LexinFintech Holdings Ltd (LX) Q4 2024 Earnings Call Highlights: Strong Profit Growth and ...

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Thu, Mar 20, 2025, 12:00 AM 4 min read

Outstanding Loan Balance: RMB110 billion as of quarter end.
GMV: RMB52 billion for the fourth quarter.
Revenue: RMB3.7 billion for the fourth quarter.
Non-GAAP Profit: RMB390 million for the fourth quarter.
Net Income: Increased by 17% to RMB363 million quarter-over-quarter.
Net Income Take Rate: Increased from 1.09% to 1.31% in the fourth quarter.
Revenue Take Rate: 6.22%, a 36 basis point improvement from the previous quarter.
Weighted Average APR: 23.88% for loans.
Credit Costs: Decreased by 5% to RMB1.5 billion in the fourth quarter.
Funding Partners: Number increased to 63 in the fourth quarter.
Tech Empowerment Service Income: Increased by 57% quarter-over-quarter.
E-commerce Business Revenue: Increased by 12% quarter-over-quarter.
Cash Position: Approximately RMB4.1 billion as of year-end 2024.
Shareholders' Equity: Approximately RMB10.7 billion as of year-end 2024.
Provision Coverage Ratio: Approximately 255% at the end of the fourth quarter.
Dividend: USD0.11 per ADS for the second half of 2024, equivalent to approximately 20% of total net profit for the period.

Warning! GuruFocus has detected 8 Warning Signs with LX.

Release Date: March 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

LexinFintech Holdings Ltd (NASDAQ:LX) reported consistent profit growth driven by enhanced risk management systems and advanced data analytics capabilities.
The company achieved a significant improvement in asset quality, with key risk indicators such as the 90-day delinquency ratio and first payment default rates showing marked declines.
LexinFintech Holdings Ltd (NASDAQ:LX) increased its dividend payout ratio to 25% of net profit, reflecting a commitment to boosting shareholder returns.
The company made notable progress in its e-commerce and inclusive finance business lines, with the latter being profitable for three consecutive quarters.
Investment in AI technology, including the development of the proprietary Singularity model, has enhanced operational efficiency and customer experience across various functions.

Negative Points

Despite improvements, LexinFintech Holdings Ltd (NASDAQ:LX) still faces challenges with legacy loans impacting overall performance compared to peers.
The company anticipates potential volatility in performance due to macroeconomic headwinds and seasonality fluctuations.
Operating expenses are expected to increase in 2025, driven by investments in marketing, risk control systems, and AI technology.
The company's GMV is expected to remain flat in the first quarter of 2025 due to Chinese New Year seasonality.
While the overseas business is growing, it remains in the early phase and may require further investment to achieve steady growth.

Q & A Highlights

Q: What is LexinFintech's business plan for 2025, and how does AI fit into this strategy? A: LexinFintech plans to prioritize asset quality and profitability enhancement in 2025. The company aims to achieve stable growth by improving customer acquisition efficiency and enhancing synergies with partners. AI technologies, such as DeepSeek, are being leveraged to improve operational efficiency and customer experience. The company plans to intensify technology investments, focusing on AI deployment to enhance risk management capabilities.

Q: Can you provide more details on LexinFintech's risk management capabilities and future targets? A: LexinFintech has significantly improved its risk management capabilities, reaching an industry-leading position in specific technical aspects. The company has restructured key processes, enhancing accuracy and stability. Key risk indicators, such as the 90-day delinquency ratio, have improved. The focus remains on asset quality, scale stability, and profit enhancement. Future targets include optimizing asset structure and refining collection strategies to ensure a continuous decline in risk.

Q: What are the trends in unit economics, and how will operating expenses be managed in 2025? A: LexinFintech expects its net profit margin to increase significantly, driven by improved asset quality and reduced funding costs. The company plans to increase operating expenses to support user acquisition and business growth, but at a slower pace than profitability improvement. Operational efficiency improvements will contribute to margin expansion.

Q: How does LexinFintech plan to deliver more value to shareholders? A: LexinFintech has raised its cash dividend payout to 25% of net income, effective from January 1, 2025. The company is committed to returning value to shareholders and is open to increasing the cash dividend payout ratio as appropriate, aligning with shareholders' expectations.

Q: What are the main drivers of LexinFintech's profitability improvement? A: The primary drivers of profitability improvement include enhanced asset quality, reduced funding costs, and a more balanced revenue mix. The company has focused on acquiring high-quality customers, leading to a decrease in APR for new loans and an increase in tech empowerment service income. Operational efficiency and improved customer acquisition strategies also contribute to profitability.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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