Transcript: LexinFintech Holdings Q1 2026 Earnings Conference Call

LexinFintech Holdings (NASDAQ:LX) held its first-quarter earnings conference call on Monday. Below is the complete transcript from the call. This content is powered by Benzinga APIs. For comprehensive financial data and transcripts, visit https://www.benzinga.com/apis/. Access the full call at https://edge.media-server.com/mmc/p/npwuqafg/ Summary LexinFintech Holdings reported a strong operational resilience in Q1 2026, despite macroeconomic and industry challenges, with a loan volume of RMB 57.9 billion, a 15.9% QoQ and 12.2% YoY increase. The company's revenue reached RMB 3.3 billion, with net profit at RMB 201 million. Active users grew 14.1% QoQ to 5.17 million, while new active users surged by 101.6% YoY. LexinFintech Holdings' diversified business ecosystem, including fintech empowerment and installment e-commerce, accounted for nearly 50% of total loan volume, highlighting a strategic shift from the traditional online loan facilitation business. Key risk indicators improved, with a 7% QoQ reduction in the day-one delinquency ratio and optimized risk strategies enhancing asset quality. The company anticipates steady progress in its diversified ecosystem strategy, focusing on fintech empowerment, e-commerce, and inclusive finance to drive future growth amid regulatory and economic uncertainties. Full Transcript Operator Good day and thank you for standing by. Welcome to LexinFintech Holdings First Quarter 2026 Earnings Conference Call at this time, all participants are in listen only mode. After the speaker's presentation, there will be question and Answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question. Please press Star one one again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to our first speaker today. Will Tan, IR Director, IR Director of the Company. Please go ahead. Will Tan (IR Director) Thank you. Operator. Hello everyone. Welcome to our first quarter 2026 earnings conference call. Our results were released earlier today and concurrently available on our IR website. Today you will hear from our Chairman and CEO Mr. Jay Wenjiexiao who will provide an update on our overall performance and the strategies of our business. Our COO, Mr. Arvin Zhang Wenqiao will then provide more details on our risk management initiatives and updates. Lastly, our CFO Mr. James Senior will discuss our financial performance. Before we continue, I would like to refer you to our Safe harbor statement in our earnings press release which also applies to this call as we will be making forward looking statements last. Please note that all figures are present in Renminbi terms and all comparisons are made on a quarter over quarter basis unless otherwise stated. Please kindly note Jay and Arvin will give their whole remarks in Chinese first, then the English version will be AI based voices. With that, I'm now pleased to turn over the call to Mr. Jay Wenjiexiao, Chairman and CEO of Leshini and Duot. Jay Wenjiexiao Hi everyone, thanks for joining us today for our first quarter 2026 earnings call. In the first quarter, against the backdrop of macroeconomic and industry challenges, our unique and diversified business ecosystem, which we have been building for many years, demonstrated strong operational resilience. During the quarter, the loan volume of our installment, E Commerce Offline inclusive finance and fintech empowerment businesses accounted for nearly 50% of the total ecosystem. Businesses grew faster than the online loan facilitation business, becoming the company's new growth drivers. This indicates the transition from old to new growth drivers, the initial success of our long term oriented strategy of diversified development and the company's steady progress toward healthy and sustainable development. During the quarter, the company achieved a loan volume of RMB 57.9 billion, representing a quarter over quarter increase of 15.9% and a year over year increase of 12.2%. Revenue reached RMB 3.3 billion. Number of active users stood at 5.17 million, a quarter over quarter rise of 14.1% and 8.6% year over year. Number of new active users was 1.44 million, up 63.3% quarter over and 101.6% year over year. Net profit reached RMB 201 million. Besides, a number of key risk indicators continue to show improvement, maintaining a stable trend. Next, I will walk you through the key initiatives we have undertaken since the first quarter. First, our diversified ecosystem businesses accounted for nearly 50% of our total loan volume, becoming the new growth drivers in the first quarter. Despite the seasonal impact of Chinese Spring Festival holiday, our installment E Commerce, offline inclusive finance and fintech empowerment businesses continue to grow steadily with loan volume increasing significantly new growth momentum to the company's overall performance. We have unlocked the new growth space for our B2B business by efficiently connecting with Internet traffic platforms and financial institutions. In the first quarter, our FinTech empowerment business, which we have been building for many years, began to grow rapidly. Our Yunxi Technology Pro solution builds a bridge of resource collaboration between LexinFintech Holdings Internet traffic platforms and various financial institutions. By incorporating our technological capabilities and operational experience, it enables our partnered platforms to distribute traffic precisely and efficiently. Empowers financial institution partners to obtain assets with stable profitability and thereby benefits for all three parties. Our Installment E Commerce refined its supply chain and fully penetrated essential consumption scenarios. Installment E Commerce business continue to deepen its presence in different consumption scenarios, refine the supply chain system and enrich product offerings across categories such as food, apparel, transportation, travel, shopping, entertainment and