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LexinFintech Holdings Ltd. Reports First Quarter 2018 Unaudited Financial Results

SHENZHEN, China, May 21, 2018 /PRNewswire/ -- LexinFintech Holdings Ltd. ("Lexin" or the "Company") (NASDAQ: LX), a leading online consumer finance platform for educated young adults in China, today announced its unaudited financial results for the first quarter ended March 31, 2018.

First Quarter 2018 Operational Highlights:

  • Total loan originations in the first quarter of 2018 reached RMB14.8 billion, representing an increase of 98.3% from RMB7.5 billion in the first quarter of 2017.
  • Total outstanding principal balance of loans reached RMB21.3 billion as of March 31, 2018, representing an increase of 99.3% from RMB10.7 billion as of March 31, 2017.
  • The weighted average tenor of loans originated on our platform in the first quarter of 2018 was approximately 11.5 months. The effective APR1 was 23.4% for the first quarter of 2018.
  • The GMV of our e-commerce channel amounted to RMB1.2 billion, representing an increase of 28.0% from RMB0.9 billion in the first quarter of 2017.
  • Customer acquisition cost2 amounted to RMB108 in the first quarter of 2018, representing a decrease of 25.4% from RMB144 in the first quarter of 2017.
  • Total number of registered users reached 26.4 million as of March 31, 2018, representing an increase of 94.8% from 13.6 million as of March 31, 2017; and users with credit line reached 8.2 million as of March 31, 2018, up by 64.0% from 5.0 million as of March 31, 2017.
  • Number of active customers who used our loan products in the first quarter of 2018 reached 2.6 million, representing an increase of 39.2% from 1.9 million in the first quarter of 2017. Number of new active customers who used our loan products in the first quarter of 2018 was 0.44 million.
  • 90 day+ delinquency ratio3 were 1.44% as of March 31, 2018.

 

1 The Effective APR refers to the percentage equal to the annualized actual amount of finance charges, including interest and service fees,
generated from a customer loan, divided by the average outstanding principal balance for the loan.

2 Customer acquisition cost refers to the amount of total costs we incur in connection with acquiring customers divided by the number of
new active customers during a given time period.

3 90 day+ delinquency ratio refers to outstanding principal balance of on- and off-balance sheet loans that were 90 to 179 calendar days
past due as a percentage of the total outstanding principal balance of on- and off-balance sheet loans on our platform as of a specific date.
Loans that are delinquent for 180 days or more are charged off.

 

First Quarter 2018 Financial Highlights:

  • Total operating revenue reached RMB1.6 billion. Financial services income reached RMB998 million, representing an increase of 56.7% from the first quarter of 2017. Loan facilitation and servicing fees reached RMB164 million, representing an increase of 204% from the first quarter of 2017.
  • Gross profit reached RMB412 million, representing an increase of 52.2% from the first quarter of 2017.
  • Net income was RMB146 million, representing an increase of 160% from the first quarter of 2017.
  • Non-GAAP EBIT was RMB211 million, an increase of 66.8% from the first quarter of 2017.
  • Adjusted net income was RMB174 million, representing an increase of 88.3% from the first quarter of 2017.

"Our consistent regulatory compliance and our investment in financial technology have enabled us to strengthen our competitive advantages and fuel our growth," said Mr. Jay Wenjie Xiao, Lexin's chairman and chief executive officer. "Nearly a third of Lexin's operating expenses went into financial technology research and development in the past year, which resulted in higher operating efficiency and greater profitability as we scale up our business."

"Our technology capabilities, including our Hawkeye risk-management engine and Wormhole fund-matching system, have helped us to gain the trust of additional partners. We believe that our cooperation with various financial institutions will create even more value and contribute to Lexin's continued growth in the future," continued Mr. Xiao.

