Lexin(LX) - 2025 Q1 - Quarterly Report

Company Overview and Management Commentary 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 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] - 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] - 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] CFO Remarks 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] - 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] About LexinFintech Holdings Ltd. 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] - 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] - The company also provides cutting-edge proprietary technology solutions to financial institutions for their digital transformation needs[36] First Quarter 2025 Operational Highlights 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 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 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 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 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] - The retention rate for commercial clients of tech-empowerment services exceeded 80%[12] Installment E-commerce Platform Service 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 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 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) 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 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 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 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 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 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 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 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] - 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][32] Business Outlook 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][9] - Full-year 2025 net income is expected to achieve significant year-over-year growth, primarily driven by continuous improvement in asset quality[33] - This forecast is subject to macroeconomic factors, and the company will adjust its outlook as circumstances evolve[33] Non-GAAP Financial Measures 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 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][39] - 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] - 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][40] Unaudited Reconciliations of GAAP and Non-GAAP Results 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 This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and comprehensive income, for Q1 2025 Balance Sheets 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 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 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 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 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][58] Dpd30+/GMV by Performance Windows 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][60] First Payment Default 30+ 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] - Loans under the Intelligent Credit Platform (ICP) are not included in this chart's calculation[63] Disclosures and Contact Information 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 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] - The company does not guarantee that RMB or USD amounts could be converted at any particular rate[42] Safe Harbor Statement 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] - 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] - The company undertakes no obligation to update any forward-looking statement, except as required by applicable law[44] Investor and Media Inquiries 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] - Media Inquiries Contact: Ruifeng Xu, Phone: +86 (755) 3637-8888 ext. 6993, Email: media@lexin.com[45]