pets. During the quarter, leveraging our advantage in partnerships with industry leaders, we added nearly 150 well known brands and launched an outlet channel for select merchants signing more than 20 domestic and international fashion and sports brands. Since its launch, total transaction volume of participating Brands increased by 43% quarter over quarter, fully meeting users demand for quality consumption targeting essential daily needs and festive gifting scenarios and several major promotional campaigns during key consumption periods such as New Year's Day, Chinese Spring Festival, Gift Fair and the Lunar New Year Holiday, consistently driving consumption growth in the 3C digital products segment. Ongoing interest free and discount offers effectively boosted user activity. During the quarter, the number of orders from high quality users on our platform increased by 35.7%. Inclusive Finance business expanded its county level presence unlocking new growth in lower tier markets. Our offline inclusive finance business has always focused on localized operations for specialized industries such as agriculture, forestry, animal husbandry and fishery. We have launched unique risk models and credit approval strategies tailored to industry specific customer segments. This helps match the funding needs of county level small and micro businesses and individual merchants with local financial institutions ensuring that inclusive financing resources continue to flow into county economies and supports their development. During the quarter, our overseas business developed steadily with continued stable growth in loan volume, profitability and asset. Second, we refined our risk strategies and optimized our product matrix leading to improvements in asset quality. In the first quarter, we continued to adjust and optimize our risk strategies. Our deeply iterated algorithms and models significantly improve the efficiency of channel connection and target user screening. We newly launched a credit report interpretation AI agent and an interactive credit enhancement function making user identification more accurate and effectively supporting personalized pricing and credit line allocation for high quality users. We have made flexible repayment features such as on demand borrowing and repaying and bullet repayment available across all products. Focusing on white collar workers and small and micro business owners, we developed differentiated credit granting and outreach strategies through scenario based operations. We allocated pricing and credit line resources preferentially to high quality customers, consistently boosting their activity levels. During the quarter, our asset quality continued its steady recovery with risk indicators improving for both existing and new assets. For total assets, day one delinquency ratio decreased by about 7% quarter over quarter 30 day collection rate improved month over month. New customer quality also improved. Loan volume to high quality Segments rose. Notably FPD 30 of new loans initiated in the first quarter is expected to decrease by about 6% in the first quarter. We continued to increase resource investment in consumer protection and customer experience improvement. We strengthened the coordination between our frontline service and consumer protection teams and various business lines enabling smoother information flow, more timely issue response and a more efficient closed loop resolution mechanism. In terms of service experience, by optimizing intelligent routing and queuing strategies and introducing peak time early warning mechanisms, we significantly improved service efficiency with key customer service metrics showing further improvement. On the customer care front, we enhanced our user behavior analysis through more sophisticated models and refined customer tiering, implementing more targeted care measures for different segments which improved overall user experience and satisfaction in combating illegal financial activities and fraudulent syndicates. We actively responded to relevant regulatory deployments, leveraging our technological advantages in AI and big data to strengthen the end to end defense and governance system including risk identification and case detection, thereby safeguarding consumers legitimate rights and interests. Looking ahead. Building upon the initial success of our diversified system strategy and the solid growth momentum of our businesses, we will continue to drive our installment E commerce, offline, inclusive finance and fintech empowerment businesses steadily advancing along the path of diversified and resilient development. We believe that our unique ecosystem advantages will continue to strengthen the company's operational resilience, enabling us to navigate future uncertainties and create long term sustainable returns for our shareholders. Next I'll hand over the floor to our CRO Arvind Thanks. Arvin Zhang Wenqiao (COO) When. Here. Don't have. Don't. Define. Sham. Daddy sui. Chan. We order a couple Cheetos. Thanks Jay Next I will provide a review of our key initiatives and achievements in risk management for the first quarter of this year. In the first quarter of 2026, as the impact of the new regulations on industry risk gradually subsided, industry wide risk began to decline. We also maintained the steady risk reduction trend we have seen since last year regarding specific risk performance. Compared to the fourth quarter of 2025, day one delinquency ratio of total assets decreased by approximately 7%. The 30 day collection rate continued to recover month over month and we estimate that FPD 30 for new loans initiated in the first quarter to decline by about 6%. Overall risk performance continued to improve. Now let me walk you through the specific risk initiatives implemented during the quarter. First, we continue to scale up the application of large models in risk management scenarios during the first quarter, consistently