Ladies and gentlemen, thank you for standing by and welcome to the LexinFintech First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. I must advise you that this conference is being recorded today. I’d now like to hand the conference over to your first speaker today, Mr. Tony Hung, Senior Director of Capital Markets. Thank you, and please go ahead, sir. Thank you operator. Hello, everyone, and welcome to Lexin's First Quarter 2021 Earnings Conference Call. The company's results were issued earlier today and are posted online. Joining me today on the call are Mr. Jay Wenjie Xiao, our Founder, Chairman, and Chief Executive Officer; Mr. Craig Yan Zeng, our Chief Financial Officer; Mr. Yang Chao, our Vice President; Ms. Beryl He, our Senior Financial Director; and other members of our team. For today's agenda, Mr. Xiao will provide an overview of our recent performance and highlights, Mr. Zeng will discuss our core results, and Mr. Chao will discuss our credit performance. Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make forward-looking statements. Please note that this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains the reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in renminbi. I will now turn the call over to our CEO, Mr. Xiao, whom I will translate for. [Non-English content] I'm pleased to announce to everyone that in this quarter, we have once again achieved a record of high growth in our financial results. China has already become the world's largest consumption market. Our new consumption strategy will allow us to seize the benefits from this opportunity. In the first quarter, this strategy enabled us to grow both our user base and business scale rapidly. In the first quarter, Lexin's newly registered users reached 14 million, continuing seven straight quarters where our newly registered users increased by over 10 million, leading the industry. At the end of the quarter, Lexin's total registered users reached 132 million, an increase of 56.5% year-on-year. Users with credit lines reached 30.3 million, an increase of 46.5% year-on-year. New active customers for the quarter reached 1.8 million, an increase of 88% year-on-year. In the first quarter, Lexin's platform facilitated RMB 53.8 billion in loans, an increase of 57.8%. [Non-English content] The continued refinement of our risk management systems allowed our asset quality to continue to improve. At the end of the first quarter, our 90-day- plus delinquency is at 1.84%, and FPD30 for new loan originations has been below 1% for eight months now, the lowest since the pandemic. [Non-English content] Both our user base and our scale continues to grow rapidly, and our risks continue to stabilize and decline. This dual rise and one decline allow many of our core financial metrics to reach record highs. In the first quarter, Lexin's revenues were RMB 2.9 billion, gross income was RMB 1.37 billion, and non-GAAP net income reached RMB 771 million, with EBIT non-GAAP reaching RMB 911 million. I anticipate this positive trend will continue in the following quarters, and we are fully confident in our ability to reach our loan origination targets of RMB 240 billion-RMB 250 billion. [Non-English content] Next, I'd like to share with everyone some of our current strategies in our financial technology services and new consumption. On the financial technology services side, we're in the process of diversifying our assets, and specifically towards micro business owners. We have worked with multiple scenarios to develop a series of pure operating credit products. In the first quarter, these products served nearly 200,000 customers, primarily from machinery equipment, electronics and related manufacturing, light manufacturing, and wholesale, generating RMB 2.1 billion in transactions. At the same time, after analyzing our existing customer base, we discovered that over 15% of our customers fit within this category of operating and financing need. And in the future, we will increase efforts to fully uncover the potential of these assets. [Non-English content] Currently, many banks, especially small- and medium-sized regional banks, face common challenges when it comes to traffic acquisition, operating models, and other problems, and have become overly reliant on outside channels or a single partner model, which is difficult to sustain. Creating a self-operated product loop, increasing operational self-sufficiency, stability, and compliance has become a real need. Lexin, through our past seven years of solid internet product experience, operating capabilities, financial technology capability, stands in a unique position to help financial institutions solve these problems. As a result, we've initiated our co-development with regional banks plan and joint operations services to help banks create a self-operated product group, enabling localized development. On May 13th, 2021 we signed strategic cooperation agreements with the Bank of Nanjing, the Bank of Gansu, Zhongyuan Bank, the Bank of Kunlun, Jiangnan Rural Commercial Bank, the Bank of Urumqi, and nine other banks. [Non-English content] In addition, our financial technology output services has also achieved noteworthy growth. Our online micro loan credit products, which product LeTu Pro, already has over 30 participating institutions, achieving CNY tens of millions in financial technology revenues. [Non-English content] On our new consumption strategy, our buy now, pay later BNPL product Maiya, is growing rapidly. In the first quarter, Maiya achieved over RMB 60 million GMV, and today Maiya has served over 510,000 customers and 1,575 merchants, generating a total GMV of over RMB 237 million. Maiya is already established in the Shenzhen IKEA mall, Excellence INTOWN, and other core shopping and business areas, creating opportunities for merchants to grow their revenues and rapidly proving the viability of the operating model. Next, Maiya will also develop along three strategic directions, rapidly expanding the possible use cases. First, we will utilize our Fenqile e-commerce platform to target existing users to push the online Maiya business. Second, we will continue to work with major consumer brands and malls and outlets. Third, we will work with offline fitness, health and beauty, educational and other businesses to use Maiya as a business solution. Towards this goal, we are diligently building our business development team, integrating service providers, and creating an online and offline joint development model for Maiya. In the second quarter, we anticipate achieving RMB 300 million in GMV. Through Maiya, we look forward to creating for China's vast online and offline merchants a completely new sales tool, enabling merchants to improve their operating capabilities and driving the real economy. [Foreign language] Our