SHENZHEN, China, May 17, 2024 (GLOBE NEWSWIRE) -- LexinFintech Holdings Ltd. ("Lexin" or the "Company") (NASDAQ:LX), a leading credit technology-empowered consumer financial service enabler in China, today announced that it will report its unaudited financial results for the first quarter ended March 31, 2024, after the U.S. market closes on Thursday, May 23, 2024. The Company's management will host an earnings conference call at 10:00 PM U.S. Eastern time on May 23, 2024 (10:00 AM Beijing/Hong Kong time on ...

User Base and Engagement - As of December 31, 2023, the total number of registered users reached 210 million, with 42 million users having a credit line, and over 85% of these users are aged between 23 and 40 years old [420]. - The cumulative active users reached 31.1 million in 2023, with around 40% of active users utilizing more than one product [420]. - The GMV per active user on the platform increased by 36.6% compared to 2022, excluding technology empowerment SaaS products [429]. - The GMV generated by existing active users increased by 30.9% year-over-year in 2023 [431]. - Total GMV increased by 20.5% in 2023, with e-commerce GMV per active user rising by 14.7% year-over-year [432]. Financial Performance and Funding - The company raised approximately US$108.4 million in net proceeds from its initial public offering on December 21, 2017 [404]. - The company issued and sold convertible notes in an aggregate principal amount of US$300 million in September 2019, which were paid in full by April 2024 [405]. - The outstanding balance of funds from institutional funding partners rose from RMB100.6 billion to RMB125.6 billion (US$17.7 billion) from December 31, 2022, to December 31, 2023 [433]. Product Offerings and Market Focus - The company offers unsecured credit products with amounts ranging from RMB3,000 to RMB200,000, with interest rates starting as low as 10% [424]. - The company strategically focuses on serving young consumers aged 23 to 40, who are expected to become the primary consumption driver in the Chinese economy [412]. - Tech-empowerment services generated approximately 24% of total loan originations in 2023 [415]. Risk Management and Security - The new customer risk management system led to a 35% increase in credit approval rates and a 10% reduction in risk for new customer loans [439]. - The integration of deep learning into risk models improved identification performance by over 30% [439]. - The company issued over 75.5 million anti-fraud alerts and intercepted 210 million data security threats in 2023 [448]. Intellectual Property - The company has registered 193 patents in China and applied for 205 additional patents [459]. - The company holds 208 software copyrights and 19 copyrights for artworks with the PRC National Copyright Administration [597]. - The company has 491 registered trademarks, including key brands such as lexin.com and lexinfintech.com [597]. Regulatory Environment - The PRC Foreign Investment Law, effective January 2020, replaces previous laws and establishes a unified legal framework for foreign investment in China [464]. - The 2021 Negative List reduces restrictions on foreign investment, expanding the scope of permitted industries while maintaining limitations on value-added telecommunications services [464]. - Foreign investors in value-added telecommunications enterprises are limited to a maximum of 50% ownership, except for certain e-commerce businesses which can be 100% foreign-owned [467]. - The implementation of the Foreign Investment Security Review Mechanism began on January 18, 2021, focusing on investments in sectors related to state security [465]. Consumer Protection and Compliance - The Circular 141 outlines requirements for "cash loan" businesses, including annualized borrowing costs and strict eligibility assessments for borrowers [476]. - Violations of the Circular 141 can lead to severe penalties, including suspension of operations and revocation of licenses [478]. - The People's Bank of China requires all loan products to prominently display annualized interest rates, ensuring transparency for consumers [491]. - The PRC Consumer Rights and Interests Protection Law allows consumers to return goods purchased online within seven days without stating a reason, with platform operators required to monitor compliance [583]. Labor and Employment Regulations - Employers are required to contribute to various social security funds, including basic pension insurance and unemployment insurance, as mandated by the Social Insurance Law of the PRC [601]. - Employers must complete social security registration within 30 days of incorporation, with penalties for non-compliance ranging from one to three times the amount of payable social security premiums [601]. - The Labor Law requires employers to establish a system for occupational safety and health, ensuring employee protection and reducing work-related hazards [599]. Data Security and Cybersecurity - The Data Security Law, effective from September 1, 2021, mandates data processing to be conducted in a legitimate manner and introduces a data classification system [533]. - The Cybersecurity Law requires network operators to safeguard network security and maintain the integrity and confidentiality of network data [532]. - The PIPL mandates that personal information processing must have a clear purpose and be limited to necessary data collection [541]. Anti-Money Laundering and Financial Regulations - The PRC Anti-money Laundering Law, effective January 2007, outlines obligations for financial and non-financial institutions, including client identification and transaction reporting [559]. - The People's Bank of China released measures in April 2021 requiring financial institutions to enhance internal controls and risk management for anti-money laundering [563].

