Economic Overview - The first quarter economic data from China indicates a positive signal, with a notable recovery in the consumer market, laying a solid foundation for the annual economic performance [1] - The total retail sales of consumer goods reached 12.4671 trillion yuan, a year-on-year increase of 4.6%, accelerating by 1.1 percentage points compared to the previous year [1] - In March, retail sales grew by 5.9% year-on-year, an acceleration of 1.9 percentage points compared to January-February, with a month-on-month growth of 0.58% [1] Financial Technology Companies Performance - Four Chinese financial technology companies focusing on consumer credit—Xiaoying Technology, Xinyi Technology, Lexin, and Qifu Technology—reported strong growth in their first-quarter financial results, reflecting the role of consumer finance in boosting consumption [1][2] - Xiaoying Technology reported a revenue of 1.938 billion yuan and a total loan facilitation of 35.149 billion yuan in the first quarter of fiscal year 2025, with a loan balance of 58.403 billion yuan [2][3] - Xinyi Technology achieved a revenue of 3.481 billion yuan and a net profit of 738 million yuan, with a total transaction amount of 52.1 billion yuan, marking a year-on-year growth of 7.9% [3][4] - Lexin's first-quarter revenue reached 3.1 billion yuan, with a non-GAAP EBIT of 580 million yuan, showing a significant year-on-year increase of 104.7% [4] - Qifu Technology reported a net income of 4.691 billion yuan, a year-on-year increase of 12.94%, with a total loan facilitation of 88.883 billion yuan, reflecting a growth of 15.8% [5] Market Trends and Future Outlook - The performance of financial technology companies is attributed to the recovery of the consumer market and the significant role of consumer credit in stimulating consumption [6] - Despite the positive first-quarter data, uncertainties remain regarding the sustainability and strength of the consumption recovery, with underlying issues such as income growth and consumer confidence needing further attention [6][7] - Recent government policies aimed at stabilizing the real estate market and expanding domestic demand have shown initial effectiveness, contributing to the overall economic stabilization [2][6] - The focus on service consumption as a key area for future economic stimulus reflects the government's commitment to enhancing consumer spending [6][7]

Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of $12.00 [5][6]. Core Insights - The company's Q1 2025 performance shows a significant increase in net profit, with a year-on-year growth of 113% and a quarter-on-quarter growth of 19%, reaching 430 million RMB [1]. - The improvement in net profit take rate to 1.59% is primarily driven by a reduction in credit costs, which decreased by 219 basis points to 3.4% [1][2]. - The company is focusing on enhancing shareholder returns, increasing the dividend payout ratio from 25% to 30% in the second half of 2025 [1]. Summary by Sections Financial Performance - In Q1 2025, the company reported a new loan issuance of 51.6 billion RMB, which is a slight decrease of 0.8% quarter-on-quarter [3]. - The first-day overdue rate for existing loans improved with an 11% reduction, indicating better loan quality [2][3]. - The annualized net profit take rate is expected to improve to 2% in 2025, supported by ongoing enhancements in loan quality and a higher proportion of light capital business [2]. Profit Forecast and Valuation - The net profit forecasts for 2025, 2026, and 2027 have been adjusted to 2.18 billion RMB, 3.21 billion RMB, and 3.59 billion RMB respectively, reflecting increases of 0.5%, 1.5%, and 1.7% [4]. - The estimated price-to-book (PB) ratio for 2025 is maintained at 1.15x, with a target price of $12 based on a projected book value of 75.07 RMB per ADS [4][10].

Investment Rating - The report assigns a "Buy" rating for the company, Lexin Group (LX US), with a target price of $11.80, indicating a potential upside of 36.1% from the current price of $8.67 [2][11]. Core Insights - The company has shown significant improvement in asset quality and has increased its dividend payout ratio. The dividend payout ratio was raised from 20% to 25% in November 2024, with plans to further increase it to 30% starting in the second half of 2025 [6][8]. - The net profit for Q1 2025 reached 430 million RMB, marking a 113.4% year-on-year increase, attributed mainly to a decrease in provisioning expenses [6][7]. - The company maintains guidance for substantial profit growth in 2025, with a projected net profit of 1.93 billion RMB, representing a 75% year-on-year increase [6][9]. Financial Performance Summary - Revenue for 2023 is projected at 13,057 million RMB, with a year-on-year growth of 32.3%. However, a decline of 4.6% is expected in 2025 [5][13]. - The net profit for 2024 is estimated at 1,100 million RMB, with a growth of 3.2% compared to 2023. The Non-GAAP net profit is expected to be 2,062 million RMB in 2025, reflecting a 71.4% increase [5][9]. - The company’s loan facilitation is projected to be 218 billion RMB in 2025, with a year-on-year growth of 3% [9][14]. Asset Quality and Risk Management - The 90-day delinquency rate improved to 3.3%, a decrease of 0.3 percentage points, indicating better asset quality [6][7]. - The company has shifted towards a low-risk business model, with the light asset model accounting for 28% of loan facilitation in Q1 2025, up from 20% in Q4 2024 [6][7]. Market Position and Comparison - The company’s market capitalization stands at approximately 1,149.56 million USD, with a year-to-date stock price increase of 49.48% [4][8]. - The stock has a 52-week high of $11.43 and a low of $1.62, showcasing significant volatility and potential for growth [4][8].

