LexinFintech Holdings Ltd. (LX) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to LexinFintech Fourth Quarter and Full Year 2022 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Ms. Jamie Wang, IR Manager. Thank you. Please go ahead.

Thank you, Desmond. Hello, everyone. Welcome to Lexin's Fourth Quarter and Full Year 2022 Earnings Conference Call. With us on the line today are our 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 contains business outlook and forward-looking statements which are based on the assumptions as of today. The actual results might 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 will now turn the call over to our CEO, Jay. His remarks will be in English and the -- sorry, his remarks will be in Chinese, and the English translation will follow. Jay?

[Interpreted] Good morning, and good evening, everyone. It's my pleasure to be speaking to you again. In the fourth quarter of 2022, the COVID situation in China underwent a major turning point, bringing considerable pressure to the Chinese economy. But despite the such pressure, we were able to achieve satisfactory results by rigorously adhering to our strategy of prioritizing risk management, making data-driven decisions and continuously focusing on improving and refining our operations. Our loan originations for the past quarter reached CNY 56.1 billion, representing an increase of 29% year-over-year, with total outstanding loan balance reaching CNY 99.6 billion as of December 31, 2022, representing an increase of 16%, 1-6, year-over-year. Total revenue reached CNY 3.1 billion, representing an increase of 38.7% year-over-year, with net income reaching CNY 301 million, representing an increase of 17.9% year-over-year. Our asset quality continues to steadily improve. In addition, funding costs decreased to 6.8% from 7.0% in the third quarter. Our net profit margin increased substantially from 4.8% in the first quarter of 2022 to 9.9% this past quarter. From our fourth quarter numbers, we can see that Lexin has clearly produced 3 consecutive quarters of steadily improving profitability, realizing a V-shaped recovery. To be more specific, there were 3 main highlights for the past quarter. First, the continued improvement in asset quality. Second, the ability of our installment e-commerce platform service business to deliver growth against a weak backdrop and breakthroughs in our tech empowerment service sector, which achieved its first quarterly profit. And third, notable results in reducing operating costs and in increasing efficiency. On asset quality, although we were affected by the COVID outbreaks, Lexin was able to continue our stable and upward trajectory in asset quality, which was accomplished through our focus on continuous improvements to our risk management capability and our progress in refining our operations, and this can be seen from our existing and our new customers. For existing customers, we took the following 2 steps. First, we improved our ability to identify prime customers from our data and through deeper data mining of the information available with Lexin's ecosystem. We refined our ability to identify different customer segments. In particular, we continue to data mine and obtain valuable information from the PBOC's credit data. This allowed us to more deeply and comprehensively to improve our customer risk assessment-related profiles in multiple dimensions, including customer risk profile, income level information, asset information and existing customer liabilities. In the application of our models, we were able to finalize the joint modeling of over 10 data loops, building an accurate ROI evaluation framework in the progress. Improvements in our ability to identify client customers allowed us to dedicate greater resources towards serving this customer segment while also expediting the reduction of high-risk segments. Second, we applied our [Foreign Language] policy, which refines our operating strategy by improving our ability to identify different customer groups and segments via more accurate segmentation capabilities, enabling us to dig deeper to meet and satisfy the needs of different customer cohorts and improve our customer satisfaction rates and customer retention. In the fourth quarter, loan contributions from our prime customers increased by 60% year-over-year, while loan contribution from our high-risk customers increased by 13%. So prime customers as a percentage of loan increased from 72% in the fourth quarter of 2021 to 82% in the fourth quarter of 2022. For our new customers, we continue to expand our data set and the use of our models. We have built a complete end-to-end RTA processing model, which has significantly improved our postcustomer acquisition conversion rate by over 50%. We have improved the efficiency and accuracy of our customer identification capabilities by 20% through prelending and in-lending channel model iterations. We have also constructed a new operational matrix to continuously increase and improve the retention rate and the activity rates for both new and existing customers. In the fourth quarter, the percentage of new client customers with approved credit lines increased by 18.2%, with average ticket sizes for new customers increasing by 16.7% quarter-over-quarter. Online advertising costs to convert credit lines into active borrowers from the time of granting of the credit line to the time of the use of credit decreased by 25.9% quarter-over-quarter for prime customers. The second highlight was the ability of our installment e-commerce platform service business to deliver growth against a weak backdrop and outbreaks in our tech empowerment service sector, which achieved its first quarterly profit. Our installment e-commerce platform service business under a weak backdrop of poor overall consumption throughout the year last year was able to achieve CNY 1.4 billion in GMV for the fourth quarter, an increase of 40.2% year-over-year. Younger, more fashion-focused nonelectronic devices consumption scenarios such as cosmetics, apparel and footwear favored by younger demographics became our main driver, demonstrating notable increases in growth and further enhancing our competitive advantages in consumption scenarios and consumer demographics in the process. For