交银国际研究 公司更新 收盘价 目标价 潜在涨幅 美元 1.91 美元 2.40↓ +25.7% 金融科技 2024 年 3 月 22 日 乐信集团 (LX US) 关注风控能力和资产质量改善趋势，下调目标价 4 季度盈利低于预期。公司 2023 年归母净利润为 10.66 亿元（人民币，下 同），同比增 30%，显著低于我们和市场预期（13.4 亿元），主要由于 4 季度公司针对所持有的江西裕民银行（注册资本20亿元，公司持股20%） 计提 3 亿元减值损失；Non-GAAP 净利润 14.85 亿元，同比增长 40%，略低 于市场一致预期 1.3%，主要由于资产质量波动，拨备费用显著增长。 2024 年促成贷款规模增速放缓，公司将更侧重业务质量。4 季度促成贷款 612 亿元，同比增长 9%，环比下降 3%，2023 年全年促成贷款 2500 亿元， 同比增长 21.9%，符合公司此前指引，公司预计 2024 年促成贷款规模不低 于 2023 年。 4 季度资产质量面临压力，但 2024 年风控能力改善值得期待。4 季度公司 90 天违约率 2.9%，高于同业，环比上升 0.23 个百分点。公司新 CRO ...

LexinFintech Holdings Ltd. (NASDAQ:LX) Q4 2023 Earnings Conference Call March 20, 2024 10:00 PM ET Company Participants Mandy Dong - Director of Investor Relations Jay Xiao - Chief Executive Officer Zhanwen Qiao - Chief Risk Officer James Zheng - Chief Financial Officer Conference Call Participants Alex Ye - UBS Yada Li - CICC Yuying Zou - CLSA Operator Good day, and thank you, for standing by. Welcome to LexinFintech's Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a li ...

SHENZHEN, China, March 20, 2024 (GLOBE NEWSWIRE) -- LexinFintech Holdings Ltd. ("Lexin" or the "Company") (NASDAQ:LX), a leading technology-empowered personal financial service enabler in China, today announced its unaudited financial results for the quarter and fiscal year ended December 31, 2023. "Total loan origination for the fourth quarter reached RMB61.2 billion, with the full year figure for 2023 hitting RMB250 billion — aligning with the midpoint of the year's guidance and representing a 21.9% growt ...

LexinFintech Holdings Ltd. (NASDAQ:LX) Q3 2023 Results Conference Call November 22, 2023 9:00 PM ET Company Participants Mandy Dong - Director of Investor Relations Jay Xiao - Chief Executive Officer Jared Wu - President James Zheng - Chief Financial Officer Conference Call Participants Alex Ye - UBS Yada Li - CICC Betty Li - CLSA Operator Good day and thank you for standing by. Welcome to LexinFintech's Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A ...

