LexinFintech Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 23, 2023

Key Takeaways

  • In Q1 2023, LISN Fintech achieved loan originations of RMB 60.9 billion (+41% YoY), revenue of RMB 2.98 billion (+74% YoY) and net profit of RMB 327 million (+302% YoY), lifting net margin to 11%.
  • The company overhauled its risk management system, upgrading user assessment and risk branding models, which raised prime user originations to 88% (from 77%) and improved delinquency metrics.
  • Operational refinements—advanced customer segmentation and a new telemarketing decision tree—drove telemarketing loan volume up 92% sequentially while cutting cost per sale by 49% and saving 23% of annual telemarketing spend.
  • Cost efficiency measures led to a 17% YoY reduction in G&A expenses, funding cost hit a 3-year low at 6.6%, and R&D investment stayed high at RMB 130 million to bolster AI and data-driven tools.
  • For Q2 2023, management guides loan originations of RMB 63–63.5 billion (+28–29% YoY), maintaining a prudent stance as China’s consumption recovery remains gradual.
AI Generated. May Contain Errors.
Earnings Conference Call
LexinFintech Q1 2023
00:00 / 00:00

There are 6 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the LISN Fintech First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Ms.

Operator

Jamie Wang, IR Manager. Please go ahead, ma'am.

Speaker 1

Thank you. Hello, everyone. Welcome to Loxing's Q1 2023 earnings conference call. With us today on the line today are CEO, Jay Xiao President, Jared Wu and CFO, James Zheng. Before we get started, I'd like to remind you that the call and presentation containing business outlook and forward looking statements, which are based on assumptions as of today.

Speaker 1

Actual results may differ materially, and we undertake no obligation to update any forward looking statements. Jay will first provide an update on our overall performance. James will cover the financial results in more detail. And lastly, Jared will then discuss risk management. I'll now turn the call over to Jay.

Speaker 1

His remarks will be in Chinese and the English translation will follow. Jay, please. Good morning and evening, everyone. It's my pleasure to speak with all of you again. In the Q1, with the gradual recovery of consumption post pandemic and the continued improvement of the overall macro environment, consumer finance started its moderate growth.

Speaker 1

As we've maintained growth through a 2 wheel drive strategy, risk upgrading and data driven optimization, we achieved another quarter of strong results.

Speaker 2

RMB60.9

Speaker 1

billion in loan originations volume, up 41 percent year over year. Total outstanding balance at RMB107 1,000,000,000, up 28.0 percent year over year. Revenue at RMB2980 million, up 74.0 percent year over year Net profit of RMB327 1,000,000, an increase of 302.0 percent year over year. As demonstrated by the Q1 results, our profitability has continued to improve, with net profit margin rising to 11.0% from 4.8% in the Q1 of last year and has grown steadily for the 4th consecutive quarters and various operating indicators are moving in a positive direction. Let me elaborate in more detail.

Speaker 1

There were 3 major operational highlights in the Q1. 1st, as we enhanced our user risk assessment capabilities, we accelerated our pace in reducing high risk user segments and therefore improved the overall asset quality. 2nd, we continue to refine operations and further optimize operational efficiency. 3rd, we have been implementing cost efficiency initiatives. As a result, our profitability has been steadily rebounding.

Speaker 1

First, in terms of asset quality, we further pushed ahead on overhauling our risk management system, focused on maintenance and operation of high quality existing customers and gradually eliminated more high risk users. We have iterated and upgraded the user assessment system, the risk branding model, which automatically integrates a variety of risk models along with the combination of multidimensional risk factors into an overall user risk assessment scheme. These upgrades help us to conduct more comprehensive risk assessments and therefore make more accurate decisions on users. After being put into use, the new loan volume in the Q1 contributed by Prime users increased to 88 0.0% from 77.0 percent a year ago. 2nd, in terms of operational optimization, we upgraded our marketing system and segmented our user into more detailed and various categories.