the year 2022, our e-commerce platform [Foreign Language] total number of merchants grew by 100.3% year-over-year, with average ticket prices increasing by 39% year-over-year. In addition, our tech empowerment service business designed for small- and medium-sized banks have also made significant progress. Our service enables the digital transformation of our financial institutional partners by providing 5 core services: product development, customer acquisition channel for building, joint risk management, customer life cycle management and intelligent customer services, enabling our partners to achieve breakthroughs in their businesses. Our partners have been steadily growth wherever the corporation has come online. And all new launches in the fourth quarter has progressed to scale, enabling our tech empowerment service business to achieve profitability for the quarter. These 2 businesses are both critical components of our ecosystem, forming a mutually reinforcing cycle and linking with our main credit facilitation business. Each business has also achieved its own respective breakthroughs in the fourth quarter and can be expected to be publishing new growth driver in the future. Lexin's ecosystem, which is integrated with different businesses in various consumption scenarios, as well as technological capabilities, will in time become our core competitive advantage, differentiating ourselves from our competition and establishing our sustainable long-term core competitive advantages. The third highlight is related to the notable results in reducing operating costs and in increasing efficiency. Operational expenses for the fourth quarter were RMB 660 million, down 2.1% sequentially. In particular, G&A expenses decreased by 7% quarter-over-quarter to about RMB 97 million. Total expenses as a percentage of the outstanding loan balance has continued to [indiscernible] second quarter of 2022. In addition, in the fourth quarter, we restructured some functions and downsized the headcount to further stimulate the overall vitality of the company and to improve organizational efficiency. Behind the aforementioned operational achievement is the continued enhancement of our data and technological capability. R&D expenses for the fourth quarter was approximately RMB 136 million, which represents a leading position in the industry. Lexin's unique smart business engine has integrated digital and intelligent capabilities into every key aspect of our daily operation and enterprise. Specifically, in terms of system capabilities, we further applied the indicator variation and intelligent attribution system to the core notes of our transaction and risk management systems. We built a unified event management platform, covering all internal and external events related to product and technology, [indiscernible] improving our data efficiency and accuracy. In terms of model applications, we continue to improve our life cycle model and has developed and iterated more than 30 targeted marketing models, among which our model matrix of customer intent and customer reaction is able to cover scales of 10 million users per month and has achieved meaningful results. For specific customer groups, after using our models, order rates have increased by 30%, with ARPU and profit increasing by over 50%. Finally, I would like to update you on Lexin's corporate social responsibility initiatives. In the first half of 2022, we launched a specific program called [Foreign Language] to help relieve small and micro enterprise with their cash liquidity problems. In the fourth quarter, we continue to provide assistancy, enabling the total amount of small and micro loans to reach CNY 5 billion for the quarter. In February of this year, a follow-up program called [Foreign Language] was launched, which aims to promote a recovery in consumption through our 9 initiatives and 3 directives, molding individual consumption, facilitating merchant growth and enabling the recovery of small and micro site business. In addition, to better protect customers, we are currently instituting a 24/7 customer protection hotline, which will also further enhance our customer satisfaction rate. Going forward, we see an accelerated pace of recovery for domestic consumption and improved macroeconomic environment. So we remain cautiously optimistic about the prospects for business growth this year. In 2023, we will make sustainable profitability, which is Lexin's main objective. Four concrete steps, which we'll take towards this goal, are: first, is to continue to strengthen our risk management systems and build our core capabilities, further improving our asset quality in the process; second is to focus on refining our customer operations by improving our ability to identify and manage our prime customers from our existing ones. Adjusting policies for our new customers based on the economic conditions. Capturing the opportunities presented by the consumption recovery through investing in customer acquisition at the opportune time. Continuing to both improve our customer quality and quantity and improving asset quality in the process. Third is to strengthen Lexin's unique business ecosystem, including online consumer finance, offline [Foreign Language] team, installment e-commerce platform service, tech empowerment service and more, allowing our multiple and diverse businesses to become mutually supportive and mutually reinforcing, generating a virtuous cycle; fourth is to continue to reduce cost and improve efficiency, increasing our ability to generate sustainable profits in the process. In the fourth quarter of 2023, our total loan balance exceeded RMB 100 billion, marking another milestone in the company's growth and development. With the exception of the beginning of the first quarter, which was negatively impacted by the tail end of the COVID outbreak, all risk management-related metrics have started to recover since February, and we expect both our loan originations and profitability for the first quarter of 2023 to improve from levels achieved in the fourth quarter of 2022. In addition, we expect to continue double-digit growth in both our loan originations and net profit for the year 2023. Let me now hand over the call to our CFO for the financial update. Thank you.