LexinFintech Holdings Ltd. (NASDAQ:LX) Q2 2023 Earnings Conference Call August 29, 2023 10:00 PM ET Company Participants Mandy Dong - Director of Investor Relations Jay Xiao - Chief Executive Officer Jared Wu - President James Zheng - Chief Financial Officer Conference Call Participants Frank Zheng - Credit Suisse Alex Ye - UBS Yada Li - CICC Operator Hello, and welcome to the LexinFintech's Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the spe ...

Financial Data and Key Metrics Changes - Loan origination volume reached RMB60.9 billion, up 41% year-over-year [5] - Total outstanding balance increased to RMB107 billion, up 28% year-over-year [5] - Revenue was RMB2,980 million, up 74% year-over-year [5] - Net profit was RMB327 million, an increase of 302% year-over-year [5] - Net profit margin rose to 11.0% from 4.8% in the same quarter last year [6][19] Business Line Data and Key Metrics Changes - E-commerce business achieved RMB113 billion GMV, a 69% increase year-over-year [13] - Revenue from credit facilitation services was approximately RMB2.1 billion, representing a 136% increase year-over-year [22] - Revenue from tech-empowerment services was RMB368 million, a 10.9% decrease quarter-over-quarter [22] - Revenue from installment e-commerce platform services was RMB499 million, a decrease of 25.9% quarter-over-quarter but an increase of 56.6% year-over-year [22] Market Data and Key Metrics Changes - The weighted average APR stood at approximately 24%, close to 1 percentage point lower than a year ago [17] - 30-day plus delinquency rate improved to 4.57% from 4.62% in the previous quarter [18] - 90-day plus delinquency rate remained stable at 2.53% [18] Company Strategy and Development Direction - The company is focused on upgrading risk management capabilities and eliminating high-risk users [36] - Plans to differentiate customer acquisition through e-commerce and offline sales teams [37] - Continued investment in research and development, with R&D expenses reaching RMB130 million [11] - Emphasis on cost efficiency initiatives, with G&A expenses down 17% year-over-year [10][23] Management's Comments on Operating Environment and Future Outlook - Management noted a gradual recovery in consumer finance post-pandemic, with expectations for continued growth [5][15] - The company remains cautious about the macroeconomic environment and is monitoring consumption recovery closely [24][25] - Preliminary estimates for Q2 2023 loan volume are expected to reach RMB63 billion to RMB63.5 billion, representing a 28% to 29% growth year-over-year [25] Other Important Information - The company has a cash position of around RMB6.5 billion and a net equity position of RMB9 billion [24] - The application of AI technology has improved operational efficiency, particularly in telemarketing [12] Q&A Session Summary Question: What is the current recovery of credit demand and supply dynamics? - Management indicated an increase in loan volume and a rebound in overall demand attributed to post-COVID consumption needs and improved risk assessment capabilities [33][34] Question: What is the loan volume run rate in April and May? - Loan volume guidance for Q2 is RMB63 billion to RMB63.5 billion, with a minor decrease in demand observed in May [40] Question: What are the trends in asset quality? - Early indicators show stable asset quality, with improvements in the structure of new loans [41]

Share Ownership and Voting Power - Mr. Jay Wenjie Xiao, CEO and chairman, beneficially owns 26.7% of the total issued and outstanding ordinary shares, representing 77.2% of the total voting power as of February 28, 2023[4] - Directors and senior management collectively own 32.1% of the total issued and outstanding shares, representing 78.8% of the total voting power as of February 28, 2023[4] - K2 Partners entities own 12.1% of the total issued and outstanding ordinary shares, representing 3.8% of the total voting power as of February 28, 2023[5] Shareholder Structure - No shareholder, excluding directors, senior management, and K2 Partners entities, owns 5% or more of the total issued and outstanding ordinary shares as of February 28, 2023[6] Government Ownership - The company is not owned or controlled by any governmental entity in mainland China[6]

