LexinFintech Holdings Ltd. (NASDAQ:LX) Q2 2021 Earnings Conference Call August 25, 2021 7:00 AM ET CorporateParticipants Patricia Cheng - Head of Capital Markets Jay Xiao - Chairman and Chief Executive Officer Kris Qiao - Interim Chief Financial Officer Jayden Qiao - Chief Risk Officer ConferenceCall Participants Eddie Leung - Bank of America Merrill Lynch Ethan Wang - CLSA Alex Ye - UBS Jacky Zuo - China Renaissance Operator Ladies and gentlemen, thank you for standing by and welcome to the LexinFintech Se ...

Financial Data and Key Metrics Changes - In Q1 2021, Lexin's revenues reached CNY 2.9 billion, with gross income at CNY 1.37 billion and non-GAAP net income at CNY 771 million, marking a significant growth [8][17] - Loan origination facilitated by Lexin's platform amounted to CNY 53.8 billion, an increase of 57.8% year-on-year [6][8] - The cost of capital decreased to 7.46% from 7.7%, indicating improved funding costs [18] Business Line Data and Key Metrics Changes - Newly registered users reached 14 million, with total registered users at 132 million, a 56.5% year-on-year increase [5][6] - Users with credit lines grew to 30.3 million, up 46.5% year-on-year, while new active customers increased by 88% year-on-year to 1.8 million [5][6] - The Buy-Now-Pay-Later (BNPL) product, Maiya, generated over CNY 60 million in GMV in Q1 and served over 510,000 customers [13][14] Market Data and Key Metrics Changes - The company is focusing on micro business owners, with nearly 200,000 customers served through new operating credit products, generating CNY 2.1 billion in transactions [9][10] - The delinquency rate for loans over 90 days is at 1.84%, with the first payment default rate for new loan originations below 1% for eight consecutive months [7][20] Company Strategy and Development Direction - Lexin is diversifying its financial technology services and focusing on new consumption strategies to capture growth opportunities in China's consumption market [5][9] - The company has signed strategic cooperation agreements with multiple banks to enhance self-operated product groups and improve operational efficiency [11][10] - Future plans for Maiya include expanding use cases and targeting various sectors, including e-commerce and offline businesses [14][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving loan origination targets of CNY 240 billion to CNY 250 billion for the year, supported by strong credit performance [8][17] - The regulatory environment is viewed positively, with management indicating that their loan facilitation model is stable and compliant with regulations [27][28] - Management remains cautiously optimistic about asset quality trends, maintaining guidance for vintage charge-off rates between 3.5% to 4% for the year [46] Other Important Information - The company is focusing on improving risk management systems and operational efficiency to enhance profitability [18][19] - Lexin's local service and lifestyle products are showing good growth potential, with significant GMV generated in recent months [15] Q&A Session Summary Question: Can you provide a breakdown of the Maiya product's GMV target for Q2? - Management indicated that the growth in offline channels is expected to be significant, but specific percentages are not yet available as it is still early in the product's development [23][25] Question: How will recent regulatory changes impact the loan facilitation business? - Management expressed confidence in their model's stability and noted that they do not provide credit scoring services, which mitigates regulatory risks [27][28] Question: What is the target for SME loans this year? - Management stated that it is still early to provide specific targets for SME loans, but there is potential for growth in this area [29] Question: What is the take rate for the first quarter? - The profit-sharing take rate was 47%, slightly down from 50% in the previous quarter, but overall stable [30][31] Question: Will the Maiya business incur expected credit losses? - Management noted that the accounting for Maiya is still being determined, but the risk associated with the product is considered low [33][35] Question: Are there plans to apply for a national micro loan license? - Management indicated that they do not plan to pursue the national micro loan license due to its low leverage levels, which do not align with their business model [39][40] Question: What is the typical size and APR for SME loans? - The typical size for SME loans is CNY 100,000 to CNY 150,000, with an APR of 18% to 24% [42][43]