Market Capitalization Summary - The market capitalizations of various companies are listed, with notable figures including 136.20 billion for a leading company and 88.05 billion for another significant player [2] - Companies like MINISO and VIPSHOP have market caps of 76.81 billion and 75.61 billion respectively, indicating strong positions in the market [2] - TAL Education and other firms show varying market caps, with TAL at 66.64 billion and others like Zai Auto and Huya at 35.18 billion and 29.68 billion respectively [2] Stock Performance Overview - Stock price changes are noted, with MINISO showing a slight increase of +0.07 (+0.41%) and VIPSHOP increasing by +0.24 (+1.70%) [2] - TAL Education's stock rose by +1.03 (+2.43%), while other companies like Dada and Yatsen experienced minor fluctuations [2] - Companies such as Lexin and Huya saw declines, with Lexin down by -0.49 (-5.71%) and Huya down by -0.19 (-4.24%) [2] Company Specific Insights - MINISO and VIPSHOP are highlighted as strong competitors in the retail sector, with significant market caps and positive stock performance [2] - TAL Education continues to show resilience with a notable market cap and stock price increase, reflecting investor confidence [2] - Companies like Dada and Yatsen are also mentioned, indicating a diverse range of players in the market with varying performance metrics [2]

Core Insights - LexinFintech Holdings Ltd. reported strong financial results for Q1 2025, with revenue of RMB 3.1 billion and a profit (Non-GAAP EBIT) of RMB 580 million, reflecting a year-over-year increase of 104.7% and a quarter-over-quarter increase of 25.3% [1] - The company has demonstrated resilience amid macroeconomic uncertainties, achieving its highest quarterly profit in 13 quarters, supported by a dual-driven strategy focusing on risk control and data management [1][8] Financial Performance - Lexin's early-stage risk metrics, FPD7, improved by 5% quarter-over-quarter, while the overall delinquency rate decreased by 11% QoQ, and the 90+ day delinquency rate fell by 9% QoQ, indicating enhanced asset quality [3] - The profit margin rose by 21% QoQ, marking the fourth consecutive quarter of improvement [3] - Funding costs decreased by 2.3% QoQ, continuing a seven-quarter trend of declines [4] Business Scale and User Growth - The transaction volume in Q1 reached RMB 51.62 billion, with a managed outstanding loan balance of RMB 107.33 billion [6] - The total number of users grew to 232 million, representing an 8.1% year-over-year increase [6] Dividend Policy - Lexin announced an increase in its cash dividend payout ratio from 25% to 30% of total net profit, effective from the second half of 2025, marking the second dividend hike in six months [7] Strategic Transformation - The company emphasized its strategic transformation over the past two years, focusing on risk-driven, data-driven, and refined operations, which has led to high-quality development [8] - Lexin invested RMB 156 million in R&D in Q1, a 15.3% year-over-year increase, enhancing its industry leadership [10] Risk Management and Technology Integration - Lexin upgraded its risk control system, achieving synergy between risk management and business operations, and improved customer segmentation accuracy by 10% [11] - The company developed intelligent risk control tools, reducing overall fraud incidence by 30% year-over-year [11] Ecosystem Business Development - Lexin's installment retail, personal consumption credit, and inclusive finance businesses showed solid progress, with the installment retail business transaction volume increasing by 16.2% QoQ [14] - The launch of "FlexiLoan" in the personal consumption credit sector catered to young users' needs, enhancing user retention and engagement [17] Inclusive Finance Initiatives - Lexin's Fenqile Inclusive Finance initiative connected 150,000 micro and small businesses with approximately RMB 4.3 billion in funding, with over 70% of transactions originating from fourth-tier cities and below [19] International Expansion - In Q1, Lexin upgraded its financial products in Mexico and Indonesia, reducing overseas customer acquisition costs by 19% QoQ while improving profitability [20][21] Consumer Protection Efforts - The company deployed AI-powered tools to enhance consumer service experiences, aiming to strengthen consumer trust and deliver secure financial experiences [22]

Investment Rating - The report assigns a "Buy" rating for the company, Lexin Group (LX US), with a target price of $11.80, indicating a potential upside of 36.1% from the current price of $8.67 [2][11]. Core Insights - The company has shown significant improvement in asset quality and has increased its dividend payout ratio, which is expected to rise from 20% to 25% in November 2024, and further to 30% in the second half of 2025 [6][8]. - The net profit for Q1 2025 reached 430 million RMB, marking a 113.4% year-on-year increase, attributed mainly to a decrease in provisioning expenses [6][7]. - The report anticipates a substantial growth in net profit for 2025, projected at 1.93 billion RMB, representing a 75% year-on-year increase [6][9]. Financial Performance Summary - Revenue for 2023 is reported at 13,057 million RMB, with a year-on-year growth of 32.3%. However, a decline of 4.6% is expected in 2025 [5][13]. - The net profit for 2024 is projected at 1,100 million RMB, with a slight increase to 1,927 million RMB in 2025 [5][13]. - The company’s net take rate improved to 1.58% in Q1 2025, reflecting a 27 basis points increase from the previous quarter [6][7]. Business Metrics - The company’s loan facilitation for Q1 2025 was 51.6 billion RMB, showing a year-on-year decline of 11% but stabilizing since Q2 2024 [6][7]. - The 90-day delinquency rate improved to 3.3%, down by 0.3 percentage points from the previous quarter, indicating an overall enhancement in asset quality [6][7]. - The average loan balance for Q1 2025 was 107 billion RMB, with a year-on-year decrease of 11.7% [6][7]. Forecast Adjustments - The report has adjusted its forecasts for 2025, maintaining the loan facilitation estimate at 218 billion RMB, while increasing the net profit forecast to 1.93 billion RMB, up by 16.1% from previous estimates [9][10].