Speaker 1

Based on the underlying customer tagging system and over 10 evaluation models of users borrowing willingness, marketing preferences, responsiveness, offer set expression and etcetera. For some certain customer groups, the application of new detailed separation of user segment model pushed up the operating profit of that specific customer group by 70.0%. On this basis, we sorted out a marketing strategy decision tree structure and launched marketing strategies accordingly, which significantly boosted users' activities. Under this new optimized operational system, in the Q1, our telemarketing capabilities have been significantly strengthened and the loan volume contributed by the telemarketing channel grew by 92.0% sequentially. At the same time, the cost significantly decreased in the quarter, but telemarketing cost per sale fell 49% year over year, we expect it to save 23.0 percent of the original annual telemarketing cost.

Speaker 1

In front of reactivating paid off customers, the conversion rate increased 15.0% quarter over quarter. Loan volume from those converted customers grew 15.0% quarter over quarter. Additionally, these results were achieved with half of the marketing cost. 3rd, we have enhanced our profitability attributing to our continuous efforts in cost optimization initiatives and a further reduction in financing costs. In the Q1 of 20.3, G and A expenses stood at RMB97 1,000,000, a 17.0 percent decrease from a year ago.

Speaker 1

This is a clear indication of our improved operational efficiency. Funding costs further dropped to 6.6%, which is 0.2 percentage point lower than last quarter and 1.6 percentage point lower from a year ago. It's worth noting that this is a historic low of funding costs during the past 3 years. In April, we successfully resumed our Annual Financial Partners Conference, which got suspended during the 3 year pandemic period. In the conference, we were very honored to have over 100 financial institutional partners with whom we will surely strengthen our business cooperation in the future.

Speaker 1

We remain committed to investments in research and development as we firmly believe in technology is the core engine of our business growth. In the Q1 of 2023, research and development investment reached RMB130 1,000,000, maintaining one of the highest technology input levels amongst our peers. On the data front, we have put tremendous effort in data mining and analysis of our entire data. Accordingly, we're able to find links and correlations amongst various data sets and links between low level fundamental datasets and business models are the solid foundation of Lexin's data driven and intelligent decision making approach. Furthermore, we developed simulation predicting model, attribution model of abnormalities, AB testing platform and etcetera.

Speaker 1

AutoGrid empowers management to steer business in a more data driven and intelligent manner. We have been continuously exploring the utilization of new technologies in optimizing operation efficiency and users' experience. In the Q1 of 2023, we expanded the application of our AI large language model in our business at a faster pace. We saw a noticeable improvement in efficiency among the application areas, including coding assistant tools, initiatives of designs, telemarketing and smart customer services. For example, the application of this AI model in our telemarketing scenario pushed up credit line approval rate by 70% versus the technology service supplied by vendors and also boosted order placing rates on the exact date that borrowers are granted with credit line by 10%.

Speaker 1

Looking ahead, we'll also comprehensively apply the model to the areas of risk management, antitrust and etcetera. In addition, we further enhanced our existing unique Lexin ecosystem.

Operator

First,

Speaker 1

e commerce business reached RMB1.13 billion, an increase of 69.0 percent from last year. Cumulative customers grew by 71 point 0% compared to last year. The robust growth of GMV and users in e commerce business effectively filled the engine of consumption

Speaker 3

ecosystem.

Speaker 1

2nd, the technology impairment SaaS business achieved tangible progress, therefore, won the recognition from various financial partners, including local commercial banks with AUM over RMB1 1,000,000,000,000, regional urban and rural banks. The technology impairment service facilitates our cooperation with financial partners and deepens our business relations. 3rd, we plan to expand our offline sales team and leverage our expertise in direct sales channels in light of the gradual recovery of China's economic activities. Our offline acquisition channels bring more first hand user information, hence, more accurate credit assessment and eventually creating a unique competitive advantage. The strong results in the Q1 were mainly attributable to our risk management capabilities upgrading in customer risk assessment and therefore the improvement in customer and asset quality.