"We saw continued growth in our business in the first quarter," said Mr. Craig Yan Zeng, Lexin's chief financial officer. "In the first quarter of 2018 Lexin's gross profit reached RMB412 million and non-GAAP EBIT reached RMB211 million, representing an increase of 52.2% and 66.8% from the same period in 2017. Our adjusted net income also increased by 88.3% to RMB174 million."

"Our strong profit growth reflects increasing operating leverage, which is enabling us to scale up our business with higher operating efficiency," continued Mr. Zeng. "We hope to continue this momentum as we continue to invest in our technology."

"As a result of our continuous work on our technology and Hawkeye AI engine, our credit quality continues to be stable and our performance continues to be strong," said Mr. Ryan Huanian Liu, Lexin's chief risk officer. "Our M6+ charge-off rate4 continues to be approximately 2.0%. At the end of the first quarter of 2018, our 90 day+ delinquency rate was 1.44%."

 

4 "M6+ charge-off rate" refers to, with respect to on- and off-balance sheet loans originated during a specified time period, which we
refer to as a vintage, the total outstanding principal balance of the loans that become over six months delinquent during a specified period,
divided by the total initial principal of the loans originated in such vintage.

 

First Quarter 2018 Financial Results:

Operating revenue increased from RMB1.2 billion in the first quarter of 2017 to RMB1.6 billion in the first quarter of 2018. This increase was primarily due to the substantial increase in financial services income.

Financial services income increased by 56.7% from RMB637 million in the first quarter of 2017 to RMB998 million in the first quarter of 2018. This increase was primarily due to an increase in the outstanding principal balance of on-balance sheet loans, which was in turn driven by increases in the number of active customers and the average outstanding principal balance of loans per customer.

Loan facilitation and servicing fees increased by 204% from RMB54.1 million in the first quarter of 2017 to RMB164 million in the first quarter of 2018. This increase was primarily due to the significant increase in off-balance sheet loans.

Funding cost increased by 46.1% from RMB176 million in the first quarter of 2017 to RMB257 million in the first quarter of 2018. This increase was primarily due to an increase in our funding debts to fund on-balance sheet loans originated on our platform.

Processing and servicing cost increased by 49.4% from RMB44.1 million in the first quarter of 2017 to RMB65.9 million in the first quarter of 2018. This increase was primarily due to an increase in fees to third-party payment platforms and an increase in salaries and personnel related costs.

Provision for credit losses increased by 135% from RMB122 million in the first quarter of 2017 to RMB287 million in the first quarter of 2018. This increase was primarily due to the increase in the average outstanding principal balance of on-balance sheet loans. In addition, as we had continued to improve our credit assessment and risk management capabilities as well as to enhance our collection efforts, we gradually expanded our customer base to improve our profit, while maintaining credit risks at a reasonable level.

Gross profit increased by 52.2% from RMB271 million in the first quarter of 2017 to RMB412 million in the first quarter of 2018.

Sales and marketing expenses increased by 17.5% from RMB86.4 million in the first quarter of 2017 to RMB102 million in the first quarter of 2018. This increase was primarily due to an increase in payroll expenses and an increase in online promotional fees and advertising costs.

Research and development expenses increased by 54.0% from RMB44.2 million in the first quarter of 2017 to RMB68.1 million in the first quarter of 2018. This increase was primarily due to an increase in payroll and related expenses, an increase in share-based compensation expenses allocated to research and development expenses, and an increase in rental and depreciation expenses allocated to research and development expenses.

General and administrative expenses increased by 36.6% from RMB42.9 million in the first quarter of 2017 to RMB58.6 million in the first quarter of 2018. This increase was primarily due to an increase in share-based compensation expenses allocated to general and administrative expenses and an increase in payroll expenses. In addition, we incurred an increase in professional service fees and rental expenses.