[Company Overview and Management Commentary](index=1&type=section&id=1.%20Company%20Overview%20and%20Management%20Commentary) LexinFintech Holdings Ltd. reports strong Q1 2025 results, driven by business model transformation, improved risk management, and a future focus on customer experience and AI innovation [Introduction and CEO Remarks](index=1&type=section&id=1.1.%20Introduction%20and%20CEO%20Remarks) CEO Jay Wenjie Xiao highlights successful business model transformation, improved risk indicators, and record net income, outlining future strategies focused on customer experience and AI innovation - The company's transformation to a business model driven by data analytics, risk management, and refined operations has been successful, with continuous improvement in key performance indicators[4](index=4&type=chunk) - Q1 2025 net income exceeded **RMB 430 million**, reaching its highest level in the past 13 quarters, validating the effectiveness of risk management reforms[5](index=5&type=chunk) - Future strategic priorities include: prioritizing customer-centricity, enhancing customer experience, strengthening product competitiveness, fostering ecosystem business synergy, and driving technological innovation, especially in AI applications[6](index=6&type=chunk) [CFO Remarks](index=1&type=section&id=1.2.%20CFO%20Remarks) CFO James Zheng reports Q1 2025 net income exceeding RMB 430 million, with a 1.58% net interest margin, driven by improved asset quality and lower funding costs, anticipating strong full-year net income growth Q1 2025 Net Income Performance | Indicator | Amount (RMB) | QoQ Growth | YoY Growth | | :--- | :--- | :--- | :--- | | Net Income | 430 million+ | 19% | 113% | | Net Interest Margin | 1.58% | Up 27 bps (QoQ) | - | - Net income growth primarily resulted from continuous improvement in asset quality and further reduction in funding costs[8](index=8&type=chunk) - The company is committed to prudent operational strategies, strengthening ecosystem synergy and operational optimization, and anticipates strong year-over-year net income growth for full-year 2025[9](index=9&type=chunk) [About LexinFintech Holdings Ltd.](index=5&type=section&id=1.3.%20About%20LexinFintech%20Holdings%20Ltd.) LexinFintech Holdings Ltd. is a leading credit tech enabler providing personal financial services, connecting consumers with financial institutions through technology and risk management expertise - The company is a leading credit tech enabler for personal financial services, aiming to make financing more accessible for younger generations through technology and risk management expertise[36](index=36&type=chunk) - It connects consumers with financial institutions through a unique model, including online and offline channels, installment e-commerce platforms, big data and AI-driven credit risk management, and smart user and loan management systems[36](index=36&type=chunk) - The company also provides cutting-edge proprietary technology solutions to financial institutions for their digital transformation needs[36](index=36&type=chunk) [First Quarter 2025 Operational Highlights](index=2&type=section&id=2.%20First%20Quarter%202025%20Operational%20Highlights) LexinFintech's Q1 2025 operational highlights include growth in user base and e-commerce GMV, alongside improved credit performance, despite a decrease in loan facilitation volume [User Base](index=2&type=section&id=2.1.%20User%20Base) As of March 31, 2025, the company's total registered users and users with credit lines increased year-over-year, with active and cumulative successful borrowing users also growing User Base Data (As of March 31, 2025) | Indicator | March 31, 2025 | March 31, 2024 | YoY Growth | | :--- | :--- | :--- | :--- | | Total Registered Users | 232 million | 215 million | 8.1% | | Users with Credit Lines | 46.2 million | 42.8 million | 7.8% | | Active Users (Q1 2025) | 4.8 million | 4.5 million | 6.0% | | Cumulative Successful Borrowing Users | 34.5 million | 32 million | 7.6% | [Loan Facilitation Business](index=2&type=section&id=2.2.%20Loan%20Facilitation%20Business) As of March 31, 2025, cumulative loan facilitation volume significantly increased, but Q1 2025 loan facilitation volume and outstanding principal balance decreased year-over-year Loan Facilitation Business Data | Indicator | March 31, 2025/Q1 2025 | March 31, 2024/Q1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Cumulative Loan Facilitation Volume | RMB 1,376.7 billion | RMB 1,171.1 billion | Up 17.6% | | Q1 2025 Loan Facilitation Volume | RMB 51.6 billion | RMB 58.0 billion | Down 11.0% | | Outstanding Principal Balance of Loans | RMB 107.0 billion | RMB 122.0 billion | Down 11.7% | [Credit Performance](index=2&type=section&id=2.3.%20Credit%20Performance) As of March 31, 2025, the 90-day+ delinquency rate decreased quarter-over-quarter, and the first payment default rate (30-day+) for new loans remained below 1%, indicating continuous asset quality improvement Credit Performance Data (As of March 31, 2025) | Indicator | March 31, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | 90-day+ Delinquency Rate | 3.3% | 3.6% | Down 0.3 percentage points | | First Payment Default Rate (30-day+) for New Loans | Below 1% | - | - | [Tech-empowerment Service](index=2&type=section&id=2.4.