Speaker 1

It is also due to our continued refining of operations and cost reduction initiatives. As of the as for the Q2, we understand the economic recovery and resuming consumption is a long process.

Operator

We will continue to undertake a more prudent approach.

Speaker 1

Based on our preliminary affirmations, loan volume in the second quarter is expected to reach RMB 63 to RMB63.5 billion, a 28% to 29% growth year over year. Next, I'll hand over the call to our CFO, James, to share more detailed financials. Thank you.

Speaker 3

Thank you, Jay. I will now provide more details on our financial results. Please note that all numbers are in RMB unless otherwise stated. In the Q1, we continued our 4th consecutive quarters of recovery, both in our overall business and in our financial numbers. We expected this trajectory of turnaround to continue in light of the rebound of China's economy and our dedicated efforts in optimizing operations.

Speaker 3

The strong performance in the Q1 was a result of the management's continuous efforts in overhauling our risk management, focusing on better quality user segments, upgrading our technology and operational capabilities as well as our new cost restructuring initiatives. First, please let me explain at a high level what happened in the quarter as compared with the same quarter of 2022. The loan originations for the quarter reached RMB60.9 billion, an increase of 41% year over year, beating Q1 guidance we gave earlier. Revenue grew by 74.2% year over year to reach around RMB3.0 billion for the quarter, which was mainly driven by the GMV growth and an increased loan balance, which reached RMB107 1,000,000,000. The weighted average APR stood at approximately a little over 24% for the 5th quarter, close to around 1% points lower than a year ago.

Speaker 3

Loans with APR under 24% now make up more than 80% of all loans, Partially offsetting the negative impact from the lower APRs on our loans was a decrease in our cost of funding from 8.2% a year ago to 6.6% in Q1. It's worth noting that this is a historical low of funding cost during the past 3 years. Loan tenors increased to 15.1 months versus 12.3 months a year ago. As we emphasized last quarter, overhauling risk management remains our top strategy for the year. We continue to focus on upgrading to better credit user segments and rebuilding the risk team, the systems and the process and the infrastructure.

Speaker 3

Jared will elaborate more on this shortly. The improved results from our efforts can be partially seen in our 30 day plus delinquency rate, which improved to 4.57% in the Q1 as compared to 4.62% in the Q4 of last year. The 90 day plus delinquency rate stood at 2.53%, basically remaining stable as compared to the previous quarter. This was due to 90 day plus digit frequency rate metric is a more lagging indicator than 30 day plus metric. In Q1, we have been pushing ahead a series of cost restructuring initiatives that we launched last year.

Speaker 3

We have seen some further improvements to operating expenses. Total operating related costs and expenses, including processing and serving costs, sales and marketing, R and D and G and A, as a percentage of average loan balance stood at 1.16% versus 1.28% in Q1 of last year. This cost optimization happened despite of a slight pickup of sales and marketing expenses, while G and A, R and D and the processing and servicing costs all came down. We will remain committed to undertaking these cost restructuring initiatives and expect our efforts to bear more fruit in the long run. As a result of the aforementioned, we are able to report net income of RMB327 1,000,000, an increase of 302% year over year.

Speaker 3

The net margin improved to 11% versus 4.8% in Q1 last year. This clearly presents a steady upward trajectory of our operation result with each quarter improving over a year ago. Apart from the above year over year analysis, I would also like to elaborate a little bit more on the progress achieved through quarterly comparisons. Total GMV was RMB 60 point 9,000,000,000, an increase of 8.7 percent quarter over quarter as we grew the business with prudent approach and put risk management as a top priority. In the Q1, we saw the GMV on our e commerce platform came down slightly from boosted high level during single days shopping festival in Q4 last year.