[Introduction](index=4&type=section&id=INTRODUCTION) [Definitions and Conventions](index=4&type=section&id=INTRODUCTION) This section defines key operational terms, clarifies the VIE corporate structure, and specifies the reporting currency and exchange rates - The company conducts its operations in China through a combination of PRC subsidiaries and **Variable Interest Entities (VIEs)**, with which it has contractual arrangements[6](index=6&type=chunk) - The reporting currency is the **Renminbi (RMB)**, with all U.S. dollar translations made at a rate of **US$1.00 = RMB6.8972** as of December 30, 2022[7](index=7&type=chunk) - Key operational terms defined include **'originations'**, **'active users'**, and **'90 days+ delinquency ratio'**[5](index=5&type=chunk) [Forward-Looking Information](index=6&type=section&id=FORWARD-LOOKING%20INFORMATION) This section outlines forward-looking statements regarding future performance and trends, noting associated risks and uncertainties - Forward-looking statements cover areas such as **company goals and strategies**, **future business development**, financial condition, and market growth expectations[9](index=9&type=chunk) - The company operates in a rapidly evolving environment, and it cautions that **actual future results may be materially different** from what is expected[10](index=10&type=chunk) [PART I](index=7&type=section&id=PART%20I) [Item 3. Key Information](index=7&type=section&id=Item%203.%20Key%20Information) This section details the company's VIE corporate structure, presents selected financial data, and outlines key associated risks [Selected Financial Data and Corporate Structure](index=7&type=section&id=A.%20Selected%20financial%20data) This sub-section explains the VIE operational structure, presents consolidating financial statements, and discusses related risks - LexinFintech is a Cayman Islands holding company operating in China through **contractual arrangements with its Variable Interest Entities (VIEs)**[12](index=12&type=chunk) VIE Revenue Contribution | Year | Revenue Contribution from VIEs (%) | | :--- | :--- | | 2020 | 99.4% | | 2021 | 97.5% | | 2022 | 94.2% | Cash and Asset Transfers (Year Ended Dec 31, 2022, RMB in thousands) | Transfer Description | Amount | | :--- | :--- | | Service fees paid by VIEs to PRC subsidiaries | 1,539,812 | | Goods/service fees received by VIEs from PRC subsidiaries | 13,004 | | Funds from parent to Cayman, BVI, and Hong Kong subsidiaries (net) | (36,817) | | Funds from Cayman, BVI, and Hong Kong subsidiaries to parent (net) | (323,446) | | Funds provided by PRC subsidiaries to VIEs (net) | (1,507,456) | | Funds provided by VIEs to PRC subsidiaries (net) | 61,831 | Condensed Consolidating Statement of Operations (Year Ended Dec 31, 2022, RMB in thousands) | Account | Parent | Other Subsidiaries | Primary Beneficiary of the VIEs | The VIEs and the VIEs' subsidiaries | Consolidated totals | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Operating revenue** | — | 161,811 | 2,036,113 | 9,298,063 | 9,865,811 | | **Gross profit** | — | 84,100 | 1,767,386 | 2,813,370 | 3,034,716 | | **Income before income tax** | 819,752 | 872,225 | 1,076,608 | 36,225 | 1,028,569 | | **Net income** | 819,752 | 872,049 | 888,094 | 22,275 | 825,929 | Condensed Consolidating Balance Sheet (As of Dec 31, 2022, RMB in thousands) | Account | Parent | Other Subsidiaries | Primary Beneficiary of the VIEs | The VIEs and the VIEs' subsidiaries | Consolidated totals | | :--- | :--- | :--- | :--- | :--- | :--- | | **TOTAL ASSETS** | 11,087,234 | 11,032,632 | 9,262,744 | 19,835,968 | 22,770,703 | | **TOTAL LIABILITIES** | 2,438,483 | 291,398 | 991,751 | 17,544,534 | 14,121,952 | | **TOTAL SHAREHOLDERS' EQUITY** | 8,648,751 | 10,741,234 | 8,270,993 | 2,291,434 | 8,648,751 | [Risk Factors](index=19&type=section&id=D.