Income tax expense for the first quarter of 2018 was RMB33.4 million, compared to income tax expense of RMB33.5 million in the first quarter of 2017. The decrease of the annualized effective tax rate for the first quarter of 2018 was primarily due to the change of our cost structure and lower enacted tax rate for certain qualified entities. The Company's subsidiaries completed 2017 annual tax filings with relevant tax authorities in May 2018, which may result in a favorable change of tax positions in recognizing deferred tax assets.

Net income for the first quarter of 2018 was RMB146 million, representing an increase of 160% compared to RMB56.3 million in the first quarter of 2017.

Adjusted net income for the first quarter of 2018 was RMB174 million, representing an increase of 88.3% from RMB92.3 million in the first quarter of 2017.

Please click here to view our vintage curve: https://mma.prnewswire.com/media/694073/vintage_1.jpg

M6+ Charge-off Rates

Outlook

Lexin expects the total loan origination for fiscal year 2018 to be RMB80 billion. This outlook is Lexin's current and preliminary view, which is subject to changes and uncertainties.

Conference Call

The Company's management will host an earnings conference call at 8:00 AM U.S. Eastern time on May 21, 2018 8:00 PM Beijing/Hong Kong time on May 21, 2018.

Dial-in details for the earnings conference call are as follows:

 

United States (toll free):

1 845 675 0437 or 1 866 519 4004

International:

65 6713 5090

Hong Kong (toll free):

800 906 601 or 852 3018 6771

China:

400 6208 038 or 800 8190 121

 

Participants should dial-in at least 5 minutes before the scheduled start time and use the following passcode: 4689247.

Additionally, a live and archived webcast of the conference call will be available on the Company's investor relations website at http://ir.lexinfintech.com.

A replay of the conference call will be accessible approximately two hours after the conclusion of the live call until May 27, 2018, by dialing the following telephone numbers:

 

United States (toll free):

1 855 452 5696 or 1 646 254 3697

International:

61 2 8199 0299

Replay Access Code:

4689247

 

About LexinFintech Holdings Ltd.

LexinFintech Holdings Ltd. is a leading online consumer finance platform for educated young adults in China. As one of China's leading financial technology companies, Lexin integrates its e-commerce-driven installment finance platform, Fenqile, with advanced risk management technologies, the Company's Dingsheng asset distribution technology platform, and the Company's Juzi Licai online investment platform for individual investors, to create a comprehensive consumer finance ecosystem. The Company utilizes technologies including big data, cloud computing and artificial intelligence to enable the near-instantaneous matching of user funding requests with offers from the Company's more than 30 funding partners, which include commercial banks, consumer finance companies, and other licensed financial institutions.

For more information, please visit http://ir.lexinfintech.com

To follow us on Twitter, please go to: https://twitter.com/LexinFintech

Use of Non-GAAP Financial Measures Statement

In evaluating our business, we consider and use adjusted net income and non-GAAP EBIT, two non-GAAP measures, as supplemental measures to review and assess our operating performance. The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. We define adjusted net income as net income excluding share-based compensation expenses and interest expense associated with convertible loans, and we define non-GAAP EBIT as net income excluding income tax expense, share-based compensation expenses and interest expense, net.

We present these non-GAAP financial measures because it is used by our management to evaluate our operating performance and formulate business plans. Adjusted net income enables our management to assess our operating results without considering the impact of share-based compensation expenses and interest expense associated with convertible loans. Non-GAAP EBIT, on the other hand, enables our management to assess our operating results without considering the impact of income tax expense, share-based compensation expenses and interest expense, net. We also believe that the use of these non-GAAP financial measures facilitate investors' assessment of our operating performance. These non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP.

These non-GAAP financial measures have limitations as an analytical tool. One of the key limitations of using adjusted net income and non-GAAP EBIT is that they do not reflect all items of income and expense that affect our operations. Share-based compensation expenses, interest expense associated with convertible loans, income tax expense, and interest expense, net have been and may continue to be incurred in our business and are not reflected in the presentation of adjusted net income and non-GAAP EBIT. Further, these non-GAAP financial measures may differ from the non-GAAP financial information used by other companies, including peer companies, and therefore their comparability may be limited.