Speaker 3

If we carve out the revenue from e commerce business, total Q1 revenue grew by 4.5 percent quarter over quarter. Considering impact of e commerce business seasonality, total revenue for the whole group stayed at about RMB3 1,000,000,000, almost flat on quarter over quarter basis. Take rate fell slightly to 2.5% from 2.6% last quarter. The minor fluctuation in take rate is a blended result of the more booking of provision due to longer tenor loans and the continuous improvement in asset quality and the reduction in funding costs. Operating expenses stayed almost flat by a minor 1.6% increase quarter over quarter, attributing to pickup of sales and marketing related costs in user growth.

Speaker 3

As a result of aforementioned, we achieved a sequential growth in the net income of 8.7% and a boosted net margin to 11% from 9.9% in last quarter. To summarize, we have delivered a noticeable improvement during the Q1 from both a year over year and a quarter over quarter perspective. This marks the 4th consecutive quarter of V shaped recovery, both in top line and bottom line since we hit the lowest point of operational results in Q1 last year. As we mentioned last quarter, although we are fully aware, we have a long way ahead in our turnaround. The year of 2023 unfolds with a good start, indicating we're well on track.

Speaker 3

Next, let's take a detailed look at the financials. As mentioned, our total operating revenue for the Q1 was CNY3 1,000,000,000, representing a decrease of 2.2 percent quarter over quarter due to seasonality of e commerce business and an increase of 74.2 percent year over year, mainly driven by the credit facilitation services and the e commerce business. Revenue from credit facilitation service was approximately RMB2.1 billion, representing a 7.8% increase quarter over quarter and a 136% increase year over year, which is driven by the GMV growth. Revenue from tech empowerment service was RMB368 1,000,000, representing 10.9% decrease quarter over quarter and a 26% decrease year over year, which was primarily due to the change of product mix among various tech empowerment services. Revenue from installment e commerce platform service was 499,000,000 representing a decrease of 25.9 percent from the last quarter and an increase of 56.6% year over year, which is due to seasonality of e commerce business.

Speaker 3

Moving on to the expense side of the quarter. Sales and marketing expense increased by 4% quarter over quarter, which was mainly due to our stepped up investment in acquiring better quality users. Our goal is to upgrade to better quality customer groups and obtain higher LTV. While we are taking a prudent new acquisition strategy now, we will keep on closely monitoring macro data as China's economy is gradually recovering and sees the growth opportunity when the right timing comes. Research and development expenses decreased by 4.5 percent quarter over quarter and it decreased 15.1% year over year to RMB129 1,000,000 due to efficiencies.

Speaker 3

G and A expense stayed almost flat on a quarterly basis and a decrease of 17% year over year to RMB97 1,000,000. It's a noticeable cost efficiency achievement that G and A expense remained at almost the same level on a quarter over quarter basis, while our top line GMV maintained an upward momentum due to a series of costs in the initiatives. Going forward, we plan to step up efforts in this regard. Net profit was approximately CNY327 1,000,000 in the first quarter, a 8.7% increase quarter over quarter and a 302% increase year over year, which beat high end of our initial expectations. At the end of the Q1, the company had a cash position of around RMB6.5 billion on hand and a net equity position of RMB9 1,000,000,000.

Speaker 3

Finally, I would like to discuss our outlook for the Q2 of 2023. As we know, economic and consumption recovery usually will take time, as evidenced by the ongoing current quarter's modest growth. Therefore, we remain cautious and are monitoring closely on the overall macro and consumption outlook. Based on the company's preliminary assessment of the current market conditions, total loan originations for the Q2 of 2023 are expected to be around RMB63,000,000,000 to RMB63,500,000,000, representing an increase of 28% to 29% on a year over year basis. These estimates reflect the company's current expectations, which is subject to change.

Speaker 3

The strong results of Q1 demonstrates clearly that our turnaround is well underway. In the long run, our dedicated efforts in risk management, cost initiatives as well as new user acquisitions will establish solid foundations for our long term goal of sustainable growth. With that, I would like to turn the call over to our President, Jared Wu, who will discuss our risk management. Jared, please go ahead.

