Hsu: Our first question comes from Emma Hsu from BRFA, your line is now open. Thank you for giving me the first chance to ask a question. Congratulations to the company for achieving excellent results. I have a question. Facing all kinds of challenges in the macro level, and the regulatory level, you recently launched the new rules for housing. What impact will this have on the company? There are also many uncertainties in terms of geopolitics. How will this affect the company's listing status? Does the company have a plan to return to Hong Kong? Let me simply translate my question.
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Emma Hsu: So how does the company address various external challenges, such as the impacts of the new rules on loan facilitation business and geopolitical uncertainties on the company's listing standards? Does the company have any plans for Hong Kong IPO?
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Wenjie Xiao: Okay, let me answer this question. We have seen some significant changes in the external environment this year, but we have always insisted on risk-driven, data-driven, and information-driven operations. So we can see that we have achieved a good result. Although there are many external challenges, we are well prepared. So the management team is still full of confidence in achieving our goals this year.
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Wenjie Xiao: Xigui Zheng, Unknown Executive, Wenjie Xiao, Xiaoxiong Ye, Yada Li, Mandy Dong, Zhanwen Qiao, Huanan Zhou, Yuying Zou, Will Tan, Zhuhan Wang, Lexinfintech Holdings Ltd. We support the regulatory agency's intention to continue to regulate the entire development of the industry. Although this short-term impact on the industry, I think it's because it just came out. We think we still need further observation. But from a long-term perspective, this will promote a healthy and sustainable development of the entire industry. This kind of environment is actually very beneficial to some of us, including a slightly larger brand. For us, we have the ability to deal with some of the impacts of the new regulations.
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Doug: So women Tidewater Tegra Eagle Ford shale volumes.
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Doug: His sense of the Xiaowei could reconcile quarter cogeneration.
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Doug: So.
Doug: The grade of week.
Doug: Any color there limiting you from here to the woman conducted a year we get.
Doug: Okay.
Wenjie Xiao: We welcome Xigui, and we are confident that she will continue to achieve our goals all year round.
Doug: So it's not a woman to do that.
Doug: Could you go through the budget other than <unk> Union linear Gulf of Manchester.
Doug: Okay.
Doug: So on that side.
Wenjie Xiao: I just talked about the influence of geopolitics on the company's listing status. I think the company is already taking some active measures to prepare and respond. We need to explore the possibility of listing in different exchanges, including the listing in Hong Kong, to ensure the interests of all shareholders. Once we have a specific plan or important progress, we will announce this information to the market in time.
Doug: The other element.
Doug: So I Wonder woman, who led the way with his team.
Doug: <unk> also said a moment ago consolidated shareholder tissue.
Doug: So with him to have a year with higher <unk> unit, some women to exit the year with buses, while so you got to be dodging centers.
Doug: You've got somebody that hydro.
Wenjie Xiao: This is the translation for Change Remote. Despite significant changes in the macroeconomic environment and industry landscape this year, the company has delivered outstanding results by adhering to its strategy, focusing on risk management, data analytics, and refined operations. Although external challenges persist, the company is well prepared to navigate through them and management remains confident in achieving its 2025 performance target. Regarding the new rules on long-participation-based business, we welcome and support regulators' efforts in standardizing the... While the full impact of these rules remains to be seen in the short term, they are expected to foster a more compliant, healthy and sustainable environment for the sector in the long run, a trend that particularly benefits large and compliant platforms like the For us, we have the capabilities and resilience to address the potential impacts of the new rules.
Doug: He has only.
Doug: Congress, including.
Doug: I'm really happy.
Doug: And we have unique competitive edge.
Doug: Consistent.
Doug: More specifically as I mentioned in my remarks.
Doug: Online business.
Doug: We continue to increase our risk management capability operational refinement and have witnessed substantial enhancements and the capability and efficiency content acquisition.
Doug: Going forward.
Doug: Based on providing tailored product contract cleanups customers with very weak profiling enriching our product portfolio.
Doug: Catherine.
Doug: Got it.
Doug: And expanding customer acquisition.