local service and lifestyle products, LeCard and Yuehui, has also established relationships with leading nationwide vendors to provide benefits and privileges, increasing and gathering benefits and advantages to transfer to financial institution partners, and also increasing the stickiness of our consumers. In high-frequency consumption scenarios, LeCard and Yuehui are already exhibiting good growth potential. Current numbers indicated that in May, after rolling out the Yuehui model in participating movie theaters, RMB 3.65 million in GMV was generated in a single month. In the future, these new consumption products connecting both online and offline consumption scenarios will expand nationally to every city and district. Not only will it contribute revenues to us, but can also help financial institutions, especially local financial institutions, to acquire customers more cheaply and to more effectively manage high-quality local customers, creating a new driver of growth for Lexin's businesses. I believe that these new initiatives will enable us to further diversify, open new areas of even greater growth, and create stable growth for the future. Thank you Jay. As mentioned, we are very proud to announce our best quarter ever. In addition to achieving our highest loan origination ever, with numerous other all-time highs, we are also pleased to announce that our highest adjusted net income ever, as non-GAAP adjusted net income reached RMB 771 million. Key to our success in the quarter is the improvements of our credit statistics. The recovery and the stability of which we had already indicated back in January, which is now being reflected in our financials, a trend which we expect to continue for the year. Our loan origination trends continue to be strong, and we fully expect to reach our guidance of RMB 240 billion-RMB 250 billion in loan origination for the year. In addition, our cost of capital declined to 7.46% from 7.7% as we are once again lowering our funding costs, a trend which we also expect to continue over the course of the year. For the quarter, the profit-sharing component of our revenue remained relatively flat as we have decided to focus more on profitability and cash flow from this core part of our business. We already have the industry-leading position when it comes to profit-sharing. As we can choose to increase the portion of our funding from profit-sharing based on the market condition, this year, with our increasing scale, we will further refine our risk management operations while simultaneously improving our operating efficiency, enabling our profitability to further improve. At the same time, we will continue to invest in our new initiatives and technology to ensure our long-term growth. At the core of our strong profitability for the quarter is the increasing strong performance of our credit team. Next, I would like to turn the call over to Jayden to discuss our credit performance. Thank you Craig. As previously mentioned, we have continued our stable credit performance in the first quarter, and we expect this trend to continue. Our 90-day- plus delinquency ratio is now at 1.84% in the first quarter, and our credit performance continues to be stable as our lifetime charge-off ratio has stabilized at between 3.5%-4%, a rate which we expect to continue for the year. Our 30-day delinquency is at 3.6%. In addition, as you can see from the graphs disclosed with our latest earnings release, our first payment default rates 30-day- plus for new loan originations have been at well under 1% and continues to improve. Through continuous improvements and refinements of our risk management systems, we have been able to work continuously with financial institutions to enable them to tap into their preferred customer segments for new loans to further differentiate the risk levels for these high-quality borrowers, thereby optimizing the overall asset mix. Whether in terms of risk assessment, loan pricing, or loan size, we have made additional improvements in efficiency in all areas, reducing the expected delinquency rates. In terms of portfolio management, we have developed more accurate and differentiated strategies to manage overdue balances while enhancing collection rates through high efficiency and intelligent tools and more refined business management policies, enabling us to keep our overall collection rates and delinquency levels at a consistently healthy and stable level. As a result, I fully expect our strong credit performance to continue throughout the year. With that, I conclude our prepared remarks. Operator, please proceed with the question and answer session. Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press pound or hash key. Please stand by while we compile the question and answer roster. Once again, if you wish to ask a question, please press star one on your telephone. The first question comes from Jacky Zou from China Renaissance. Please ask your question. [Non-English content] So thanks management and congrats for the strong results. I have three questions. Number one is about our Maiya business. Observe that management gave RMB 300 million target GMV for second quarter. Can you give us a breakdown in terms of online offline channels? What is the current unit economics for Maiya? And who is bearing this credit risk? And what is our long term target for this business? Second question is about regulation. We know that the regulators summoned 13 FinTech platforms end of April and require loan facilitation business to go through licensed credit bureau. How will that impact our loan facilitation business going forward? Last question is about our SME business. Just want to understand what is our SME loan target for this year? Thank you. [Non-English content] Yeah. Jacky on your first two questions. First with regards to the BNPL or Maiya product, I think obviously we started in the first quarter and there is a big difference between what this product does and what we've done traditionally, not the least of which, of course, is that it's a 0% interest product to the customers, and we collect the fee from the merchant. When we created this product and we set out on these goals, we had a few principles in mind: that this is not going to be in any way like the traditional consumer finance. It will require a new type of funding model. That said, we have to say that all these things right now are very early. We were able to achieve RMB 60 million in terms of GMV in the first quarter, which was primarily driven by online and online transactions. In the second quarter, we can see that the offline has been growing very rapidly, and we believe that most of the growth in the future that we can see is probably likely going to come from offline as opposed to online. That said, we're hesitant to say a very specific