Financial Data and Key Metrics Changes - In Q4 2020, Lexin's platform revenues reached RMB 720 million, an increase of 232% year-on-year [7] - For the full year 2020, total revenues were RMB 11.6 billion, with a non-GAAP net income of over RMB 600 million [8][14] - Total loan originations for 2020 reached RMB 176.5 billion, representing a year-on-year increase of 40% [8] - The company recorded a 90-day delinquency rate decline from 2.6% in Q3 to 1.95% in Q4 [10][17] Business Line Data and Key Metrics Changes - The bank technology loan facilitation model achieved significant growth, with risk-free pure technology service model reaching 50% of total new originations for the first time [6] - Credit-oriented service income for 2020 was RMB 7.5 billion, while platform-based service income exceeded RMB 2 billion, marking a 150% increase from 2019 [14] Market Data and Key Metrics Changes - The total registered users reached 118 million by the end of 2020, a year-on-year increase of 61% [8] - Quarterly active users reached a record high of 8.2 million [8] Company Strategy and Development Direction - The company aims to expand its potential customer base from 120 million to 500 million new consumption consumers, establishing itself as a new consumption digital technology service provider [11] - The introduction of new products like Yuehui and Maiya is expected to open new avenues for growth [9][12] Management Comments on Operating Environment and Future Outlook - Management raised the full-year 2021 loan origination guidance to RMB 240 billion to RMB 250 billion, indicating a 40% year-on-year increase [13] - The macro environment is viewed positively, with regulatory stability expected to favor the company's loan facilitation model [22][23] Other Important Information - A management change was announced, with Ryan Liu promoted to Senior Vice President in charge of new business initiatives [16] - The company is experiencing a shift in customer acquisition strategies, moving towards non-conventional channels [37] Q&A Session Summary Question: What are the key drivers behind the loan growth guidance? - Management cited a positive macro environment and strong recent performance as reasons for raising guidance [22][24] Question: What is the impact of recent regulations on college loans? - Management indicated that they have been prepared for such regulations and expect limited changes to operations [25][26] Question: What is the risk management strategy for maintaining high-quality growth? - The target for vintage loss in 2021 is around or below 4% [27] Question: What is the contribution of the buy now, pay later model to loan growth? - Management stated it is too early to provide a full-year number for this new product [30][31] Question: What is the outlook for pricing and funding costs? - Long-term rates are expected to decline, while short-term rates are anticipated to remain stable [42] Question: What are the expectations for the profit-sharing model? - Management expects the profit-sharing business to remain stable around 50% for 2021, with potential for long-term growth [52]

LexinFintech Holdings Ltd. (NASDAQ:LX) Q3 2020 Earnings Conference Call November 24, 2020 6:00 AM ET Company Participants Tony Hung - Investor Relations Jay Xiao - Founder, Chairman & CEO Craig Zeng - CFO Ryan Liu - Chief Risk Officer Stanley Zhao - Senior Financial Director Conference Call Participants Jacky Zuo - China Renaissance Ethan Wang - CLSA Sanjay Jain - Aletheia Capital Steven Chan - Haitong International Operator Ladies and gentlemen, thank you for standing by, and welcome to the LexinFintech Th ...

Business Overview - Lexin has over 100 million registered users, focusing on new generation consumers[5] - The company facilitated RMB 752 billion in loan originations since its founding[12] - In the first half of 2020, Lexin's Fenqile platform achieved a GMV of RMB 26 billion[10] Customer Base and Credit - The average customer is 25 years old with an average credit limit of RMB 10,000 in Q2 2020[14] - Lexin had 68 million active customers in Q2 2020[14] - The average loan tenor was 114 months with a weighted average APR of 265% for Q2 2020[45] Financial Performance and Funding - In the first half of 2020, RMB 222 billion in loan originations were facilitated through Lehua Card[16] - Institutional funding accounted for 100% of new loans facilitated in 1H 2020[21] - As of 1H2020, approximately 2 million members in the installment membership program[16] Technology and Risk Management - The Lingxi AI Platform achieves an 856% recommendation success rate[25] - The Hawkeye Engine processes 998% of applications automatically[25]