%20Risk%20Factors) This section outlines significant risks related to the VIE structure, PRC operations, business-specific challenges, and ADSs - The company's reliance on VIEs is a primary risk, as these entities **contributed 94.2% of revenue in 2022** and could be deemed non-compliant by the PRC government[60](index=60&type=chunk)[73](index=73&type=chunk) - Significant risks from PRC government oversight and **new regulations requiring CSRC filing for overseas offerings** create uncertainty for future capital raising[113](index=113&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) - There is a **risk of delisting from U.S. exchanges under the Holding Foreign Companies Accountable Act (HFCAA)** if the PCAOB cannot inspect the auditor in the future[181](index=181&type=chunk)[185](index=185&type=chunk) - Evolving PRC regulations on interest rates, including a **lowered cap for protected private lending rates**, could materially impact the business[205](index=205&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk) - The dual-class share structure gives its founder, Mr. Jay Wenjie Xiao, **77.2% of the aggregate voting power**, limiting other shareholders' influence[413](index=413&type=chunk) [Item 4. Information on the Company](index=81&type=section&id=Item%204.%20Information%20on%20the%20Company) This section details the company's business model, history, regulatory environment, and complex VIE organizational structure [History and Development of the Company](index=81&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) This sub-section outlines key corporate milestones, including its founding, IPO, convertible note issuance, and headquarters development - The company commenced its online consumer finance business, Fenqile, in **October 2013**[463](index=463&type=chunk) - On December 21, 2017, the company's ADSs began trading on Nasdaq under the symbol 'LX', raising net proceeds of approximately **US$108.4 million**[463](index=463&type=chunk) - In September 2019, the company issued **US$300 million in convertible senior notes**, which were later amended to require full repayment by April 2024[464](index=464&type=chunk) [Business Overview](index=81&type=section&id=B.%20Business%20Overview) This sub-section describes the company's credit technology services, target users, risk management, and funding model within the PRC regulatory framework - The company connects young consumers with financial institutions through a model integrating online/offline channels and **AI-driven risk management**[469](index=469&type=chunk)[471](index=471&type=chunk) - Core services include **credit facilitation**, **tech-empowerment**, and an **installment e-commerce platform**[470](index=470&type=chunk)[472](index=472&type=chunk) User Statistics as of Dec 31, 2022 | Metric | Value | | :--- | :--- | | Registered Users | 189 million | | Users with Credit Line | 40.0 million | | Cumulative Active Users | 29.4 million | - The company utilizes a proprietary **'Hawkeye' engine** for credit assessment and risk management, leveraging big data and AI[492](index=492&type=chunk) - Funding is primarily sourced from institutional partners, which accounted for **100% of newly funded loans in 2022**[489](index=489&type=chunk) - The business is subject to a wide range of PRC regulations governing **Foreign Investment (VIE structure)**, **Online Consumer Finance**, and **Data Security**[522](index=522&type=chunk) [Organizational Structure](index=123&type=section&id=C.%20Organizational%20Structure) This sub-section details the VIE corporate structure and the contractual arrangements enabling control over its PRC operating entities - LexinFintech Holdings Ltd. is a Cayman Islands holding company that controls its PRC operating entities through a **VIE structure** due to foreign investment restrictions[727](index=727&type=chunk) - The contractual arrangements are designed to provide **effective control over the VIEs** and the right to receive substantially all economic benefits[728](index=728&type=chunk) - Key agreements underpinning the VIE structure include **Exclusive Business Cooperation Agreements**, **Powers of Attorney**, and **Equity Pledge Agreements**[730](index=730&type=chunk)[732](index=732&type=chunk)[733](index=733&type=chunk)[734](index=734&type=chunk) [Item 5. Operating and Financial Review and Prospects](index=127&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) This section provides management's analysis of financial results, liquidity, capital resources, and critical accounting estimates [Operating Results](index=128&type=section&id=A.