Doug: Meanwhile, we will further explore collaboration with huge traffic platform, which have already exhibited good momentum yes.
Doug: Our business.
Doug: To achieve sustainable volume growth.
Wenjie Xiao: Therefore, we are confident in achieving our four-year profit target. Regarding the geopolitical uncertainties, the company has proactively taken measures to prepare, including exploring potential listings on different exchanges, including Hong Kong Stock Exchange, in order to protect the interests of all shareholders. Once any concrete plans or significant progress is materialized, we will promptly disclose relevant information to the market in accordance with laws and regulations.
Doug: Far installment E Commerce, basically we have revamped our risk management.
Doug: Merchandise supply chain and extended stays in this country.
Doug: By tailoring.
Doug: Services to users based on their risk profile with better address diverse customer demand.
Doug: Thanks, a lot.
Doug: Exactly.
Doug: Battery engage existing customers and attract new one missing a key lever for us to adapt to industry changes and continued operational resilience.
Doug: Uh huh.
Doug: Well, our offline, including finance business, reaching quite a unique feature of our business. Finally, we have strengthened our in house channel development and optimize the risk management in order to ensure that differentiate the competitor.
Operator: Thank you. Just one moment for our next question.
Alex Ye: Our next question comes from Alex Ye from UBS, your line is now open. Thank you, Guan Yichen, for giving me this opportunity to ask questions.
Doug: Products and also curious sequential increase in conference.
Doug: We will continue to increase the penetration of micro business owner in lower tier cities.
Alex Ye: I have two questions here. The first one is, can you please tell us a little bit about... ...
Doug: Local lines of business development.
Doug: Additional efficiency.
Doug: Well it will be safe.
Alex Ye: The second question is, in terms of risk, what is the current stage of improvement in this stage, and how should we understand the ability to block the wind? What level have we reached now, and what are some of our main goals for the next stage?
Doug: No further optimize that business model and capabilities into areas from lifestyle our Odyssey.
Doug: <unk> achieved profit growth going.
Doug: Going forward our overseas business.
Doug: A prudent approach and can in fact make essentially.
Alex Ye: So my questions include, first one is, what are the progress and development plans for your ecosystem business? And second is, can you give us more color in terms of where we are in terms of our security impact?
Doug: Thank you.
Kim: Kim go on Permian.
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Speaker Change: So if we can run Indonesia Permian Latino woman from.
Wenjie Xiao: Trend and how to understand the strength of your current risk management capabilities and what's your plan for the future. Okay, let me answer the first question. As we all know, Lexin's business is relatively diverse and has its own unique ecological advantages. As I mentioned in my speech earlier, our ability to refine our business is constantly improving. and Xigui Zheng, Unknown Executive, Wenjie Xiao, Yada Li, Mandy Dong, Zhanwen Qiao, Huanan 加大我们在差异化的整个的一个经营能力 to enhance our recognition of the entire customer's distinguishedness, and thus provide different products to different users to enrich our entire product range and enhance our entire competitiveness.
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Doug: Some of them this year, because I think the bango Amanda.
Doug: Please yes, so what's important.
Doug: Underneath the dollar revision to the egotism, Jim <unk> will maintain luncheon to big <unk>.
Doug: And when you see.
Doug: Good to see the data.
Doug: We have bundle them and theyre willing to China.
Wenjie Xiao: At the same time, we will also begin to expand some new growth channels, especially since this year, we have continued to strengthen some of our major partners, some of the opportunities for cooperation on some of the partners of KA. So we see that this is a potential that has actually grown quite well this year. Through this kind of large-scale platform cooperation, we have further expanded the entire customer channel of the company, which can help us to continue to grow steadily.
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Wenjie Xiao: Secondly, I would like to talk about the retail business of our branch. Since last year, we have rebuilt the entire risk management system of our retail branch and upgraded our supply chain. It helps us to meet the needs of consumers of different levels. In the future, we will make full use of the whole retail scene, which is to help the whole platform to attract customers.
Doug: Okay.
Doug: Do you plan for a time when things at Garfunkel in the Union power down enrollment that will add tissue.