Speaker 1

Thank you, James. Good morning and good evening, everyone. It's my pleasure to speak with all of you again. Next, I'd like to elaborate a bit more regarding our risk management measures and improvements for the past quarter. Ever since the beginning of the year 2023, we saw a gradual recovery of China's economy.

Speaker 1

Accordingly, at the company level, we continue to implement our unwavering focus on risk management and the continuation of a prudent risk management and customer acquisition approach. In addition, we have been allocating more resources and putting more effort to better serve and favor our prime customers. In terms of our risk modeling, we have been continuously iterating our top four models and enhancing our risk user risk assessment capability. In the Q1 of 2023, the day 1 delinquency continued to drop and overall asset quality got improved, with 30 plus day delinquencies down 5 bps quarter over quarter at 4.57% and 95 day delinquency being the 4 lagged indicator standing unchanged sequentially at 2.53% as of the end of the first quarter. Currently, as business and daily life of people continue to normalize and consumer confidence being gradually restored, we will continue to hold risk management as one of the top priorities in business operations and we expect the overall asset quality to continue to maintain a positive upward momentum.

Speaker 1

In the Q1, increasing the proportion of prime customers remains our most crucial objective. Thus, we continue to work on upgrading our risk management system, including the following key initiatives. 1st, we continue to iterate and upgrade our risk management system under the business strategy of risk driving operations. It improves the granularity and the overall efficiency of risk management, further refining our customer segment and increasing the depth and width of our user identification capabilities, while continuing to reduce high risk customers and optimize our asset structure. 2nd, we put heavy emphasis on investing in the coverage of PBOC credit data and strengthen the utilization of credit data.

Speaker 1

In the meantime, we continue to introduce more compliance data sources combined with the thorough usage of internal consumption behavior data to ensure that we can identify customer credit profile more accurately by further refined customer segmentation accordingly. 3rd, we continue to iterate and upgrade model metrics for different customer segments and our ability to assess customer credit profile has also got further improved, which is the most essential pillar for us to increase the proportion of client customers and will be one of the most key projects in which we continue to invest. We believe that in the remainder of 2023, we will make more breakthroughs in our user 2023 is a year of economic recovery in China. We are committed to upgrading our core risk management capabilities and accelerating the strengthening of our refined risk management system. As Jay and James mentioned earlier, we maintain a cautious view of the macroeconomic environment, adhering to the principle of risk driven, monitor the market externally and build capacities internally.

Speaker 1

Above all, we firmly believe that with a first vision in mind and a solid infrastructure, we can continuously generate sustainable long term returns for all shareholders. Thanks. This concludes our prepared remarks. Operator, we're now ready to take questions.

Operator

Thank you. We will now begin the question and answer session. Our first question comes from the line of Frank Chen from Credit Suisse. Please ask your question, Frank.

Speaker 4

Thank you, management for taking my questions. This is Frank from Credit Suisse. My first question is regarding the supply and demand dynamics most recently. In the Q1 and Q2 to date, how would you describe the recovery of credit demand? And on the supply side, is there any change in terms of appetite?

Speaker 4

On the other hand, could the management provide some more color on the strategic or operational focus for the rest of the year?

Speaker 1

Okay. So I'll do the translation. Thank you, Frank. In terms of demand side, as you can see from our Q1's results, our overall loan volume have increased and we actually saw the rebound of the overall demand in the Q1. It was mainly attributed by a couple of factors.

Speaker 1

The first one was the COVID and the lockdown quarantine being over, there was a spike in consumption needs and also the overall recovery. 2nd, it was mainly due to our refined operations as well as the capabilities in risk assessment being increased, we were able to better recognize customers to better serve the right customers and the good existing customers. Since then, most of you already knew that we have a very large existing customer pool With our improved risk assessment capabilities, we are able to better pick them out and better explore their value from the existing customers. And as of right now, in the Q2 of 2023, we are as we can see the data right now, the trend is still stable. But as the spring breaks by past, the demand has been slowing down a little bit, but the trend of increasing is still remaining relatively strong.