%20Operating%20Results) This sub-section analyzes financial performance from 2020-2022, detailing revenue and cost trends, and key loan performance metrics Key Operating Metrics (in RMB millions, except user numbers) | Metric | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | | Outstanding principal balance | 76,480 | 85,930 | 99,618 | | Originations | 176,679 | 213,807 | 204,585 | | Active users (thousands) | 12,927 | 14,167 | 9,694 | Consolidated Results of Operations (in RMB millions) | Metric | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | | Total operating revenue | 11,645 | 11,381 | 9,866 | | Gross profit | 3,633 | 5,749 | 3,035 | | Net income | 595 | 2,334 | 826 | - **Operating revenue decreased by 13.3% in 2022**, primarily due to lower credit facilitation and tech-empowerment service income[800](index=800&type=chunk)[801](index=801&type=chunk)[803](index=803&type=chunk) - The **90 day+ delinquency ratio increased to 2.53%** as of December 31, 2022, attributed to the negative impact of COVID-19[766](index=766&type=chunk)[770](index=770&type=chunk) - **Provision for contingent guarantee liabilities increased by 136%** in 2022 to RMB 1,468 million[806](index=806&type=chunk) [Liquidity and Capital Resources](index=146&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) This sub-section details the company's funding sources, cash position, debt obligations, and material cash requirements Cash and Cash Equivalents | As of Dec 31 | Amount (RMB millions) | | :--- | :--- | | 2020 | 1,564 | | 2021 | 2,664 | | 2022 | 1,494 | Summary of Cash Flows (Year Ended Dec 31, 2022, RMB in millions) | Activity | Amount | | :--- | :--- | | Net cash provided by operating activities | 98.8 | | Net cash used in investing activities | (2,409.0) | | Net cash provided by financing activities | 1,111.7 | - As of December 31, 2022, total **funding debts amounted to RMB 5.72 billion**[849](index=849&type=chunk)[850](index=850&type=chunk) - The company has **US$300 million in convertible senior notes outstanding**, which must be paid in full by April 2024 per a March 2023 amendment[842](index=842&type=chunk)[869](index=869&type=chunk) - **Capital expenditures for 2023 are expected to be approximately RMB 122 million**, primarily for its new headquarters[864](index=864&type=chunk) [Critical Accounting Estimates](index=153&type=section&id=E.%20Critical%20Accounting%20Estimates) This sub-section identifies key estimates requiring significant management judgment, including credit loss allowances and revenue recognition - The allowance for credit losses is a critical estimate determined using a **Current Expected Credit Losses (CECL) model**[879](index=879&type=chunk)[880](index=880&type=chunk) - The fair value of financial guarantee derivatives, a **Level 3 measurement**, is determined using a discounted cash flow model[882](index=882&type=chunk)[883](index=883&type=chunk) - **Revenue recognition for loan facilitation fees** involves significant judgment in allocating the transaction price to performance obligations[884](index=884&type=chunk)[886](index=886&type=chunk) [Item 6. Directors, Senior Management and Employees](index=155&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) This section provides information on the company's leadership, compensation, board structure, and employee composition Executive Officers and Directors | Name | Position/Title | | :--- | :--- | | Jay Wenjie Xiao | Chief Executive Officer and Chairman of the Board | | Jared Yi Wu | President and Director | | James Xigui Zheng | Chief Financial Officer and Director | | Shirley Yunwen Yang | Chief Human Resources Officer | | Jason Ming Zhao | Chief Marketing Officer | | Erwin Yong Lu | Chief Technology Officer | - For fiscal year 2022, the company paid an aggregate of approximately **RMB 26.9 million in cash to its executive officers** and RMB 1.6 million to non-executive directors[902](index=902&type=chunk) - The company has a **2017 Share Incentive Plan** allowing for the grant of options, restricted shares, and restricted share units[907](index=907&type=chunk) Employee Breakdown by Function (as of Dec 31, 2022) | Function | Number of Employees | % of Total | | :--- | :--- | :--- | | Sales and marketing | 2,514 | 64.9% | | Research and development | 602 | 15.5% | | Risk management | 387 | 10.0% | | General and administrative | 244 | 6.4% | | Installment e-commerce and Operations | 125 | 3.2% | | **Total** | **3,872** | **100%** | - As of February 28, 2023, founder Jay Wenjie Xiao beneficially owns **77.2% of the aggregate voting power** through his holdings of Class B ordinary shares[935](index=935&type=chunk)[938](index=938&type=chunk) [Item 7. Major Shareholders and Related Party Transactions](index=165&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section details transactions with major shareholders and other related parties, including entities controlled by management family members - The company operates its business through **VIEs based on a series of contractual arrangements** due to PRC laws restricting foreign ownership[942](index=942&type=chunk) - In 2022, transactions with entities controlled by an immediate family member of senior management for collection services amounted to **RMB 16.2 million**[944](index=944&type=chunk) - The company provided a loan to L.P. Technology Holdings Limited, an equity investee, with **RMB 6.6 million due** as of December 31, 2022[946](index=946&type=chunk) [Item 8. Financial Information](index=167&type=section&id=Item%208.%20Financial%20Information) This section presents the audited financial statements, discusses past legal proceedings, and outlines the company's dividend policy - Two putative federal securities class actions filed against the company in 2020 were **both dismissed by December 2021**[950](index=950&type=chunk) - The company has **no present plan to pay cash dividends** and intends to retain future earnings to operate and expand its business[952](index=952&type=chunk) - As a holding company, its ability to pay dividends is dependent on receiving dividends from its PRC subsidiaries, which is **subject to PRC laws and regulations**[952](index=952&type=chunk) [Item 10. Additional Information](index=168&type=section&id=Item%2010.%20Additional%20Information) This section provides details on corporate governance, articles of association, and material tax consequences for investors [Memorandum and Articles of Association](index=168&type=section&id=B.%20Memorandum%20and%20Articles%20of%20Association) This sub-section summarizes key provisions of the company's governing documents, including its dual-class share structure and voting rights - The company has a **dual-class share structure** where each Class A share has one vote and each Class B share has ten votes[960](index=960&type=chunk) - A **special resolution**, requiring a two-thirds majority vote, is needed for important matters like amending the articles of association[962](index=962&type=chunk) - Anti-takeover provisions include the board's authority to **issue preferred shares without shareholder approval**[974](index=974&type=chunk) [Taxation](index=173&type=section&id=E.%20Taxation) This sub-section details tax implications in the Cayman Islands, PRC, and U.S., including risks of PRC residency and PFIC classification - The Cayman Islands, where the company is incorporated, **does not levy taxes on profits, income, gains, or dividends**[991](index=991&type=chunk) - If deemed a **PRC resident enterprise**, the company could be subject to a 25% tax on its global income and a 10% withholding tax on dividends to non-resident shareholders[994](index=994&type=chunk)[996](index=996&type=chunk) - The company believes it was not a **Passive Foreign Investment Company (PFIC)** for 2022 but notes a continued decline in its ADS price increases this risk for future years[1007](index=1007&type=chunk)[1008](index=1008&type=chunk) [Item 11. Quantitative and Qualitative Disclosures about Market Risk](index=179&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the company's exposure to market risks, primarily interest rate risk and foreign exchange risk - The company's primary market risks are **interest rate risk** and **foreign exchange risk**[1026](index=1026&type=chunk)[1029](index=1029&type=chunk) - The company does not expect a material impact from interest rate fluctuations and **does not use derivatives for hedging**[1027](index=1027&type=chunk) - **Foreign exchange risk exists** as revenues are in RMB while ADSs are traded in USD, and the company does not currently hedge this risk[1029](index=1029&type=chunk) [Item 15. Controls and Procedures](index=182&type=section&id=Item%2015.