%20Tech-empowerment%20Service) In Q1 2025, the company's tech-empowerment services covered over 95 commercial clients with a retention rate exceeding 80%, demonstrating robust business development - In Q1 2025, tech-empowerment services covered over **95 commercial clients**[12](index=12&type=chunk) - The retention rate for commercial clients of tech-empowerment services exceeded **80%**[12](index=12&type=chunk) [Installment E-commerce Platform Service](index=2&type=section&id=2.5.%20Installment%20E-commerce%20Platform%20Service) In Q1 2025, the company's installment e-commerce platform service achieved significant year-over-year GMV growth, serving a substantial number of users and merchants Installment E-commerce Platform Service Data (Q1 2025) | Indicator | Q1 2025 | Q1 2024 | YoY Growth | | :--- | :--- | :--- | :--- | | GMV | RMB 1.126 billion | RMB 0.903 billion | 24.7% | | Number of Users Served | Over 310 thousand | - | - | | Number of Merchants Served | 200 | - | - | [Other Operational Highlights](index=2&type=section&id=2.6.%20Other%20Operational%20Highlights) In Q1 2025, the weighted average tenor of platform loans extended, and repeat borrowers maintained a high contribution rate to loan volume Other Operational Data (Q1 2025) | Indicator | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Weighted Average Tenor of Loans | Approximately 13.4 months | 12.5 months | Extended by 0.9 months | | Contribution Rate of Repeat Borrowers to Loans | 86.1% | - | - | [First Quarter 2025 Financial Highlights and Detailed Results](index=3&type=section&id=3.%20First%20Quarter%202025%20Financial%20Highlights%20and%20Detailed%20Results) LexinFintech's Q1 2025 financial results show a slight decrease in total operating revenue but strong growth in tech-empowerment and installment e-commerce services, leading to a doubling of net income [Key Financial Highlights (Summary)](index=3&type=section&id=3.1.%20Key%20Financial%20Highlights%20(Summary)) In Q1 2025, total operating revenue slightly decreased year-over-year, but tech-empowerment and installment e-commerce service revenues grew strongly, with net income attributable to ordinary shareholders more than doubling Q1 2025 Key Financial Highlights | Indicator | Q1 2025 (RMB million) | Q1 2024 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Total Operating Revenue | 3,104 | 3,242 | -4.3% | | Credit Facilitation Service Revenue | 2,191 | 2,648 | -17.3% | | Tech-empowerment Service Revenue | 625 | 362 | +72.8% | | Installment E-commerce Platform Service Revenue | 288 | 232 | +24.4% | | Net Income Attributable to Ordinary Shareholders | 430 | 202 | Growth over 100% | | Adjusted Net Income Attributable to Ordinary Shareholders | 472 | - | Growth over 100% | | Net Income per ADS (Diluted) | 2.39 | 1.21 | Growth 97.5% | | Adjusted Net Income per ADS (Diluted) | 2.62 | 1.35 | Growth 94.1% | [Operating Revenue](index=3&type=section&id=3.2.%20Operating%20Revenue) Q1 2025 total operating revenue decreased 4.3% to RMB 3.104 billion, with credit facilitation revenue declining due to lower guarantee income, while tech-empowerment and e-commerce revenues saw significant growth Operating Revenue Breakdown (Q1 2025) | Revenue Category | Q1 2025 (RMB million) | Q1 2024 (RMB million) | YoY Change | Primary Reason | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenue | 3,104 | 3,242 | -4.3% | - | | Credit Facilitation Service Revenue | 2,191 | 2,648 | -17.3% | Decrease in guarantee income and credit-oriented loan facilitation and service fees, partially offset by increased financing income | | Loan Facilitation and Service Fees - Credit-oriented | 1,136 | 1,417 | Decrease | Decrease in off-balance sheet loan facilitation volume | | Guarantee Income | 548 | 744 | Decrease | Decrease in off-balance sheet loan outstanding balance and improved credit risk performance | | Financing Income | 507 | 487 | Increase | Increase in average outstanding balance of on-balance sheet loans | | Tech-empowerment Service Revenue | 625 | 362 | +72.8% | Increase in ICP loan facilitation volume and referral services | | Installment E-commerce Platform Service Revenue | 288 | 232 | +24.4% | Increase in transaction volume | [Operating Cost](index=4&type=section&id=3.3.%20Operating%20Cost) In Q1 2025, overall operating costs decreased, driven by lower financing and processing costs due to reduced interest rates and risk management fees, and decreased guarantee contingent liability provisions, despite increased sales costs and financing receivable provisions Operating Cost Breakdown (Q1 2025) | Cost Category | Q1 2025 (RMB million) | Q1 2024 (RMB million) | YoY Change | Primary Reason | | :--- | :--- | :--- | :--- | :--- | | Cost of Sales | 262 | 236 | Increase | Consistent with growth in installment e-commerce platform service revenue | | Funding Cost | 83.0 | 90.7 | Decrease | Decrease in financing interest rates for on-balance sheet loans | | Processing and Servicing Cost | 551 | 588 | Decrease | Decrease in risk management fees | | Provision for Financing Receivables | 182 | 137 | Increase | Increase in outstanding balance of on-balance sheet loans and latest performance | | Provision for Contract Assets and Receivables | 130 | 166 | Decrease | Improved credit risk performance and decrease in off-balance sheet loan outstanding balance | | Provision for Contingent Liabilities from Guarantees | 677 | 828 | Decrease | Improved credit risk performance and decrease in off-balance sheet loan outstanding balance | [Gross Profit](index=4&type=section&id=3.4.