Doug: Yep Yep.
Doug: Yes, we have comprehensively upgrading our risk management system across multiple fronts, including risk identification differentially outbreak <unk> differentiated risk pricing risk bearing.
Wenjie Xiao: we grew up in Wuhan, and it established high-tech startups here, and it's big deal that subcontractors change commodities in China to open new sectors. We are trying to explain this to our customers, we are trying to help them in their maping to practice, to continue to optimise our entire model. Because it is a very unique online and offline business model. Under a diversified risk management model, we are exploring how to increase the penetration rate in the downstream market, in the downstream region, to face the small micro-businesses in these cities, and to strengthen our competitiveness I think this is a very good performance This is our day-to-day chain, and its profitability...
Doug: Our model rate monitoring and Andy one and risk management et cetera.
Doug: This has led to a significant improvement in our risk management and our ability to handle right.
Doug: Thanks to our efforts and upgrades in the past in the past again, we have established a mature robust quantitative driven risk management system.
Doug: As a result reached levels of both new and overall assets have exhibited a sustained decline over the past year.
Doug: In light of the persistently challenging external environment and ongoing industry uncertainty, we remain committed to our rate strategy and prudent operational approach.
Doug: We will further strengthen our risk management capability, while actively exploring the application of large models to enhance the accuracy.
Wenjie Xiao: It shows good results Let's talk about our overseas business. We still think that we are further optimizing our business model to build a better foundation. 现在海外业务是整体盈利的,我们对此保持谨慎投入态度 Our coalition has always had very diverse business deployments in only having online business but also offline. And we have a unique competitive edge in our own ecosystem business. More specifically, as I mentioned in my remark, for our online continual finance business, we continue to improve the risk management capabilities and operational requirements and have witnessed a substantial enhancement in the capability and efficiency of customer acquisition. Going forward, we will focus on providing tailored product offers to match customers with varying risk profiles.
Doug: On risk management system.
Doug: We'll ensure asset rate maintains the current downward trajectory.
Amanda: Thank you Amanda next question please.
Speaker Change: Our next question comes from <unk>.
Lee: Lee from Ci Cc. Your line is now open.
Lee: Okay.
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Speaker Change: Yes.
Speaker Change: Then I'll do the translation firstly, congrats to the record high results and thanks for taking my questions. My first question is in this quarter I don't know that the revenue structure is doing some material changes and I was wondering what are the main reasons to drive this change.
Speaker Change: And what is the Companys plan shareholders' returns going forward. Thank you so much.
Wenjie Xiao: Enriching our product portfolio to enhance customer offer competitiveness and expanding customer acquisition channels. Meanwhile, we will further explore collaboration with Huge Traffic Platform, which has already exhibited good momentum this year and expanded our business model to achieve sustainable volume growth. For our installment e-commerce business, we have revamped our risk management system, updated the merchandise supply chain, and expanded the business function. By tailoring employment services to users based on their risk profiles, we better address diverse customer demands. Going forward, we will fully leverage our e-commerce business to better engage existing customers and attract new ones, making it a key lever for us to adapt to industry changes and enhance the company's operational resilience.
Speaker Change: Okay I will take the first question and ask Jay to talk about the second.
Speaker Change: The first question.
Jay: First of all as I mentioned in my previous script. It is important to bear in mind that despite the different factors contributing to the quarter over quarter revenue variance analysis, we should always take a holistic view to look at the total revenue and credit costs together to get the big picture.
Speaker Change: The Big picture is that from the Utica.
Speaker Change: <unk> practice, our revenue take rate increased from six 2% to $6 six 9% quarter over quarter and the net take rate after offsetting the operational cost increased from.
Speaker Change: 1.31% to $1 five 8% quarter over quarter.
Wenjie Xiao: For our offline-inclusive finance business, which is quite a unique feature of our business deployment, we have strengthened our in-house channel development and optimized the risk management model to ensure the differentiated competitiveness of our products and also secure sequential increase of cost. Going forward, we will continue to increase the penetration of micro-business owners in lower-tier cities, enhance localized business development, and increase operational efficiency.