Speaker 1

And in that sense, we also have different products. We have our own legal system. We have the e commerce, a very special consumption scenario. When the lending need is relatively not as strong as the previous quarter, we have another option to create demand, which is the product discount on products to attract our customers, whether it's new, whether it's existing ones, to make consumptions and to create demand. So the Q2 as of right now, we are preparing the 6/18 festival, which would be a great opportunity to generate more demand, thanks to our unique ecosystem.

Speaker 1

But when it comes to the funding cost side, I'd say the supply is still relatively strong and positioned right now. Based on the current national situation right now from our funding partners, they have limited options to really invest in. And after 10 years, our risk level and our capabilities in risk management are recognized and approved by them. And also, as you might know already, we had this cooperation conference day with our funding partners and all of them showed the willingness to make the cooperation deeper. And also, as you can see, our funding costs actually lowered in the Q1 and the overall supply is still relatively strong.

Speaker 1

I hope that answers your question, Frank.

Operator

Thank you.

Speaker 1

Okay. In terms of our key strategies, there are 4 main ones. The first one is the risk management capability upgrading. We have been undergoing to undergoing certain strategies to upgrade our asset structure and to lower risk level. We are preparing the risk management 2.0 system and when it's ready, it will be we will get the upgrade in capabilities in risk management.

Speaker 1

Hence, we are actually doing it step by step to adjust and to operate when it's ready. Our capabilities in risk management and identifying user risk will be significantly upgraded. And also, we continue to do the elimination of high risk users and we are in the progress of making it a common operational thing to do the routine elimination of the high risk users. Secondly, we'll try to continue to differentiate ourselves from others in customer acquisition. Like I said earlier, we have different scenarios like e commerce scenario and we have a very strong offline Puhui team.

Speaker 1

These are the advantages that will help us to strengthen our own capabilities. And third, we'll continue to do the refined operations to further increase the customers' LTV as well as the operational efficiency. Forces will continue to go through undergo the cost efficiency initiative. As you can see, in the Q1, it shows some prominent results. The percentage of our operational costs over the outstanding loan balance actually decreased and our net margin increased to 11%.

Speaker 1

And for the rest of the year, we aim to continue to increase our own profitability. That answers your question, Frank.

Operator

Right. Thank you. Our next question comes from the line of Alex Ye from UBS. Please go ahead, Alex.

Speaker 2

So I'll translate for my question. First is on the loan volume run rate in April May. Could you share with us how has the sequential move plan seen so far? And how does the growth you have seen now compared to your previous expectation? Second question is on your asset equity trend.

Speaker 2

Could you share with us some of the early asset equity indicators, the trend in April May? And do we expect further improvement from here? Thank you.

Speaker 1

So as you heard already, for the 2nd quarter, our guidance for the loan volume was RMB 63,000,000 to RMB 63,500,000,000. But I could share some month over month in the Q1 results with you. The numbers of application wise, there was a minor peak in volume after the Chinese New Year. In the month of February, it showed 8.0% increase quarter over quarter. For the month of March, it showed 2% month over month.

Speaker 1

And as of now, May, we are seeing a minor decrease in the amount month over month as the COVID passed and the spike kind of slowed down a little bit. We're seeing a little bit slowdown in demanding a bit entering the Q2, but it's still in line with our management team's expectation. Okay. In terms of risk, we are seeing the 1st quarter's risk being stable stably decreased. And for the Q2 as of right now, certain early indicators is stable right now.

Speaker 1

But from the new loan perspective, the structure the overall structure is actually better, whether it's the RR123 the percentage of RR123 being increased, the R68 percentage being decreased from the new loan perspective, they are overall better. And with the monthly new loan structure being continually improved, our overall risk level will be improved in the future with and there are still some optimizing rooms when it comes to overall risk level. Hope that answers your question, Alex.

Operator

Right. Thank you. Our next question comes from the line of Yada Lee from CICC. Please go ahead, Yada.