We compensate for these limitations by reconciling the non-GAAP financial measure to the most directly comparable U.S. GAAP financial measure, which should be considered when evaluating our performance. We encourage you to review our financial information in its entirety and not rely on a single financial measure.

Exchange Rate Information Statement

This announcement contains translations of certain RMB amounts into U.S. dollars ("US$") at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB6.2726 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on March 30, 2018. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the expectation of its collection efficiency and delinquency, business outlook and quotations from management in this announcement, contain forward-looking statements. Lexin may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Lexin's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Lexin's goal and strategies; Lexin's expansion plans; Lexin's future business development, financial condition and results of operations; Lexin's expectation regarding demand for, and market acceptance of, its credit and investment management products; Lexin's expectations regarding keeping and strengthening its relationship with borrowers, institutional funding partners, merchandise suppliers and other parties it collaborates with; general economic and business conditions; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in Lexin's filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Lexin does not undertake any obligation to update any forward-looking statement, except as required under applicable law. 

For investor and media inquiries, please contact:

LexinFintech Holdings Ltd.

IR inquiries:
Tony Hung
Tel: +86 (755) 3637-8888 ext. 6258
E-mail: IR@lexinfintech.com

Media inquiries:
Limin Chen
Tel: +86 (755) 3367-8888 ext. 6993
E-mail: liminchen@lexinfintech.com

ICR Inc.
Media inquiries:
Edmond Lococo
Tel: +86 (10) 6583-7510
E-mail: Edmond.lococo@icrinc.com

 

 

LexinFintech Holdings Ltd.


Unaudited Condensed Consolidated Balance Sheets






(In thousands, except for share and per share data)

As of

December 31,
2017


March 31,
2018


RMB


RMB


US$

ASSETS






Current assets






Cash and cash equivalents

1,126,475


613,436


97,796

Restricted cash

561,922


799,950


127,531

Restricted time deposits

6,750


137,774


21,964

Short‑term financing receivables, net

9,857,209


11,811,687


1,883,061

Accrued interest receivable

129,622


168,499


26,863

Prepaid expenses and other current assets

945,258


920,736


146,787

Amounts due from related parties

9,447


1,992


318

Inventories, net

101,653


94,550


15,075

Total current assets

12,738,336


14,548,624


2,319,395

Non‑current assets






Restricted cash

46,889


65,972


10,517

Restricted time deposits

600


-


-

Long‑term financing receivables, net

1,785,045


2,416,099


385,183

Property, equipment and software, net

63,125


71,120


11,338

Long‑term investments

23,485


22,693


3,618

Deferred tax assets

38,841


38,841


6,192

Other assets

33,263


25,047


3,993

Total non‑current assets

1,991,248


2,639,772


420,841

TOTAL ASSETS

14,729,584


17,188,396


2,740,236

LIABILITIES






Current liabilities






Accounts payable

198,177


129,470


20,641

Amounts due to related parties

67,510


62,680


9,993

Short‑term borrowings

168,844


317,647


50,640

Short‑term funding debts

10,525,134


12,879,710


2,053,329

Accrued interest payable

290,446


328,434


52,360

Accrued expenses and other current liabilities

1,611,029


1,297,492


206,851

Total current liabilities

12,861,140


15,015,433


2,393,814

Non‑current liabilities






Long‑term funding debts

166,629


245,836


39,192

Long‑term borrowings

289


-


-

Total non‑current liabilities

166,918


245,836


39,192

TOTAL LIABILITIES

13,028,058


15,261,269


2,433,006

SHAREHOLDERS' EQUITY






Class A Ordinary Shares

142


144


23

Class B Ordinary Shares

68


68


11

Additional paid‑in capital

2,110,957


2,233,391


356,055

Statutory reserves

55,861


55,861


8,906

Accumulated other comprehensive loss

(14,951)


(58,200)


(9,278)

Accumulated deficit

(450,551)


(304,137)


(48,487)

TOTAL SHAREHOLDERS' EQUITY

1,701,526


1,927,127


307,230

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

14,729,584


17,188,396


2,740,236


 

 

LexinFintech Holdings Ltd.