improving the efficiency and effectiveness of risk management. On the high risk asset management side, we leveraged large model capability to optimize and upgrade our high risk asset management robots and automated risk inspection robots, effectively enhancing our risk identification capabilities and the efficiency of high risk customer management. This helps sustain the downward trend in risk during the quarter. At the same time, we used large models to enable real time interactive credit line increasing, growing the prime asset base and driving continued improvement in new loan risk. Through large models, we achieved real time online interaction for credit line increases, efficiently capturing customers credit needs and credit enhancement documentation. This not only significantly improved the accuracy and efficiency of risk identities, but also enabled us, based on a comprehensive understanding of customer risk profiles and needs, to offer customers personalized credit offers that meet their specific requirements. Second, in our consumer credit business, we promoted steady growth in prime asset volume through dedicated prime customer segment management, focusing on prime white collar customers and small and micro business owners. We leveraged dedicated risk identification models, differentiated credit line increase and pricing reduction strategies and account management services to substantially increase both the addressable customer base and drawdown rate of prime target segments, driving significant growth in loan volume compared with the fourth quarter of 2025. Loan volume from Prime White Collar customers increased by 56% and volume from prime small and micro business customers increased by 30% in the first quarter, demonstrating the early success of our prime segment management approach. In the second quarter, we will continue to refine our prime segment management capabilities to further drive prime asset growth. Third, regarding our inclusive finance business, we continue to deeply cultivate broad county level markets and fully implemented localized operation strategy tailored to the characteristics of county level customers. We developed a county level business risk model and optimized risk strategies with optimized customer onboarding, credit granting and pricing to match the risk profile and credit needs of small and micro customers in offline, wholesale and retail, agricultural supply and farming segments. At the same time, we strengthened risk management and post loan collection for small and micro customers through online and offline coordination. To date, we have covered nearly 100 counties, served over 4 million small and micro merchants and individual operators, maintained stable risk performance and continued to grow loan volume. Additionally, in the first quarter we strengthened our identification and crackdown on illegal and fraudulent activities. We built an end to end prevention and control system encompassing early warning in process interception, post event enforcement and ecosystem coordination to combat illicit activities such as agent assisted complaints. We provided actionable leads to public security authorities, assisted in the successful crackdown of a fraudulent syndicate in Shandong Province, China and facilitated the arrest of over 40 suspects. Looking ahead to the second quarter of 2026, we will continue to optimize our asset mix and strengthen risk management over new loans. At the same time, we will better serve prime customers and enhance their experience driving further growth in high quality assets while keeping risks stable and controllable. Our goal is to gradually bring risk levels back within our target risk appetite. Next, I will hand over to our CFO James to provide a review of the company's financial performance for the first quarter. James Senior Thanks Arvin. I will now provide a detailed overview of our first quarter financial results. Please note that all figures are presented in Renminbi terms and all comparisons are made on a quarter over quarter basis unless otherwise stated. During the first quarter, the industry continued to navigate a period of adjustment against this complex backlog. Our diversified business ecosystem demonstrated continued operational resilience driven by the structural optimization of our business portfolio. We successfully grew our total loan volume while our online consumer finance business faced pressure due to the macro uncertainties our ecosystem segments predicted. Clearly, the FinTech Empowerment Service achieved solid growth. Consequently, total revenue for the first quarter was 3.3 billion, representing a 8.7% sequential increase with net income remaining relatively stable at 201 million. Now let's take a review of our first quarter financial results. First, net revenue of the credit business which is derived by adding up credit facilitation service income and tech empowerment service income net of credit costs including provisions and fair value changes and the funding cost was 1.5 billion representing a 7.2% or 98 million increase quarter over quarter. The overall growth was largely driven by 382 million rise in tech empowerment service income. This was underpinned by revenue growth from lower provision top ups for our capital-light portfolio amongst improving asset quality. Since our capital-light income is recorded net of credit costs, the material sequential decline in provisions directly boosted this revenue line. On the other hand, credit facilitation service income our capital heavy business declined by about 10% or 253 million. This reflects the ongoing volume and pricing headwinds in our online consumer finance business, partially offsetting the increase in our tech empowerment service income. Second, net income of the installment E commerce business defined by installment E commerce revenue net of cost of inventory sold increased by 41 million to 208 million. So the total net