Speaker Change: So in terms of the specific remedies various analysis basically the.
Speaker Change: The quarter over quarter variance in total revenue was primarily due to lower credit facilitation service income driven by the reduced the pricing higher early prepayments and a shift in <unk> towards the capital light model.
Speaker Change: While the Tech Impoundment service line income saw some increase driven by the capitalized <unk> volume migration.
Wenjie Xiao: For our overseas business, we better optimize the business model and capabilities at various fronts. By far, our overseas business has achieved profit overall. Going forward, for overseas business, we will adopt a prudent approach in terms of investment and expansion.
Speaker Change: The net lease accounting recognition is used.
Speaker Change: The revenue is net of related credit cost instead of recognizing revenue and in credit cost in two separate lines.
Speaker Change: So related to this the total credit cost declined at the same time, partially due to the same reason.
Speaker Change: Additionally, despite the sequential <unk> growth of 16, 2% quarter over quarter. The installment E. Commerce platform revenue decreased similarly, as a result of the revenue recognition difference due to the volume mix shift between the third party sellers and the <unk>.
Speaker Change: Any direct sourcing.
Speaker Change: For the.
Speaker Change: For the third party incentives only the platform service commissions recognized as revenue rather than the entire transaction amount under the direct sourcing model.
Speaker Change: The sales volume from the third party seller account for 56% of the total E Commerce <unk> in the first quarter up from the 36% in the last quarter.
Speaker Change: So in conclusion.
Speaker Change: Revenue structural variance really reflected our ongoing risk centric business transformation and our operational refinement.
Speaker Change: While the accounting treatment across different business models may cause some topline variances however, our profit and profit margin continued to improve.
Speaker Change: Really firmly tracking our plan.
Speaker Change: Okay.
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Wenjie Xiao: 面向未来,整个消费信贷的外部环境和行业的不确定性依然比较大 We are still facing a lot of challenges and pressures in terms of risk management. We will continue our risk-driven strategy in the future. Keep improving and optimizing our risk management capabilities and improving our risk management system. Be cautious in operating the software. Ensure the accuracy and efficiency of our entire risk management. Keep improving. Promote and actively explore the application of large models in the entire risk management field. Ensure that we continue to reduce the risk in the future. Over the past year, we have comprehensively upgraded our risk management system across multiple fronts, including risk identification, risk strategy, differentiated risk pricing, risk-bearing models, risk monitoring and early warning, and risk management tool effects.
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Thiago Sousa: Sousa Thiago.
Thiago Sousa: Look we don't see that the mobile posse so Susan.
Thiago Sousa: The company has only attach great importance from shareholders.
Thiago Sousa: And is committed to delivering value to shareholders.
Thiago Sousa: <unk>.
Thiago Sousa: Since November 2024, the company has increased its cash dividend payout ratio target with a six month demonstrating emphasis on shareholders return.
Thiago Sousa: This not only tax advise the company stable and reliable profitability.
Thiago Sousa: Also reflects the management confidence in achieving stable and sustainable growth in the future.
Thiago Sousa: The company will continue to create value for shareholders.
Wenjie Xiao: This has led to a significant improvement in our risk management strength and our ability to handle risk volatility. Thanks to our efforts and upgrades in the past year, we have established a mature, robust, quantitative-driven risk management. As a result, bridge levels of both new and overall assets have exhibited a sustained decline over the past year. In light of the persistently challenging external environment and ongoing industry uncertainties, we remain committed to our risk-centric strategy and prudent operational approach. We will further strengthen our risk management capability while actively exploring the application of large models to enhance the accuracy.
Thiago Sousa: I understand that this expectations regarding shareholders' return and were wet to align our dividend policy shareholders' expectation by considering the company's resources with business development and capital market condition, while striving to enhance returns.
Thiago Sousa: Thank you for the question.
Thiago Sousa: I see no further questions at this time I will now hand, the conference back to Bill for closing remarks.
Thiago Sousa: Thank you operator. This conference is now concluded. Thank you for joining today's call. If you have any more questions. Please do not hesitate to contact us.