Unaudited Condensed Consolidated Statements of Operations





(In thousands, except for share and per share data)

For the Three Months Ended March 31,

2017


2018


RMB


RMB


US$

Operating revenue:






Online direct sales

579,179


542,899


86,551

Services and others

2,616


30,094


4,798

Online direct sales and services income

581,795


572,993


91,349

Interest and financial services income

531,709


782,989


124,827

Loan facilitation and servicing fees

54,061


164,377


26,206

Other revenue

51,033


50,302


8,019

Financial services income

636,803


997,668


159,052

Total operating revenue

1,218,598


1,570,661


250,401

Operating cost:






Cost of sales

(605,720)


(548,723)


(87,479)

Funding cost

(175,920)


(257,026)


(40,976)

Processing and servicing cost

(44,134)


(65,934)


(10,511)

Provision for credit losses

(122,084)


(286,791)


(45,721)

Total operating cost

(947,858)


(1,158,474)


(184,687)

Gross profit

270,740


412,187


65,714

Operating expenses:






Sales and marketing expenses

(86,405)


(101,510)


(16,183)

Research and development expenses

(44,209)


(68,093)


(10,856)

General and administrative expenses

(42,943)


(58,641)


(9,349)

Total operating expenses

(173,557)


(228,244)


(36,388)

Interest expense, net

(21,719)


(3,639)


(580)

Change in fair value of financial guarantee derivatives

16,738


(8,075)


(1,287)

Others, net

(2,423)


7,625


1,216

Income before income tax expense

89,779


179,854


28,675

Income tax expense

(33,522)


(33,441)


(5,331)

Net income

56,257


146,413


23,344

Pre-IPO Preferred Shares redemption value accretion

(16,447)


-


-

Income allocation to participating preferred shares

(34,514)


-


-

Net income attributable to ordinary shareholders

5,296


146,413


23,344







Net income per ordinary share






Basic

0.05


0.44


0.07

Diluted

0.04


0.41


0.07







Net income per ADS






Basic



0.88


0.14

Diluted



0.81


0.13







Weighted average number of ordinary shares outstanding






Basic

110,647,199


331,158,139


331,158,139

Diluted

136,184,241


361,428,816


361,428,816







 

 

LexinFintech Holdings Ltd.


Unaudited Condensed Consolidated Statements of Comprehensive Income






(In thousands, except for share and per share data)

For the Three Months Ended March 31,

2017


2018


RMB


RMB


US$







Net income

56,257


146,413


23,344

Other comprehensive loss






Foreign currency translation adjustments, net of nil tax

(984)


(43,249)


(6,895)

Total comprehensive income

55,273


103,164


16,449

 

 

LexinFintech Holdings Ltd.

Unaudited Reconciliations of GAAP and Non-GAAP Results

(In thousands)






For the Three Months Ended March 31,

2017


2018


RMB


RMB


US$

Reconciliation of Adjusted Net Income to Net Income




Net income

56,257


146,413


23,344

Add: Share-based compensation expenses

14,868


27,311


4,354

Interest expense associated with convertible loans

21,142


-


-

Adjusted net income

92,267


173,724


27,698

 



For the Three Months Ended March 31,


2017


2018


RMB


RMB


US$

Reconciliations of Non-GAAP EBIT to Net Income






Net income


56,257


146,413


23,344

Add: Income tax expense


33,522


33,441


5,331

Share-based compensation expenses


14,868


27,311


4,354

Interest expense, net


21,719


3,639


580

Non-GAAP EBIT


126,366


210,804


33,609

 

 

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SOURCE LexinFintech Holdings Ltd.