I will now provide more details on our financial results. Please note that all numbers are in RMB terms, unless otherwise stated. In the fourth quarter, we continued our third consecutive quarter of recovery, both in our overall business and in our financial numbers. This was in spite of the impact of COVID and weaker economic conditions. Our continued recovery was the 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 to the same quarter of 2021. Total loan originations for the quarter reached CNY 56.1 million, an increase of 29% year-over-year in spite of the COVID outbreak and meeting the high end of our guidance. Revenue grew by 38.7% year-over-year to reach CNY 3.1 billion for the quarter, which was mainly driven by the GMV growth. The weighted average APR stood at approximately 24% for the fourth quarter, close to 2 percentage points lower than a year ago. Loans with APR under 24% now make up more than 83% of all loans. Partially offsetting the negative impact from the lower APRs on our loans was a decrease in our cost of funding from 7.7% a year ago to 6.8% in the fourth quarter. Loan tenders increased to 13.9 months versus 10.3 months a year ago. Importantly, we have been relentless in our focus on overhauling our risk management. This includes a focus on better credit user segments and rebuilding the team, the systems and the infrastructure. Jared will elaborate more on this shortly. The improved results from our efforts can be partially seen in our 90-day plus delinquency rate, which was at 2.53% in the fourth quarter as compared to 2.66% in the third quarter. The 30-day plus delinquency rate was at 4.62%, basically remaining stable as compared to third quarter in spite of the rapidly deteriorating COVID situation in December. At the same time, we have launched a new initiative to restructure our cost by benchmarking against the industry. We have seen some early improvements to operating expenses. Specifically, processing and servicing costs, sales and marketing, research and development and G&A expense combined, as a percentage of average loan balance, are at about 1.2% as compared to 1.3% in the third quarter. G&A expense as a percentage of average loan balance stood at 0.1% versus 0.12% in Q3. Of course, we realize this is only a very small start, but we will be sure to fully explore all the opportunities to improve our operational efficiency in the future. As a result of the aforementioned, we are able to report net income of CNY 301 million, an increase of 18% year-over-year. This is not an easy achievement in light of the severe impact of the COVID outbreak and weak macroeconomic conditions. Apart from the above year-over-year analysis, I would also like to elaborate a little bit more on the progress achieved through some quarterly comparisons. Total GMV was CNY 56.1 billion, almost flat from Q3 as we have generally taken a more prudent approach towards scale in terms of the uncertainty around COVID for all of 2022. However, total Q4 revenue grew 13.4% quarter-over-quarter due to an improved take rate of 2.59% versus 2.55% in Q3. The uptake rate is a result of an overall improvement in asset quality and lower funding costs, which has continued to improve since the beginning of the year. Operating expenses declined by 2.1% quarter-over-quarter as a result of our cost restructuring initiatives, and this, in turn, led to a sequential growth in net income of 9.3%. In summary, we have made great progress during the fourth quarter of the past year from both a year-over-year and a quarter-over-quarter perspective. If you take a look at the full year 2022 numbers, total GMV was CNY 204.6 billion, a decrease of only 4.3% year-over-year, with a total loan balance reaching CNY 99.6 billion, an increase of 15.9% year-over-year. Total revenue was CNY 9.9 billion, a decline of 13.3% year-over-year. Obviously, like most other companies, we have been negatively impacted by the weak macro environment. However, since hitting the lowest point in earnings in first quarter of 2022, we have since seen a continuous recovery in profitability, and the fourth quarter represents the third consecutive quarter of this recovery. This demonstrates the resilience and the sustainability of our business. We fully realize that with turnaround, we still have a long way to go, but the fourth quarter of 2022 should mark the end of 3 years of macro-related uncertainty with ending something on a bit of positive note. Next, let's take a detailed look at the financials. As mentioned, our total operating revenue for the fourth quarter was CNY 3.1 billion, representing an increase of 13.4% quarter-over-quarter and 38.7% year-over-year. Revenue from credit facilitation service was approximately CNY 2.0 billion, representing a 17.9% increase quarter-over-quarter and an over 71.4% increase year-over-year. Revenue from tech-empowered service was CNY 430 million, representing a 17.4% decrease quarter-over-quarter and 34.6% year-over-year, which was mainly due to the COVID impact, where both volume and rev share percentage were lowered. Revenue from installment e-commerce platform service was CNY 674 million, representing an increase of 28.4% from the last quarter and an increase of 59.3% year-over-year, which can be attributed to a strong Singles' Day shopping festival. Moving on to the expense side of this quarter. Sales and marketing expense decreased by 0.4% quarter-over-quarter, which was mainly due to our scale-down approach to new user acquisition in the time of macro uncertainty. Recently, however, we have noticed an improvement in user credit quality as well as improved economic activity. We will continue to closely monitor this and other macro indicators, and we'll be sure to seize on the right opportunities to invest in new user acquisition when conditions are favorable. Research and development expenses decreased by 3.5% quarter-over-quarter and decreased 17.1% year-over-year to CNY 136 million. General and administrative expenses decreased by 7% quarter-over-quarter and 17.9% year-over-year to CNY 97 million. While our top line revenue continued a promising upward trajectory this year, G&A expenses remained very stable and a decrease on a quarter-over-quarter basis for 3 consecutive quarters, demonstrating the continuous improvements to our operating efficiency, which we expect to continue in the future. Net profit was approximately CNY 301 million in the fourth quarter, a 9.3% increase quarter-over-quarter and a 17.9% year-over-year, in line with our expectations. Next, some updates on our share repurchase program and our convertible notes. First, on our share repurchase program, in March 22, 2022, the company's Board authorized a USD 50 million share/ADS repurchase program. And in addition, in November 2022, the company's Board authorized a second share repurchase program, and of which, the company could purchase up to an aggregate of USD 20 million of shares/ADS over the next 12 months. As of December 31, 2022, the company had repurchased a total of approximately 22 million ADS for about USD 48 million. Lexin's management remains open to making further repurchases in the future. Separately, on our convertible notes. We have entered into an amendment agreement with PAG regarding our existing convertible notes in the amount of USD 300 million. According to the original payment schedule, the company was potentially expected to pay the principal plus interest in 1 lump sum in September 2023. With the amendment, we're able to begin the repayment ahead of the original schedule and complete the installment payment plan over a 14-month period ending in April 2024. The notes remain convertible into fully paid Class A ordinary shares of the company or ADS at original conversion price of USD 14 per ADS at the holder's option. At the end of 2022, the company had a cash position of CNY 4.1 billion on hand and a net equity position of CNY 8.6 billion. Although Lexin has a strong balance sheet and sufficient cash reserves to meet the original terms of the convertible note agreement, we see the new arrangement as more beneficial for the company as it will allow us to smooth out the cash flow impact from the repayment as opposed to a single lump sum payment. This will give us more time and flexibility to efficiently plan and utilize capital in pursuing business growth opportunities. Finally, I would like to discuss our outlook for the first quarter of 2023. Based on the company's preliminary assessment of current market conditions, total loan originations for the first quarter of 2023 are expected to be around RMB 60 billion, representing an increase of 39% on a year-over-year basis. These estimates reflect the company's current expectations, which is subject to change. For 2023, as Jay mentioned earlier, we remain cautiously optimistic about China's macroeconomic recovery, consumption outlook and a stabilized regulatory environment. Currently, we can see that our turnaround is well underway as we continuously improve and revamp ourselves to be able to better meet the new challenges, address new opportunities ahead. We are looking forward to establishing a more solid and sustainable foundation to help follow our future growth and profitability. 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.