%20Gross%20Profit) In Q1 2025, the company's gross profit increased by 1.8% year-over-year to RMB 1.219 billion Gross Profit (Q1 2025) | Indicator | Q1 2025 (RMB million) | Q1 2024 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Gross Profit | 1,219 | 1,197 | +1.8% | [Operating Expenses](index=4&type=section&id=3.5.%20Operating%20Expenses) In Q1 2025, the company's selling and marketing, R&D, and general and administrative expenses all increased, primarily due to higher online advertising costs, technology development investments, and personnel-related costs Operating Expenses (Q1 2025) | Expense Category | Q1 2025 (RMB million) | Q1 2024 (RMB million) | YoY Change | Primary Reason | | :--- | :--- | :--- | :--- | :--- | | Selling and Marketing Expenses | 493 | 418 | Increase | Increase in online advertising costs | | Research and Development Expenses | 156 | 135 | Increase | Increase in technology development investments | | General and Administrative Expenses | 101 | 89.8 | Increase | Increase in personnel-related costs | [Other Income/Loss and Net Income](index=5&type=section&id=3.6.%20Other%20Income%2FLoss%20and%20Net%20Income) In Q1 2025, fair value changes of financial guarantee derivatives and loans measured at fair value shifted from loss to gain, primarily due to the release of guarantee obligations from loan repayments, leading to a doubling of net income to RMB 430 million Other Income/Loss and Net Income (Q1 2025) | Indicator | Q1 2025 (RMB million) | Q1 2024 (RMB million) | YoY Change | Primary Reason | | :--- | :--- | :--- | :--- | :--- | | Fair Value Change of Financial Guarantee Derivatives and Loans Measured at Fair Value | Gain 74.6 | Loss 316 | Shift from loss to gain | Release of guarantee obligations due to loan repayments, partially offset by revaluation losses from expected loss rates | | Income Tax Expense | 101 | Gain 53.4 | Increase | Increase in income before income taxes | | Net Income | 430 | 202 | Increase 112.9% | - | [Recent Developments and Business Outlook](index=1&type=section&id=4.%20Recent%20Developments%20and%20Business%20Outlook) LexinFintech updated its dividend policy to increase payout ratio and maintains confidence in strong full-year 2025 net income growth, driven by continuous asset quality improvement [Updated Dividend Policy](index=1&type=section&id=4.1.%20Updated%20Dividend%20Policy) The Board approved increasing the cash dividend payout ratio from 25% to 30% of net income, effective from H2 2025 and paid semi-annually, to continuously return value to shareholders - In November 2024, the Board increased the cash dividend payout ratio from **20% to 25%**, effective January 1, 2025[8](index=8&type=chunk) - On May 19, 2025, the Board further approved increasing the cash dividend payout ratio from **25% to 30%** of net income, effective from H2 2025 and paid semi-annually[8](index=8&type=chunk)[32](index=32&type=chunk) [Business Outlook](index=1&type=section&id=4.2.%20Business%20Outlook) Despite macroeconomic uncertainties, management remains confident in achieving significant year-over-year net income growth for full-year 2025, driven by continuous asset quality improvement, with guidance subject to market adjustments - Management remains confident in achieving significant year-over-year net income growth for full-year 2025 and reiterates its full-year net income guidance[7](index=7&type=chunk)[9](index=9&type=chunk) - Full-year 2025 net income is expected to achieve significant year-over-year growth, primarily driven by continuous improvement in asset quality[33](index=33&type=chunk) - This forecast is subject to macroeconomic factors, and the company will adjust its outlook as circumstances evolve[33](index=33&type=chunk) [Non-GAAP Financial Measures](index=6&type=section&id=5.%20Non-GAAP%20Financial%20Measures) This section details the company's use of non-GAAP financial measures, such as adjusted net income and non-GAAP EBIT, to assess operational performance, providing reconciliations to GAAP results [Use of Non-GAAP Financial Measures Statement](index=6&type=section&id=5.1.%20Use%20of%20Non-GAAP%20Financial%20Measures%20Statement) The company uses non-GAAP measures like adjusted net income and non-GAAP EBIT to evaluate operating performance, excluding items such as share-based compensation and investment gains/losses, while emphasizing their supplementary nature to GAAP - The company uses non-GAAP measures such as adjusted net income attributable to ordinary shareholders and non-GAAP EBIT as supplementary measures to evaluate operating performance and formulate business plans[38](index=38&type=chunk)[39](index=39&type=chunk) - Adjusted net income excludes share-based compensation expenses, interest expenses related to convertible notes, and investment gains/losses; non-GAAP EBIT excludes income tax expenses, share-based compensation expenses, net interest expenses, and investment gains/losses[38](index=38&type=chunk) - These non-GAAP measures are not substitutes for GAAP, have limitations, may not reflect all revenue and expense items affecting operations, and may differ from non-GAAP information used by other companies[38](index=38&type=chunk)[40](index=40&type=chunk) [Unaudited Reconciliations of GAAP and Non-GAAP Results](index=11&type=section&id=5.2.