LexinFintech Holdings Ltd. Q2 FY2025 earnings call

• The company achieved high-quality growth with total GMV up 2.4% QoQ, revenue up 16%, and net profit up 19% QoQ. - Transformed to a data analytics, risk management, and refined operations-driven model. - Installment e-commerce business upgraded supply chain, partnered with top brands, and saw e-commerce GMV up 139% YoY during June 18 festival. - Off-line inclusive finance business expanded to lower-tier cities with customized risk management. - Online consumer finance business partnered with leading platforms. - Tech empowerment business helped partner banks with risk management, saw growth in business volume and users. - Overseas business had consecutive quarters of QoQ growth in volume and revenue. - AI applied in post-loan management and operational strategies, with 50 AI agent roles deployed. - Strengthened consumer protection with optimized tools and systems. - Risk management initiatives included optimizing risk identification models, preventive/proactive approaches, and upgrading e-commerce risk management system.

In the second quarter, total GMV reached RMB 52.9 billion. Revenue was RMB 3.6 billion, up 16% quarter-over-quarter. Net profit was RMB 511 million, up 19% quarter-over-quarter. Credit facilitation service income was RMB 2.3 billion, up 4% quarter-over-quarter. Tech empowerment service income increased by 33% to RMB 830 million. E-commerce platform service income increased by 69% to RMB 487 million. The net revenue of the credit business increased by 10% to RMB 2 billion. The net revenue of the e-commerce business increased by 71% to RMB 97 million. The credit business's net revenue take rate increased from 6.69% to 7.51%. The provision coverage ratio was 270%, up 2 percentage points quarter-over-quarter.

• Maintains full year guidance of significant year-over-year profit growth. - Starting from H2 2025, cash dividend payout ratio raised from 25% to 30%. - Announced $60 million share repurchase plan to be executed within 12 months. - Sees new loan facilitation regulation fostering industry health and benefiting compliant platforms like Lexin.

• Macroeconomic uncertainties. - New loan facilitation regulation led to tightened funding supply and increased funding costs in Q2. - Minor fluctuations in risk metrics like collection rates.

Q: About the new regulations, what impact has the company observed and what measures will be taken?

A: Short-term, funding supply tightened, funding costs increased, and some risk metrics fluctuated. Proactive measures taken since April include tightening risk management strategies. Long-term, regulation fosters healthy industry.

Q: Regarding the ecosystem, share development strategy and outlook?

A: Installment e-commerce has independent risk management system, saw significant growth. Offline business expands to lower-tier cities. Tech empowerment helps partners with digital risk management. Overseas business continues sequential growth.

Q: How does Lexin's risk management system respond to potential risk fluctuations?

A: Tightened risk approval standards for new customers in April, improved early reminders for existing loans, and took measures for rate-sensitive customers. Leverages AI models and refined pricing strategies.

Q: Thought process behind share repurchase program and future plans for shareholder return?

A: $50 million share repurchase plan and personal $10 million share purchase. Total shareholder return to rise above industry average. Values shareholder return and will explore various means to deliver value.