revenue summing the credit and installment e commerce business added up to 1.7 billion, a 9.1% or 138 million increase quarter over quarter. On the expense side, operating expenses including sales and marketing, research and development, general administrative expenses and processing and servicing Costs increased by 13.8% or 169 million to 1.4 billion. Tax and others decreased by 20.9% or 18 million to 68 million. Consequently, total expenses added up to 1.5 billion, an increase of 151 million. By deducting the total expenses of 1.5 billion from the total net revenue of 1.7 billion, we arrive at a net income of 201 million, a decrease of 5.9% or 13 million quarter over quarter. While the macro headwinds our diversified ecosystem has successfully sustained our financial performance. Now let me walk you through three key business highlights behind these results. First, the resilience of our diversified BIMS ecosystem. Amid continued industry consolidations in the first quarter of 2026, we proactively optimized our business mix to strengthen risk management and compliance. Anchored by our diversified ecosystem, we continue to demonstrate strong operational resilience. Consequently, non online consumer finance G which encompasses offline inclusive finance, fintech empowerment services and our E commerce businesses grew to nearly 50% of our total GMV up 42%, sequentially effectively offsetting the contraction in our online consumer finance business. This shift was largely fueled by our Fintech empowerment or Shuker model where we partner with leading Internet platforms and banks on risk assessment and assume the corresponding credit risk with loan volume surging to around 21 million, rather 31 billion. This model's financial contribution is not yet fully reflected due to its lower pricing and empathize the revenue recognition. However, the buildup of the Shuker model creates a robust revenue pipeline and it will improve our long term asset quality and ensures steady profitability across market cycles. The installment E Commerce business maintained its positive momentum supported by stable transaction volumes and improving the gross margins which I will elaborate later. At the same time, our offline inclusive finance and overseas business advanced steadily, serving as additional stabilizers and diversifiers for our broader business portfolio. Second, the steady development of our installment E Commerce business Our installment E Commerce business continue to be deeply integrated into our ecosystem, providing seamless and convenient consumption scenarios and acting as a unique competitive advantage. Given the current macroeconomic environment, this segment continue to prioritize asset quality over rapid expansion while demand remains Strong. In the first quarter of 2026, we deliberately moderated the growth to contain credit risk within our risk appetite. As a result, installment E Commerce GMV remained steady at 2.2 billion. Gross profit from the E commerce business reached 208 million, representing a 24% increase with gross margin expanded by 169 basis points sequentially to 9.4%. The solid performance was largely driven by the continued refinement of our E Commerce operations. Ultimately, the steady development of this assessment not only generates reliable gross profit, but also allows us to capture and serve the diverse consumption needs of our users, further diversifying our revenue streams and reinforcing our operational resilience. Third, prudent provision coverage. In the first quarter, our total credit cost, which encompasses 3 provision line items and the fair value changes financial guarantee derivatives in our income statement stood at 1.3 billion, up 0.8% sequentially. This increase was primarily volume driven, aligning with the growth in our new loan origination. As Arvind noted, our risk indicators are stabilizing, with risks for both existing and new loans trending downward from January through March. The supplementary provisions required for our existing portfolio were lower than in fourth quarter. To highlight our provisioning strength, let's look at our growth provision metrics. By stripping out the net impact of the fair value changes, gross provision offers a true picture of the capital we have reserved against our loan portfolio. Specifically, our gross provision ratio for new capital heavy loans stood at about 7.2%, comfortably exceeding our historical peak vintage charge off rate. Coverage ratio was 258% in the first quarter. To summarize, our diversified ecosystem has proven its value as a structural stabilizer. The solid progress in our fintech empowerment and e commerce segments effectively offsets the near term pressure of consumer finance business Building a Sustainable Revenue pipeline for Future quarters Coupled with our conservative provisioning strategy, we have established resilient foundation to navigate current and potential market uncertainties, ensuring steady operations across all cycles. Now let's move on to our operating expense line items. On the cost and expense side, total operating expenses increased by 14% or 169 million to 1.4 billion, mainly due to the increase of sales marketing expenses of 124 million, primarily reflecting our investment in ecosystem user engagement alongside the upgrading of our service infrastructure to further improve consumer protection and overall user experience for balance sheet Items. As of March 31, our cash position, which includes cash, cash equivalents and restricted cash, was approximately 3.3 billion shareholders. Equity remained solid at about we expect the gradual recovery trend we saw in the first quarter to carry into the second quarter, modest in pace but trending in the right direction. That said, as the lingering impact of macroeconomic uncertainties have not yet fully dissipated, we will strictly maintain our prudent operational approach. As such, we expect the total loan originations for the second