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and internal control over financial reporting - Management concluded that as of December 31, 2022, the company's **disclosure controls and procedures were effective**[1038](index=1038&type=chunk) - Based on the COSO framework, management concluded that the company's **internal control over financial reporting was effective** as of December 31, 2022[1039](index=1039&type=chunk) - The independent auditor, PricewaterhouseCoopers Zhong Tian LLP, audited and **confirmed the effectiveness of the company's internal control** over financial reporting[1042](index=1042&type=chunk) [Item 16. Other Information](index=183&type=section&id=Item%2016.%20Other%20Information) This section covers accountant fees, share repurchase programs, corporate governance practices, and HFCAA compliance status Principal Accountant Fees (USD) | Fee Type | 2021 | 2022 | | :--- | :--- | :--- | | Audit fees | 2,630,602 | 2,448,442 | | Tax fees | 85,828 | 142,812 | | Other service fees | 308,285 | 125,964 | - The company announced a **US$50 million share repurchase program** in March 2022 and an additional **US$20 million program** in November 2022[1049](index=1049&type=chunk) ADS Repurchases under March 2022 Program (as of March 31, 2023) | Period | Total ADSs Purchased | | :--- | :--- | | Mar 2022 | 1,398,881 | | Apr 2022 | 4,354,136 | | May 2022 | 396,262 | | Jun 2022 | 7,075,381 | | Jul 2022 | 3,238,744 | | Aug 2022 | 1,538,277 | | Sep 2022 | 1,902,479 | | Oct 2022 | 1,871,588 | | Nov 2022 | 385,924 | | Dec 2022 | 23,146 | - As a **'controlled company'** and foreign private issuer, the company follows certain home country corporate governance practices instead of Nasdaq rules[1053](index=1053&type=chunk)[1054](index=1054&type=chunk) - The company **does not expect to be identified as a Commission-Identified Issuer** under the HFCAA for the 2022 fiscal year[1055](index=1055&type=chunk) [PART III](index=186&type=section&id=PART%20III) [Financial Statements](index=186&type=section&id=Item%2018.%20Financial%20Statements) This section contains the complete audited consolidated financial statements and accompanying notes for fiscal years 2020-2022 [Report of Independent Registered Public Accounting Firm](index=192&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) This sub-section presents the auditor's unqualified opinion on the financial statements and internal controls, noting key audit matters - The auditor, PricewaterhouseCoopers Zhong Tian LLP, issued an **unqualified opinion** on both the financial statements and the effectiveness of internal control[1072](index=1072&type=chunk) - A change in accounting principle was noted for 2020 with the adoption of the **CECL (Current Expected Credit Losses) methodology**[1072](index=1072&type=chunk)[1169](index=1169&type=chunk) - **Critical Audit Matters** identified were revenue recognition, expected credit losses, and fair value measurement of financial guarantee derivatives[1079](index=1079&type=chunk)[1084](index=1084&type=chunk)[1087](index=1087&type=chunk) [Notes to Consolidated Financial Statements](index=203&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of accounting policies, including revenue recognition, CECL, and fair value measurements - Starting in 2022, the company updated its revenue presentation to three categories: **Credit facilitation**, **Tech-empowerment**, and **Installment e-commerce**[1120](index=1120&type=chunk) - The adoption of the **CECL methodology (ASC 326)** on January 1, 2020 resulted in a cumulative-effect decrease to opening retained earnings of approximately RMB 1.9 billion[1169](index=1169&type=chunk)[1173](index=1173&type=chunk) - As of December 31, 2022, **restricted net assets amounted to RMB 5.0 billion**, representing 57.8% of consolidated net assets[1400](index=1400&type=chunk) - Total **share-based compensation expense was RMB 156.3 million** for the year 2022[1402](index=1402&type=chunk)