Lexin released Q1 financial report: revenue of 3.24 billion increased by nearly 10% year-on-year, and continuous technology investment drives intelligent business development

On May 24, Beijing time, Lexin (NASDAQ: LX), China's leading new consumer digital technology service provider, announced unaudited financial results for the first quarter of 2024. Lexin adheres to the two-wheel drive of risk and data, manages prudently, balances scale and quality, and achieves steady development: revenue for the first quarter was 3.24 billion yuan, an increase of 8.7% over the previous year.

In terms of scale, the transaction volume was 58 billion yuan; the balance of loans under management was 121.51 billion yuan, up 13.5% year on year; number of users was 215 million, up 10.8% year on year.

In terms of asset quality, the Low&Grow newcomer risk management system was launched, the disposal and recovery of stock risk assets was strengthened, and efforts were made to reduce the impact of the macro environment and industry risk cycle. During the quarter, the asset quality of new customers gradually improved. The credit approval rate for new customers increased by more than 30%, the concentration of trustworthy customers increased from 24% in January to 40% in March, and the early risk index FPD30 for new customer assets continued to decline.

In terms of financial cooperation, a number of large national financial institutions were introduced during the quarter, and their share of capital was further increased, driving capital costs down 34 bps month-on-month, to another record low. As capital costs decreased, first-quarter profit (non-GAAP EBIT) was 282 million yuan. In May, the company issued the first international 3A rated ABS, which will further drive the continuous reduction of capital costs in the future.

Lexin CEO Xiao Wenjie said, “In the first quarter, we managed prudently and consolidated our underlying capabilities through four measures, including strict risk control, refined operation by customer base, and reduction of capital costs. We achieved steady development in the context of macroeconomic and industry challenges. Looking ahead to the second quarter, we will continue to uphold the principles of prudent management, prioritize risk management, continue to improve profitability, and achieve higher quality development.”

In the first quarter, Lexin's ecological businesses such as the Installed Lexin Mall and Lexin Inclusive developed steadily to jointly help increase consumption and promote financial inclusion.

During the quarter, sales of more than 450 brands in the Instalment Mall increased by more than 50% year-on-year. Focusing on the needs of high-quality and high-growth consumers such as the post-90s and post-95, Phased Shopping Mall optimizes the product supply chain, focuses on creating trendy instalment experiences in terms of merchant introduction and category operation, stimulates the consumption potential of young consumers, and uses practical actions to help grow consumption. In advantageous categories such as 3C digital, Instalment Mall continues to consolidate the highest level of licensing for Apple T1 and Huawei L1, maintaining the advantages of scarce supplies and first-batch supplies. During the May 1st period, the sales volume of the newly launched Huawei Pura 70 on the mall increased by 534% compared to the previous generation product, the Huawei P60. In addition to the dominant categories, sales of outdoor footwear, sports and sports categories increased 108% and 554% year-on-year respectively during the quarter in response to the current popularity of city walks, urban micro-travel, and urban micro-travel, which are popular among young people. In response to fashion trends favored by young people, such as Guochao and New Chinese, the sales volume of several trendy domestic brands doubled during the quarter.

During the quarter, Lexin's inclusive business penetrated into the industrial belt of low-tier cities, strengthened the management of high-quality customer groups, and launched product turnover to serve high-quality small and micro customer groups, providing financial services with larger quotas and lower interest rates for high-quality small and micro customer groups with lower risk and strong capital turnover requirements. Compared to Tier 1 and 2 cities, financial services in low-tier cities are still insufficient, and the last mile of finance still needs more innovative forms of financial clean-up. By covering 30 provinces, municipalities, autonomous regions, and more than 2,000 direct offline customer acquisition teams, Lexin Inclusive cities went deep into the low-tier city industrial belt, focusing on serving small and micro industries, individual businesses, and high-quality wage groups. During the quarter, Lexin Inclusive Link loans amounted to nearly 4 billion yuan for various customer groups to help the local economy and inclusive finance development.

In April of this year, taking the opportunity of Lexin becoming an official partner of the China National Fencing Team, the company launched the “Trust in Power and Help Struggle” program, which continues to increase in terms of inclusive finance and boosting consumption: it plans to link more than 20 billion yuan of funds to help small, small and micro industries develop small, small and micro; launch a “1 billion interest-free dream building fund” to help young graduates pursue their dreams; and join forces with merchants in the Instalment Mall to create a product category with sales exceeding 10 million in multiple months to tap the potential consumer needs of young consumers and drive consumption growth.

According to financial reports, Lexin invested 130 million yuan in R&D in the first quarter. During the quarter, Lexin further consolidated its underlying capabilities such as data and risk control, built new financial productivity through the application of new technologies such as big models and AI in the entire digital finance chain, and drove enterprises to develop in the direction of digital intelligence driven by data driven and intelligent decision-making.

In terms of data capabilities, in the first quarter, Lexin's self-developed large model accelerated implementation in combination with business, and improved work efficiency and customer experience. At the level of business interaction, real-time intent recognition technology for large models was introduced during the quarter. Through customer service and sales scenario data accumulated by the company over many years, learn, train, and improve the accuracy of customer intent recognition of large models, tailor personalized solutions for customers in customer service and e-commerce scenarios, and greatly improve customer satisfaction. At the level of productivity improvement, large models are thoroughly applied in R&D code assistance scenarios, and more than 40,000 code improvement suggestions have been output, helping to improve R&D efficiency by 40%. At the core level of risk control, through continuous training, the ability of large models to automatically analyze and identify information such as users' industries and repayment intentions has improved, with an accuracy rate of over 70%, effectively helping the refined operation of customer groups.

In terms of risk control capabilities, through the development of automated negative disposal tools during the quarter, strategic output efficiency was shortened from weekly level to hourly level, strategy iteration efficiency was shortened from monthly level to weekly level, and the efficiency and quality of final asset disposal improved markedly. For new assets, the Low & Grow new customer risk management system was implemented, and the competitiveness of leading customer groups was enhanced through launch pricing tests and the establishment of a causal inference model; for high-quality potential customers who have been lost or not converted, targeted re-offer recalls are carried out to increase the proportion of high-quality assets. Through risk control measures targeting stock and new assets, the asset quality of Lexin's new customers gradually improved in the first quarter. The credit acceptance rate for new customers increased by more than 30%, and the concentration of customers with good credit increased from 24% in January to 40% in March; FPD30, an early risk index for new customer assets, continued to decline.

In terms of consumer rights protection, Lexin continued to improve customer service quality through a number of company-level projects during the quarter: continuously strengthening the construction and implementation of consumer insurance systems, improving consumer insurance review mechanisms, strengthening the ability to control the entire consumer insurance process before, during, and after; using big data and AI technology to dig deeper into customer service difficulties and pain points, and work with the business system to jointly improve service quality; open up underlying data, restructure customer service systems, and improve customer service efficiency and experience. During the quarter, Lexin helped police in many places uncover anti-collection organization cases and crack down on financial fraud through police and enterprise collaboration. Recently, the China Financial Supervisory Administration issued a “Reminder on Being Wary of the Risks of “Proxy Rights Protection” involving the financial sector, once again stating that financial fraud such as illegal proxy rights protection causes serious damage to financial security and social stability. In the future, Lexin will continue to cooperate with regulators, police, etc. to continue to crack down on financial fraud and protect the rights and interests of financial consumers.