LexinFintech Holdings Ltd. Q3 FY2025 earnings call

• Efficiently completed business adjustments to comply with new regulations, attributed to strong risk management capabilities and business ecosystem resilience. - Strengthened user categorization and risk identification, phased out unstable users, and refined customer segmentation with tailored pricing. - Enhanced user experience by upgrading products, optimizing funding supply, and providing customized reoffers. - Accelerated AI technology deployment, with Lexin GPT enhancing AI agent capabilities in multiple areas. - Ecosystem business units collaborated: Online consumer finance optimized service experience; installment e-commerce saw GMV growth; offline inclusive finance had stable asset quality; tech empowerment and overseas businesses grew steadily. - Comprehensively strengthened consumer rights protection across policies, products, and services.

In the third quarter, the credit business net revenue, which is derived by adding credit facilitation service income and tech empowerment service income, net of credit cost, including provisions and fair value changes and funding cost, reached RMB 1.9 billion, a 3% or RMB 59 million decrease quarter-over-quarter. The decrease was mainly due to an increase in credit costs of approximately RMB 40 million. The net revenue of the e-commerce business, defined by e-commerce revenue net of cost of inventory sold, increased by 14% or RMB 14 million to RMB 111 million. The total net revenue summing the credit and e-commerce business added up to RMB 2.1 billion, a 2% or RMB 46 million decrease quarter-over-quarter.

• Expect moderate quarter-over-quarter decline in loan volume in Q4 due to ongoing credit risk volatility. - Net income and net income take rate will see sequential decrease in Q4. - Confident of achieving stable performance growth in the long term once industry credit risks stabilize; when industry-wide credit rates show signs of stabilization, will gradually resume growth pace for installment e-commerce. - Dividend payout ratio increased to 30% of net profit from the second half of the year, share repurchase plan over halfway completed.

• Industry credit risk volatility during transitional period before and after new regulation implementation. - Liquidity tightening in the industry affecting loan volume and risk performance. - Regulatory changes impacting business operations and pricing. - Fluctuations in early risk indicators in the industry.

Q: Regarding the new regulation on the loan facilitation industry and the development strategy and outlook of the e-commerce business, what's the impact and plan?

A: Stopped underwriting loans with APR above 24% to ensure compliance. E-commerce business upgraded risk management system, balanced business quality with scale, will continue to optimize product categories while managing risk, and will resume growth pace gradually when industry credit rates stabilize.

Q: During the transitional period, how is the company managing the risk cycle and what improvements have been made in risk management system?

A: Anticipated industry liquidity impact, adjusted risk management strategy from Q2, identified vulnerable customers, used robots for account clearing and credit line reduction, strengthened engagement with prime customers, promoted quality asset growth, and controlled risk fluctuations for new and existing loans.

Q: Outlook and guidance for Q4 and full year 2026 performance, and plans for future shareholders' return?

A: Q4 expected to have moderate loan volume decline, net income and take rate decrease; full year 2025 net profit still expected to grow significantly. Share repurchase program and personal share purchase plan over halfway; will explore more initiatives to enhance shareholder value once repurchase program is fully executed.