Financial Data and Key Metrics Changes - The company's revenues reached CNY 3.0 billion, an increase of 19% compared to the previous year [7] - Gross profit was CNY 968 million, and non-GAAP pretax profit was CNY 541 million [7] - Adjusted net income was CNY 453 million, with fully diluted adjusted net income per ADS at CNY 2.21 [15] - Operating expenses as a percentage of average loan balance was 3.9% for the quarter [16] Business Line Data and Key Metrics Changes - Credit-oriented service income reached CNY 2 billion, representing an increase of 48.8% from the second quarter of 2019 [15] - Platform service income was CNY 419 million, an increase of 109% from the second quarter of 2019 [15] - The number of registered users reached 95.3 million, increasing by 90%, and surpassed 100 million shortly after [10][12] Market Data and Key Metrics Changes - The company facilitated CNY 41.1 billion worth of loans, an increase of 57.8% [8] - Current loan balance is CNY 61.9 billion, an increase of 52.4% [8] - Day-7 delinquency rate declined to 2.32%, lower than the previous year's third quarter [9][40] Company Strategy and Development Direction - The company is focusing on a new consumption platform strategy, aiming to create a new consumption ecosystem [12] - The strategy includes enhancing control over consumption scenarios and expanding both online and offline offerings [20][21] - The company aims to increase the contribution of financial services to a larger portion of its registered users [22] Management's Comments on Operating Environment and Future Outlook - Management noted signs of recovery in consumption, with year-on-year growth potentially reaching 2% [13] - The company expects loan originations in the third quarter to exceed CNY 48 billion, a growth of over 30% [9] - Management expressed confidence in achieving full-year loan origination guidance of CNY 170 billion to CNY 180 billion [9] Other Important Information - The company reported that all funding for new loan originations came from institutional funding partners, with no funding from its Juzi Licai platform [17] - The average credit limit was CNY 10,039, with a weighted average APR of 26.5% for the quarter [16] Q&A Session Summary Question: Can you elaborate on the new retail strategy and how it differentiates from peers? - The company emphasizes greater control over consumption scenarios, which helps in customer acquisition and retention [20][22] Question: What is the outlook for revenue take rates considering the increasing platform revenue-sharing model? - The company anticipates improvements in take rates over time as more funding partners come aboard [25][26] Question: What is the trend for processing and servicing costs? - Processing costs have been high due to COVID-19 impacts, but management expects these costs to normalize over time [27] Question: What is the expected impact of potential policy changes on APR? - Management believes that while there may be a reduction in APR, it could also lead to a decrease in overall risk [30] Question: What is the current expected lifetime loss for recent loans facilitated? - The expected lifetime loss is projected to be around 4%, with hopes for improvement in the latter half of the year [32] Question: What is the average customer acquisition cost for offline efforts? - The average customer acquisition cost is around CNY 150, with expectations that offline costs are lower [42] Question: How is the company improving credit quality? - Improvements in credit quality are attributed to a better macro environment and optimized collection processes [46]

Financial Data and Key Metrics Changes - In Q1 2020, Lexin facilitated RMB34.1 billion in loans, a 69.5% increase year-on-year, exceeding the target of RMB32 billion [7] - Registered users reached 84.2 million, up 99.7%, marking a record high [7] - Outstanding loan balance increased to RMB58.5 billion, a 67.2% rise [8] - Q1 revenues were RMB2.5 billion, reflecting a 40.9% year-on-year growth [8] - The company reported a net loss of RMB678 million for Q1, attributed to provisions for potential pandemic impacts [8][9] Business Line Data and Key Metrics Changes - Lexin's online and offline consumption scenarios generated RMB10.5 billion in transactions, a 337% increase, with offline transactions alone reaching RMB9.3 billion, up 1239% [10] - Membership benefits program usage increased significantly, with a 63.5% repeat rate and substantial month-on-month growth in April [11] Market Data and Key Metrics Changes - The 90-day delinquency rate was reported at 2.57%, with improvements noted as the economy recovers [12] - The seven-day delinquency rate improved to 2.77%, returning to pre-pandemic levels [12] Company Strategy and Development Direction - The company is focusing on a new consumption platform strategy to drive user growth and revenue [10] - Lexin aims to exceed RMB38 billion in loan originations in Q2, a 46% increase from Q1, and is confident in achieving full-year guidance of RMB170 billion to RMB180 billion [13] - The company is exploring a potential Hong Kong listing as a response to U.S.-China tensions regarding ADRs [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of consumption and employment in China, indicating that the worst of the pandemic appears to be over [13] - The company is committed to maintaining asset quality and has adjusted its credit model accordingly [30] - Management anticipates a return to profitability in Q2 and expects to see continued growth in the second half of the year [13][19] Other Important Information - The adoption of the CECL accounting standard has led to higher provisions being recognized upfront, impacting short-term financials but not the underlying profitability [15][18] - The company has allocated RMB900 million to prepare for pandemic impacts, which contributed to the Q1 loss [8][19] Q&A Session Summary Question: Loan origination outlook and customer acquisition efforts - Management confirmed a target of RMB38 billion for Q2 loan originations, citing diversified customer acquisition channels and a strong existing customer base [28][29] Question: Details on additional provisions and vintage loss assumptions - The RMB900 million provision is a conservative measure due to the pandemic, with further details to be provided in the P&L [31] Question: ADR listing concerns amid U.S.-China tensions - Management is exploring a Hong Kong listing as a potential solution to address investor concerns regarding ADRs [33] Question: Customer acquisition strategy across different channels - Management highlighted the importance of both online and offline channels, with a focus on risk management and customer quality [36] Question: Business model and risk-sharing loans - The company clarified that the risk-sharing model with banks allows for lower capital requirements and is a strategic direction for growth [41][68] Question: Complexity of accounting policies and full-year outlook - Management acknowledged the complexity of accounting due to multiple loan categories and pledged to provide clearer guidance in the future [62]

Table of Contents | --- | --- | |-------|--------------------------------------------------------------------------| | | | | | (Exact name of registrant as specified in its charter) | | | N/A | | | (Translation of Registrant's name into English) | | | | | | Cayman Islands (Jurisdiction of incorporation or organization) | UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 20-F (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 19 ...