[Interpreted] Thank you, James. Good morning, and good evening, everyone. It's my great pleasure to speak with all of you again. So I'll elaborate more on our risk management measures and related progress. The impact of the COVID outbreak in December brought some pressure on our risk management, which in turn led to some short-term deterioration in our early risk metrics, while thanks to our continuous focus on stable risk policies and prudent customer acquisition as well as the use of our previously built COVID risk monitoring system and refined management mechanism, we were able to mitigate the short-term impact. At the end of the fourth quarter, we were able to hold our 30-plus day delinquency rate flat compared to the third quarter at 4.62%, with our 90-plus day delinquency rate continuing a steady decrease to 2.53%, down 13 basis points quarter-over-quarter as a result of the trends that we're observing right now. With the recovery in China's social and economic activities after the Chinese New Year, we are seeing all our credit metrics recovering to normal levels and continue on a positive trajectory. In the fourth quarter, increasing the overall percentage of our client customers was our top priority. With our focus on this goal throughout the past year, we have worked on continuously improving our overall risk management in the following areas. First, we focus on our prime customers by restructuring our user tiering system. This new system enables us to target the prime customer group in a more focused manner. Second, to further improve our core risk management capability, we invested heavily in the acquisition and utilization of compliant external data sources and have substantially improved our ability to data mine such data to further segment users with different risk profiles. In particular, we put heavy emphasis on the credit data from [ POC ] with our mining and usage of this data increasing dramatically. Third, due to the improvement on our capacity to handle data, we are able to more quickly perform higher iterations of our user identification models to target different customer segments, and we have made significant strides in user risk recognition. As a result of the above improvements, we are seeing notable increases in the rate of improvement in our asset quality, which is being demonstrated in our fourth quarter and in our first quarter risk performance metrics of the 2023. Since the beginning of the year, we have noticed that our day 1 delinquency rate has followed a downward trend. On the basis of our continuous investment and the current trends, we are confident that in 2023, our risk management capabilities will make additional improvements and breakthroughs. 2022 was a challenging year but was also a year we actively raised our risk management capability to another level and rapidly implemented a more refined risk management system. Going forward, as mentioned both by Jay and James, while we're encouraged by the improving macroeconomic conditions and trends, we will remain cautiously optimistic, adhering to the policy of putting risk management first and focusing on laying a solid ground for the healthy, sustainable, long-term and balanced growth of the company. Thank you.