Speaker 5

Hello management. This is Yada from CICC. And my first question is regarding the choice of the lending model. And could you please give us more color on the trend of the credit facilitation and risk sharing model or tech empowerment services in the future? And will there be any plans to increase the on balance facilitation?

Speaker 5

Secondly, I was wondering about the recent updates and outlook of Fenqile and other new consumption business. That's all. Thank you.

Speaker 3

So I will take a crack at the first part of the question and Jay will answer the second part of your question. The first part of the question is related to risk taking and profitability. Obviously, at the company level, we always try to achieve the balance. Obviously, it makes sense that if risks improve, then I want to do a little bit more so that I increase the profitability. If somehow the risk is worsening, obviously, I don't want to do more, right?

Speaker 3

I want to do less so that I can retain my profitability. So that has been our kind of attitude. Resulted out of this basically is reflected here in terms of the proportion of the business where we take risks that is in the loan facilitation business and in rev share business reflected in our tech empowerment part of the business. Right now, the rev share business, basically, we don't take much risks in this part. It accounts for roughly 26% or so.

Speaker 3

And in the last year, several quarters, has been hovering between, say, 20% to 30% also. So we are watching very closely of the overall macroeconomic data and our overall risk indicators. If the overall macro data continue to improve and our asset quality continue to improve, obviously, the overall credit situation is improving, then it doesn't preclude us from really taking a bit more risks so that we increase the overall profitability for the company. So basically, that's our kind of thinking, if you will, to run the business. Now, Jay, for the second part of the question.

Speaker 1

Okay. So as you know, we have our own listing ecosystem. E commerce wise, the overall increase has been very strong, especially with other e commerce peers or others in the industry being in the very heavy competition. As you can as I shared already, in the Q1, not only the volume in GMV increased year over year, but also the revenue as well as the customer cumulative trading customers. They are only larger than our main business or other business within the company.

Speaker 1

They are exponentially actually larger than the overall increased speed in the industry. So the customer that we serve in our e commerce areas are mostly customers with actually credit consumption needs. Under the current situation right now, the overall macro economy and environment with our requirements being a little bit higher, the requirements being a little bit higher actually gives the e commerce sector a bit more opportunity to increase and expand a little. Furthermore, e commerce could actually help us with the customer acquisition and as well as the customer retention with our main business, which is our loan facilitation business in the future. Next is our offline Puhui team.

Speaker 1

Our offline Puhui team mainly relies on the offline BT operations, which right now the economy being resumed, being in recovery. The team actually helps with customer acquisition costs and as well as risk level. We can see there are a lot of advantages comparatively when the online traffic being more expensive as well as being more rare. The offline Pohui team helped us to evaluate customers with to evaluate customers more accurately as well as gave us the capability to understand their willingness as well as to keep them in retention. Especially with the existing customers' competitions, we get to know them better via Puhui team, and we will continue to increase the investment on our offline Puhui team to help us to differentiate when it comes to customer acquisition front to better acquire better customers.

Speaker 1

And another business I'd like to mention is our tech empowerment SaaS business. It's pretty much a accumulated experience of 10 years of standardized capabilities. We already got into cooperation with a relative sizable volume with 5 to 6 of our banking partners and our funding partners. It's pretty much a monetization of our past experience. We use them to we use our experiences and capabilities to help them.

Speaker 1

And in return, they strengthened the cooperation in our main business, helping us with a relatively lower funding cost than the current average funding cost. So I think this is a very unique system that Lexin has. We believe the cooperation between aforementioned business will be strengthened and will be more interrelatable in the future to help us to differentiate ourselves amongst our peers. Hope that answers your question, Yara.

Operator

Thank you. I'm showing no further questions. I'd now like to turn the conference back to management team for closing remarks.

Speaker 1

Thank you again everyone for joining us. If you have further questions, please contact us via our contact information available on our IR website. Thank you.

Operator

Thank you. That concludes today's conference call. Thank you for participating. You may now disconnect.

Powered by Quartr