quarter to remain relatively stable. That's all our prepared remarks for today. Operator. We're now ready to take questions. Operator Thank you. To ask a question now, please press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again, a moment for our first question. We will now take our first question from the line of Alex Ye from UBS. Please ask your question. Alex, your line is open. So my first question is regarding the recent rollout of various new regulations. What's the company's outlook on this front and what are the variety of measures that you are taking to adapt to those changes? Second question is regarding the asset quality. Could you provide some update on the latest asset quality trend for your loan portfolio? And how should we think about the risk outlook for the coming quarters? Jay Wenjiexiao The january. This is the translation for Jay's remarks, With a greater focus on compliance and user experience. For us, that's both a challenge and an opportunity. Market, market space and opportunities remain. This gives us more room to grow in healthy and high quality ways. In this environment, we will continue to deepen our customer centric approach to serve different customer segments. More specifically, we will keep improving customer experience, grow our high quality assets, further optimizing our asset mix and strengthen the overall risk resilience. At the same time, we will steadily promote the healthy development of our diversified ecosystem businesses. We are also accelerating our efforts to explore new customer segments, new products and new business models, for example going deeper into serving small and micro business owners and and improving services for prime customers. On consumer rights protection, we will put more focus on compliance process, covering the whole process from product design disclosure to to zone services. Over the long run, we will stick to compliant operations and leverage our diverse business ecosystem to further enhance our operational resilience. We believe this strategic positioning will help us navigate external changes and achieve stable operations and long term sustainable growth. Boss. So overall in the first quarter of 2026 the quality of both our new loans and existing loans maintain an improving trend. Regarding the specific metrics compared to Q4 of 2025 Day 1 delinquency ratio of total assets decreased about 7% in Q1 30 day collections FTD 30 for new loans originated in Q1 is expected to decline around 6%. So you can see the overall risk performance continues to improve. Looking ahead to the second quarter of 2026, we will continue to optimizing to optimize our asset mix and strengthen risk management over new loans by enhancing risk identification, risk disposal and maintaining the quality of new loans. This will help us to further reinforce the current downward trend we have already seen in the risk metrics. Our overall goal is to increase our rate steadily in the second quarter and which will set us up for a recovery and asset quality improvements for the rest. Again, Operator Thank you. We will now take our next question from the line of Judy Jung from City. Please ask your question. Judy, your line is open. Thank you for letting me ask questions. Judy Zhang This is Judy Zhang from Citi. So in light of the changing regulatory environment, what's your outlook for the company's full year financial performance? Thank you. James Senior Okay, I will take the question as a summary. If we look ahead to 2026, there are still a lot of uncertainty in the macro environment, so we'll continue to take a prudent approach and keep strengthening our operational resilience. I really at this time can't really provide specific numbers. Maybe I can quickly walk you through a few key metrics and its trend. First, on the loan volume side, the online consumer finance is may remain pressured but thanks to the solid growth of our ecosystem business like our fintech empowerment and installment E Commerce platform, we would expect the total loan volume to stay relatively stable quarter over quarter. Second, on the revenue side because the FinTech in R1 business recognized the revenue more gradually due to the accounting policy, so it will fully offset the near term revenue impact from the contracting contractions of the online consumer finance business. However, in the longer run, having a larger contribution from these businesses will give us more stable revenue base. Our asset quality continue to improve resulting in a lower provision top ups on the existing capital life business which led to the increase in our tech and housing service revenue. So I would expect this trend to contribute positively to our revenue in the near term. Third, on the credit cost side, they should come down as risk continues to decline assuming no major macro or regulatory changes. With that said, we'll remain prudent with our performance provisions. Fourth, on the expense side, due to the expansion of our ecosystem business, our continued investment in customer experience operating expenses increased slightly on the sequential basis in Q1. So going forward we'll keep driving operational efficiency, reduce cost where we can and aim to steadily optimize our expense ratio. So put all these together as a summary overall for 2026. We continue to focus on making steady progress while mitigating the uncertainties, so we'll keep building a strong foundation for the long term high quality business. Operator Thank you. We will now take our next question from the liner Zhehan Wang from Goldman Sachs, please ask your question. Zhihan, your is open. Thank you for taking the questions. This is. Could you please elaborate on the corporate plans to enhance shareholder returns? Thank you. We have now reached the end of the question and answer session. I would now like to turn the conference back to Will Tan for closing comments. Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.