This concludes our prepared remarks. Operator, we're now ready to take questions.

[Operator Instructions] First question comes from Yada Li from CICC.

[Foreign Language] This is Yada from CICC. My question is from the user demand side after the COVID, currently, are we experiencing a notable recovery? And I was wondering what's the guidance on loan growth in the coming quarters and the full year 2023 and 2024. That's all.

[Interpreted] Okay. We're actually -- we can feel for ourselves the fast recovery of the consumption of the entire nation, actually, especially on individual consumption, say, for example, off-line restaurants, touring spots. You can see people lining up for restaurant, waiting. And me myself for the past 3 years during the COVID time, while I myself was driving there, never was much of the traffic even in Shenzhen, but right now, we are seeing traffic jams literally everywhere. As for our company Lexin itself, for the strategic side of our scale, we were not terribly affected by the overall consumption scenario. Our risk alone was actually better alongside with the recovery of the consumption. Especially after Chinese New Year, we are seeing a better risk indicators with the macroeconomic revival and recovery of the entire nation. So as for our e-commerce platform, as we mentioned earlier, we actually saw a growth a little bit against the overall e-commerce trend as our nation's economy not being a little bit hit by the overall COVID restrictions and all the policies of that for the past several years, especially past year. The credit needs actually grew, and for us, we are a little bit different from other e-commerce platforms. We are still mostly mainly credit-driven. So when the -- in a way, when the macro economy is not as good as before, our credit need was actually -- it actually went higher. So for the full year guidance for 2023, well, overall, we are confident on the recovery of the overall consumption of the country. But we -- like we said before, we are continuously to remain prudently optimistic. We still put sustainable development, especially on the profitability first. And we are -- we will take actions when the time is right to invest in S&M, and we actually do believe it will be a good year for Lexin to develop. Especially after the last year, which was 2022, we had a turnaround, we had a strategic adjustment of the company. In terms of the full year loan guidance, we expect it -- as of right now, under current situation on our speculation, it should be around CNY 245 billion to the top line of CNY 255 billion. And also this year, our installment e-commerce platform services as well as tech empowerment service business will be both of our other 2 growth drivers as well.