%20Unaudited%20Reconciliations%20of%20GAAP%20and%20Non-GAAP%20Results) This section provides unaudited reconciliation tables for GAAP net income to adjusted net income and non-GAAP EBIT for Q1 2025, detailing adjustments and their impact on non-GAAP metrics Reconciliation of GAAP to Adjusted Net Income (Q1 2025) | (in thousands of RMB, except per share data) | March 31, 2024 | March 31, 2025 | | :--- | :--- | :--- | | Net income attributable to ordinary shareholders | 201,623 | 430,324 | | Add: Share-based compensation expenses | 23,274 | 29,541 | | Interest expenses related to convertible notes | 5,322 | - | | Investment (gains)/losses | (90) | 11,699 | | **Adjusted net income attributable to ordinary shareholders** | **230,129** | **471,564** | | Adjusted net income per ordinary share (diluted) | 0.68 | 1.31 | | Adjusted net income per ADS (diluted) | 1.35 | 2.62 | Reconciliation of Non-GAAP EBIT to Net Income (Q1 2025) | (in thousands of RMB) | March 31, 2024 | March 31, 2025 | | :--- | :--- | :--- | | Net income | 201,623 | 430,324 | | Add: Income tax expenses | 53,418 | 101,147 | | Share-based compensation expenses | 23,274 | 29,541 | | Net interest expenses | 3,904 | 4,702 | | Investment (gains)/losses | (90) | 11,699 | | **Non-GAAP EBIT** | **282,129** | **577,413** | [Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=6.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and comprehensive income, for Q1 2025 [Balance Sheets](index=8&type=section&id=6.1.%20Balance%20Sheets) As of March 31, 2025, total assets were RMB 22.619 billion, a slight increase from December 31, 2024, with significant growth in cash and cash equivalents, while shareholder equity continued to rise Condensed Consolidated Balance Sheets Summary (As of March 31, 2025) | (in thousands of RMB) | December 31, 2024 | March 31, 2025 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | 2,254,213 | 3,173,298 | | Short-term financing receivables, net | 4,668,715 | 4,743,393 | | Short-term contract assets and receivables, net | 5,448,057 | 5,009,319 | | Deposits to insurance and guarantee companies | 2,355,343 | 2,203,109 | | **Total assets** | **22,240,779** | **22,619,466** | | **Liabilities** | | | | Short-term borrowings and current portion of long-term borrowings | 690,772 | 781,324 | | Short-term financing debts | 2,754,454 | 3,207,177 | | Contingent liabilities from guarantees | 1,079,000 | 769,397 | | **Total liabilities** | **11,500,773** | **11,411,140** | | **Shareholders' equity** | **10,740,006** | **11,208,326** | [Statements of Operations](index=9&type=section&id=6.2.%20Statements%20of%20Operations) In Q1 2025, total operating revenue decreased by 4.3%, but gross profit slightly increased, and a shift from loss to gain in fair value changes of financial guarantee derivatives led to a significant 112.9% increase in net income to RMB 430 million Condensed Consolidated Statements of Operations Summary (Q1 2025) | (in thousands of RMB, except per share data) | Q1 2024 | Q1 2025 | | :--- | :--- | :--- | | **Operating Revenue** | | | | Credit facilitation service revenue | 2,648,478 | 2,190,866 | | Tech-empowerment service revenue | 361,543 | 624,850 | | Installment e-commerce platform service revenue | 231,909 | 288,383 | | **Total Operating Revenue** | **3,241,930** | **3,104,099** | | **Total Operating Cost** | **(2,045,218)** | **(1,885,191)** | | **Gross Profit** | **1,196,712** | **1,218,908** | | **Total Operating Expenses** | **(642,359)** | **(749,507)** | | Fair value change of financial guarantee derivatives and loans measured at fair value | (315,923) | 74,639 | | **Income before income taxes** | **255,041** | **531,471** | | Income tax expenses | (53,418) | (101,147) | | **Net Income** | **201,623** | **430,324** | | Net income per ADS (diluted) | 1.21 | 2.39 | [Statements of Comprehensive Income](index=10&type=section&id=6.3.%20Statements%20of%20Comprehensive%20Income) In Q1 2025, total comprehensive income significantly increased to RMB 428 million from RMB 204 million in the prior year, primarily driven by the substantial rise in net income Condensed Consolidated Statements of Comprehensive Income Summary (Q1 2025) | (in thousands of RMB) | Q1 2024 | Q1 2025 | | :--- | :--- | :--- | | Net income | 201,623 | 430,324 | | Other comprehensive income: | | | | Foreign currency translation adjustment, net of tax | 2,323 | (2,259) | | **Total comprehensive income** | **203,946** | **428,065** | | Total comprehensive income attributable to ordinary shareholders | 203,946 | 428,065 | [Additional Credit Information](index=12&type=section&id=7.%20Additional%20Credit%20Information) This section provides supplementary credit performance data, including vintage charge-off curves, Dpd30+/GMV ratios, and first payment default rates, to offer deeper insights into loan portfolio risk [Vintage Charge Off Curve](index=12&type=section&id=7.1.%20Vintage%20Charge%20Off%20Curve) This section presents a chart illustrating vintage charge-off curves for different loan cohorts, used to assess long-term credit performance and risk trends of the loan portfolio - The chart displays vintage charge-off curves for different loan cohorts, used to assess the long-term credit performance and risk trends of the loan portfolio[57](index=57&type=chunk)[58](index=58&type=chunk) [Dpd30+/GMV by Performance Windows](index=12&type=section&id=7.2.