Lexin(US:LX)2024-08-28 06:12Financial Data and Key Metrics Changes - In Q2 2024, total GMV of loan origination reached RMB51.1 billion, with a managed loan balance of RMB115.2 billion. Revenue was RMB3.64 billion, reflecting a 12.3% quarter-over-quarter increase, while net profit was RMB230 million, up 12.4% quarter-over-quarter [6][28] - The revenue take rate of the credit business rose to 2.91%, an increase of 37 basis points quarter-over-quarter and 54 basis points year-over-year, despite a 12% quarter-over-quarter decline in loan issuances [29][46] - Funding costs decreased to 5.26%, down 58 basis points quarter-over-quarter and 131 basis points year-over-year, attributed to a relaxed monetary policy and increased demand for high-quality assets [30][48] Business Line Data and Key Metrics Changes - The e-commerce business revenue surged to RMB437 million, up 88.5% quarter-over-quarter, with gross profit rebounding to RMB14 million [33] - Technology-enabled services revenue grew to RMB535 million, up 47.9% quarter-over-quarter, driven by increased GMV in risk-free loans and higher revenue share [34] Market Data and Key Metrics Changes - The overseas business segment, particularly in Mexico, saw loan origination volume increase by 61% and revenue grow by 113% quarter-over-quarter [12] - The risk-free segment of new loans increased from 23% in Q1 to 27.2% in Q2, indicating a growing demand for high-quality assets [31] Company Strategy and Development Direction - The company plans to continue a prudent strategy focusing on risk management while promoting steady growth in scale and enhancing customer acquisition efforts [16][18] - There is an emphasis on leveraging high-frequency consumption scenarios in e-commerce to boost user engagement and retention [17] - The company aims to actively pursue overseas market expansion, particularly in emerging markets, while optimizing asset structure and improving profitability [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the sluggish macroeconomic recovery and low consumer confidence, which influenced their cautious operating strategy [28] - The company anticipates that improvements in risk management capabilities will gradually enhance profitability in the future [11][52] Other Important Information - The company invested RMB143 million in research and development, focusing on AI large models to improve operational efficiency [13] - A cash dividend of approximately US$0.072 per ADS was approved, representing about 20% of total net profit for the first half of 2024 [36] Q&A Session Summary Question: Details on overseas expansion and profitability timeline - Management noted that the overseas business is growing rapidly, with loan origination in Q2 increasing by 60.8%. However, it will take time and investment to scale up and achieve profitability [40][42] Question: Increase in sales and marketing expenses - Management clarified that the increase in expenses is primarily due to investments in overseas markets, while domestic customer acquisition costs remain stable [40][44] Question: Factors driving revenue take rate increase - The significant rise in revenue take rate was attributed to improved operational efficiency, tightened risk standards, and reduced funding costs [46][47] Question: Measures taken to reduce funding costs - Funding costs decreased due to overall market liquidity, high demand for quality assets, and successful ABS issuances [48][49] Question: Expectations for asset quality improvement - Management expects gradual improvements in profitability as risk management upgrades continue, with a focus on leading risk indicators rather than lagging ones like the 90-days delinquency rate [50][53]