[Operator Instructions] Next question is from Alex Ye of UBS.

[Foreign Language] So I have 2 questions. Firstly, it's on asset quality. Management has mentioned that various indicators have shown notable improvement at the beginning of the year. I'm wondering if you can share any color on what's the expectation in 2023 in terms of the magnitude of improvement versus last year. For example, in terms of the vintage charge-off rate and the annualized credit cost perspective. Second question is on the loan pricing and funding costs. I'm wondering what -- to what extent do we expect them to decline in this year and the implication for our take rate outlook.

[Interpreted] Okay. In terms of the asset quality, for the year 2023, as I mentioned earlier, we are still confident in the macro environment. We are still confident in putting our risk management as one of our priority and also the optimization of our customer segmentation as well as the mixing of the matrix and modeling. We expect to continue our risk indicators to continue to decrease in risk level, especially with our new -- the percentage of our [ RR1 ] Q3 prime customers in our new loan continue to increase, and we target to expedite to shrink down the size of the [ RR628 ], which are less higher-risk customers. On the new loan -- as the new loan structure gets better, the overall structure gets utilized and optimized. The overall structure of the outstanding loan gets better. Our risk management can show a very prominent sign of decrease. In terms of APR, for this quarter, we already have over 80% mix within '24. And for this quarter, our pricing is actually indefinitely close to 24%. And in the near future, we expect to see the pricing level to be around this range. In terms of take rate, as our risk level gets better, like I mentioned earlier, the funding cost continues to decrease. As you might have heard earlier in my script, we mentioned that this quarter -- for the quarter -- for the fourth quarter of 2022, our funding cost actually lowered comparatively sequentially, even quarter-over-quarter. And we are, for this quarter, first quarter of 2023, seeing also lower funding costs. These 2 factors together, we actually expect our take rate to continue to increase. And we are seeing for the past couple of months take rates for over 3%.

Next, we have [ Zoe Cho ] from CLSA.

[Foreign Language] And I will do the translation. This is [ Zoe ] from CLSA. So the first question regarding the decoupling of the rail links, and we are wondering when we can targeting to achieve the full compliance in terms of older existing loan priced below 24%. And second was our business strategy between capital-light and capital-heavy model going forward.

[Interpreted] So as of right now, we have not yet received a further clear instructions. It's worth mentioning that we are not one of the 14 platforms and the ratification -- for the 14 platforms are more on the decoupling, disconnecting from the banks. And also, it's worth noting that we are both simultaneously in discussion with Baihang as well as [indiscernible]. Especially with [indiscernible], we all expect, as of right now, based on the progress, to have the trial run by or before June 30. But right now, as far as we know, with all the adjustments as well as other changes with the regulators, the ratification and the actual deadline is possible to be delayed, and also with the new structure, the regulated structure being adjusted, there is a possibility of a postponement of a date. And the regulator's foundation might need time to put themselves together in a more formal and regulated way to actually proceed.

Okay. Regarding your second question, I will take a shot at it. Basically, you're asking about the capital-light model. Right now, the revenue share model with the financial partners, basically, it -- about -- in terms of revenue account roughly about 20% to 30%. I think this will continue to be our target for the remaining of the year. Obviously, this is a balance between the risk we are taking versus the profitability, right? So if we increase the risk-taking on the business side, obviously, this will increase profitability. But if you want to be kind of more capital-light, obviously, you are taking less risks than this is the balance we have to take. So I think directionally, from a company perspective, we do want to gradually increase the capital-light model. And what will help us in this regard is that we have the tech empowerment business that we have with the medium- and smaller-sized banks. And with the increase of that business, obviously, we will increase the rev share with the financial partners. Eventually, this will lead to a gradual increase of the capital-light model.

Thank you very much. With that, I would like to hand the call back to the management for closing remarks. Thank you.

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

Thanks. Bye-bye.

This concludes today's conference call. Thank you for your participation. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]