%20Dpd30%2B%2FGMV%20by%20Performance%20Windows) This section includes a chart showing the Dpd30+ (over 30 days past due) to GMV (Gross Merchandise Volume) ratio by performance windows, analyzing the relationship between delinquency and business volume - The chart illustrates the Dpd30+ (over 30 days past due) to GMV (Gross Merchandise Volume) ratio by performance windows, used to analyze the relationship between delinquency and business volume[59](index=59&type=chunk)[60](index=60&type=chunk) [First Payment Default 30+](index=13&type=section&id=7.3.%20First%20Payment%20Default%2030%2B) This section includes a chart presenting data on first payment defaults over 30 days, measuring the early credit risk performance of newly originated loans, excluding those under the Intelligent Credit Platform (ICP) - The chart presents data on first payment defaults over 30 days, used to measure the early credit risk performance of newly originated loans[62](index=62&type=chunk) - Loans under the Intelligent Credit Platform (ICP) are not included in this chart's calculation[63](index=63&type=chunk) [Disclosures and Contact Information](index=6&type=section&id=8.%20Disclosures%20and%20Contact%20Information) This section provides essential disclosures, including exchange rate information and a safe harbor statement for forward-looking statements, along with investor and media contact details [Exchange Rate Information Statement](index=6&type=section&id=8.1.%20Exchange%20Rate%20Information%20Statement) This statement clarifies that RMB to USD conversions in the announcement use a rate of 7.2567 RMB to 1.00 USD as of March 31, 2025, without guaranteeing convertibility at any specific rate - RMB amounts in this announcement converted to USD are based on the exchange rate of **RMB 7.2567 to USD 1.00** as of March 31, 2025, as published in the Federal Reserve Board's H.10 statistical release[42](index=42&type=chunk) - The company does not guarantee that RMB or USD amounts could be converted at any particular rate[42](index=42&type=chunk) [Safe Harbor Statement](index=7&type=section&id=8.2.%20Safe%20Harbor%20Statement) This announcement contains forward-looking statements protected by the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties that may cause actual results to differ materially - This announcement contains forward-looking statements protected by the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995[44](index=44&type=chunk) - Forward-looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from those contained in any forward-looking statement[44](index=44&type=chunk) - The company undertakes no obligation to update any forward-looking statement, except as required by applicable law[44](index=44&type=chunk) [Investor and Media Inquiries](index=7&type=section&id=8.3.%20Investor%20and%20Media%20Inquiries) This section provides contact information for LexinFintech Holdings Ltd.'s investor relations and media inquiries - Investor Relations Contact: Will Tan, Phone: +86 (755) 3637-8888 ext. 6258, Email: willtan@lexin.com[45](index=45&type=chunk) - Media Inquiries Contact: Ruifeng Xu, Phone: +86 (755) 3637-8888 ext. 6993, Email: media@lexin.com[45](index=45&type=chunk)

Company Overview - LexinFintech Holdings Ltd is committed to connecting consumers to businesses and financial institutions (2C2B2F)[12] - The company has over 232 million registered users and 177 funding partners[14] - Lexin focuses on compliance, risk management, customer relationship, and organizational efficiency[21] Financial Performance (Q1 2025) - Loan origination reached RMB 516 billion, a decrease of 06% QoQ[49] - Net income was RMB 430 million, an increase of 186% QoQ[49] - Total operating revenue was RMB 3104099 million, a decrease of 152% QoQ[50] - Tech-empowerment service income increased by 38% QoQ to RMB 624850 million[50] - Installment e-commerce platform service income decreased by 164% QoQ to RMB 288383 million[50] User Base & Loan Portfolio - Registered users increased by 20% QoQ to 232 million[51] - Cumulative users increased by 21% QoQ to 345 million[53] - Loan balance decreased by 27% QoQ to RMB 1073 billion[57] Risk Management - The delinquency ratio (90 days +) increased from 36% in Q4 2024 to 37% in Q1 2025[71]

Financial Data and Key Metrics Changes - The company's GAAP net profit reached RMB 430 million, marking a record high in 13 quarters, with quarter-over-quarter growth of 18.6% and year-over-year growth of 113% [7] - The net income margin increased to 13.9% from 9.9% in the previous quarter, and the net profit take rate rose to 1.58% from 1.31% [26][36] - Total revenue from lending-related business decreased by 15% quarter-over-quarter, primarily due to lower APR of loans and a shift in GMV towards the capital light model [32] Business Line Data and Key Metrics Changes - The online consumer finance business improved customer acquisition capabilities, launching the Linhua Jie flexible loan product, which enhanced competitiveness [10] - The installment e-commerce business saw a 16.2% increase in GMV, despite a 16.4% decrease in service income due to accounting differences [11][35] - The capital light model volume grew by 43% quarter-over-quarter, accounting for 28% of total GMV, up from 20% [29] Market Data and Key Metrics Changes - GMV from Tier four, Tier five, and lower regions accounted for over 70% of inclusive finance GMV in the first quarter, indicating strong penetration in