Thiago Sousa: Thanks again.
Wenjie Xiao: Xigui Zheng, Unknown Executive, Wenjie Xiao, Xu Getian,.? This will ensure asset rates maintain the current downward trajectory.
Operator: Thank you, just one moment for our next question.
Yada Li: Our next question comes from Yada Li from CI. Your line is now open. Hello, everyone. First of all, congratulations to the company for achieving a new high performance. Thank you for giving me the opportunity to ask this question. The first question, I would like to ask about the company's income structure this quarter. There has been a major adjustment. I would like to ask what the main reason behind it is. The second question is, in terms of shareholder reports, what other plans does the company have in the future? Thank you very much. Then I'll do the translation.
Yada Li: First, congrats to the record high results and thanks for taking my questions. My first question is, in this quarter, I've noticed that the revenue structure experienced some material changes. And I was wondering what are the main reasons to drive this change? And second, what is the company's plan in shareholders' returns going forward? Thank you so much.
James Zeng: Okay, I will take the first question and ask Jay to talk about the second. So the first question, first of all, as I mentioned in my previous script, it is important to bear in mind that despite the different factors contributing to the quote-unquote revenue variance analysis, we should always take a holistic view to look at the total revenue and the credit cost together to get the big picture. The big picture is that, from the unique economics perspective, our revenue take rate increased from 6.22% to 6.69%, quote, unquote. And the net take rate, after offsetting the operational cost, increased from 1.31% to 1.58%, quote, unquote.
James Zeng: So in terms of the specific revenue variance analysis, basically the quarter-over-quarter variance in total revenue was primarily due to lower credit facilitation service income driven by the reduced pricing, higher early repayments, and a shift in GMB towards the capitalized model. While the tech empowerment service line income saw some increase driven by the capitalized GNV volume migration, here the net-based accounting recognition is used, where the revenue is net of related credit cost instead of recognizing revenue and credit cost in two separate lines. So related to this, the total credit cost has declined at the same time, partially due to the same reason.
James Zeng: Additionally, despite the sequential GMB growth of 16.2% QoQ, the installment e-commerce platform revenue decreased similarly as a result of the revenue recognition difference due to the volume mix shift between the third-party sellers and the company's direct source. For the third party standards, only the platform service commission is recognized as the revenue rather than the entire transaction amount under the direct sourcing model. The sales volume from the third party seller account for 56% of the total e-commerce GMV in the first quarter, up from the 36% in the last quarter. So in conclusion, the revenue structural variance really reflected our ongoing risk-centric business transformation and our operational refinement.
James Zeng: While the accounting treatment across different business models may cause some top-line variances, however, our profit and profit margin continue to improve, really firmly tracking our plan. How's that?
Wenjie Xiao: Let me answer the second question. The company has always valued the return of shares. We are committed to returning the value to the company in various ways. From November last year to now, the company has once again increased the percentage of our cash dividend in half a year, which reflects the company's entire focus on shareholder returns. At the same time, it also proves the company's stable and reliable profitability, and reflects Guan Liancheng's sustainable growth confidence in the future. In the future, the company will continue to create value for shareholders. We understand the investors' expectations of shareholder returns, and we will combine the company's own resources, business development and capital market conditions to improve the return rate, and strive to meet the expectations of shareholders.
Wenjie Xiao: The company has always attached great importance on shareholders' returns and is committed to delivering value to shareholders in various means. Since November 2024, the company has increased its cash dividend payout ratio twice within 6 months, demonstrating its emphasis on shareholders' returns. This not only tactifies the company's stable and reliable profitability, but also reflects the management's confidence in achieving stable and sustainable growth in the future. The company will continue to create value for shareholders. We understand investors' expectations regarding shareholders' returns and will work to align our dividend policy with shareholders' expectations by considering the company's resources, its business development, and capital market conditions while striving to enhance returns appropriately.
Operator: Thank you for all the questions. I see no further questions at this time.
Will Tan: I will now hand the conference back to Will for closing remarks. Thank you, operator.
Will Tan: 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.