lower-tier cities [12] - The overseas business achieved profitability, with acquisition costs decreasing by 19% quarter-over-quarter [12] Company Strategy and Development Direction - The company will maintain a user-centric approach, enhancing user experience and promoting high-quality customer growth [13] - Strengthening synergies across ecosystem businesses is a priority, with plans to deepen presence in lower-tier cities and explore various business models [14][15] - Increased investment in technology, particularly AI, is planned to enhance operational efficiency and competitiveness [15] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving sustained growth in net profit for the full year 2025, despite macroeconomic uncertainties [16] - The company is well-prepared to navigate external challenges, including new regulations and geopolitical uncertainties [41] Other Important Information - The company announced an increase in cash dividend payout ratio from 20% to 25% starting in 2025, with a further increase to 30% effective from the second half of 2025 [16][55] Q&A Session Summary Question: How does the company address external challenges such as new rules on loan facilitation and geopolitical uncertainties? - The company supports regulatory efforts to standardize the industry and is confident in navigating these challenges, including exploring potential listings on different exchanges [41][42] Question: What are the progress and development plans for the ecosystem business? - The company continues to enhance risk management capabilities and operational efficiency, focusing on tailored product offers and expanding customer acquisition channels [44][46] Question: What are the main reasons for the changes in revenue structure this quarter? - The revenue variance was primarily due to lower credit facilitation service income, higher early repayments, and a shift towards the capital light model [50][52]

Financial Data and Key Metrics Changes - The company reported a GAAP net profit of RMB 430 million, marking an 18.6% quarter-over-quarter growth and a 113% year-over-year increase, achieving a record high in 13 quarters [7] - The net income margin increased to 13.9% from 9.9% in the previous quarter, while the net profit take rate rose to 1.58% from 1.31% quarter-over-quarter [26][30] - Total revenue from lending-related business decreased by 15% quarter-over-quarter, attributed to lower APR of loans and a shift towards the capital light model [31] Business Line Data and Key Metrics Changes - The online consumer finance business improved customer acquisition capabilities, launching the Linhua Jie flexible loan product, enhancing competitiveness [9][10] - The installment e-commerce business saw a 16.2% increase in GMV, despite a 16.4% decrease in service income due to accounting differences [11][34] - The capital light model volume grew by 43% quarter-over-quarter, accounting for 28% of total GMV, up from 20% in the previous quarter [30] Market Data and Key Metrics Changes - GMV from Tier four, Tier five, and lower regions accounted for over 70% of inclusive finance GMV, indicating strong penetration in lower-tier cities [12] - The overseas business achieved profitability, with acquisition costs decreasing by 19% quarter-over-quarter [12] Company Strategy and Development Direction - The company will focus on a user-centric approach, enhancing user experience and promoting high-quality customer growth [13] - Strengthening synergies across ecosystem businesses to build a differentiated competitive advantage is a key strategy moving forward [14] - Increased investment in technology, particularly AI, to enhance operational efficiency and competitiveness [15] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving sustained growth in net profit for the full year 2025, despite macroeconomic uncertainties [16] - The company plans to increase its cash dividend payout ratio from 20% to 30% of net profit starting from the second half of 2025 [16] Other Important Information - The company has completed the upgrade of its risk management framework and established a robust risk management infrastructure [8] - The provision coverage ratio stood at 268%, the highest level since Q2 2024, indicating strong asset quality management [28] Q&A Session Summary Question: How does the company address external challenges such as new rules on loan facilitation and geopolitical uncertainties? - The company supports regulatory efforts to standardize the industry and is well-prepared to navigate external challenges, maintaining confidence in achieving its 2025 performance target [39] Question: What are the progress and development plans for the ecosystem business? - The company continues to enhance risk management capabilities and operational efficiency, focusing on tailored product offers and expanding customer acquisition channels [42][43] Question: What are the main reasons for the changes in revenue structure this quarter? - The revenue variance was primarily due to lower credit facilitation service income, higher early repayments, and a shift towards the capital light model [50] Question: What is the company's plan for shareholder returns going forward? - The company has increased its cash dividend payout ratio and remains committed to delivering value to shareholders while aligning its dividend policy with shareholder expectations [53]