percentage right now or breakdown because it is early, it is a little bit unstable. Similarly, for the asset quality, it's probably too early to say. That said, based on what we can see right now, it's clear that the customer quality is far better than what we've seen before. In fact, it's better by a substantial level and it's definitely much lower. Our goal here is to try to keep the losses down to, say, under 1% or so. Also like to emphasize that for the BNPL, this is very early on in terms of the model. When it comes to the defender model growth and otherwise, it's still early. What we can see, and it depends on the sector or industry. If, for example, we offer a three-month product, charging 4% is no problem at all. Longer term, charging a higher percentage wouldn't be too much of a problem. That said, though, the revenue model and exact percentage will no doubt depend on the sector. I would like to hold off until later before giving everyone more details on the numbers and otherwise, essentially the things that you would need to build a financial model. That's on the BNPL product. On the regulation, we have to emphasize that our loan facilitation model was developed in a very stable manner under what the regulators have seen within a regulatory framework that is actually fairly mature. We're quite confident in our model. What we do at the core is we give the banks a few services, including customer acquisition service and the ability to pick customers. The banks then provide the customers with your traditional financial service. We have not provided credit scoring services and we have not provided credit services. Hence, while we'll have to see how things develop on the regulators, on the credit scoring and the credit bureau front, overall, we're definitely very positive on the outlook on the regulatory side. [Non-English content] Yeah. We would also like to comment about the event where there are 13 institutions or 13 companies got called in Beijing. I think based on our knowledge, it was mainly about, if you will, the post Ant Group regulatory situation and having a fair regulation and in particular targeting those businesses that are much more complicated with more platforms integrated. As an independent company, hence we don't fall under, if you will, that level of regulatory risk or scrutiny. [Non-English content] Yeah. On the SMEs right now, safe to say that it's pretty early. That said, as mentioned on the call, there's definitely a lot of customers and users on our platform that are either SME business owners or have similar backgrounds. Hence we feel that this could become a real good new growth engine for our business. Right now it's probably too early to talk about some of the details of the numbers or to give guidance for this business. Right, thank you. Next question comes from Ethan Wang from CLSA, please ask question. [Non-English content] I have two questions. The first is about the percentage of platform based services out of the total platform based loan origination out of the total loan origination volume in the first quarter. My second question is on take rate. Just wondering what is the level, what is the first quarter's on take rate for credit-oriented and platform based on business model respectively. Thank you. [Non-English content] Ethan, I think when you look at the first quarter, the profit sharing we mentioned earlier in the prepared remarks for the first quarter was 47%. This is compared to the 50% in the previous quarter. Overall, it's pretty stable. Of course it's notable that this is a market and this is a form of funding that we developed. We are in the process of getting more and more banks to accept taking on the risk and also improving the potential take that we get on it. The combination of more and more financial institutions accepting this model and accepting, shall we say, to give us a higher take rate on it. Until that time, if you will. In the meantime, we may focus a little bit more on keeping more of the profitability for ourselves until such time as the market, the financial institutions, is willing to give us a higher take rate. On the take rate itself, you can see actually based on some of the math, that the take rates, depending on how you do the math, would be the highest in the past five quarters for a variety of reasons, including risk. We can talk about the details of this offline in the future. Until that time, if you will. In the meantime, we may focus a little bit more on keeping more of the profitability for ourselves until such time as the market, the financial institutions, is willing to give us a higher take rate. On the take rate itself, you can see actually based on some of the math, that the take rates, depending on how you do the math, would be the highest in the past five quarters for a variety of reasons, including risk. We can talk about the details of this offline in the future. Thank you. Next question comes from Steven Chen from Haitong International. Please ask your question. [Non-English content] Let me translate that. Two questions. First of all, a follow-up question on Maiya. From the accounting point of view, I would like to understand that when the business of Maiya grows, are we going to see some expected credit loss to be booked as some part of a provision charge in the P&L account? Should we also expect something like guaranteed income for the Maiya business? Secondly, if we take a look at the vintage charge-off curve chart, what we find that is for those loans originated in Q1 and Q2 2020, the shape of this vintage charge-off is different from the previous quarter shape. Especially, we are seeing the vintage start to see a sharp rise starting from the sixth month onward. I'd like to understand the reason behind, is it related to the risk management model, borrower's character, or macroeconomy? Unfortunately, I am not able to identify the Q3 curve. Did you see a similar shape for the Q3 vintage chart off bends? [Non-English content] For the first question, Steven I think it's important to emphasize the product. The Maiya is very new. The scale right now is not large. On these things, it's fair to say that we still have to figure out exactly how the accounting will work. That said, of course, everybody can look at, for example, Afterpay globally and how their accounting works for a consideration. As a whole, in terms of what it would be, it would actually be more like receivables and receivables risk associated with that. Importantly, this is not a loan product, and it will probably not be accounted for in that way. Overall, it's still early, but very clear that the risk for this product is very low. [Non-English content] Yeah. Steven maybe I jump to the end first. It's not an indication of the risk performance, but rather it's an indicator of how the charge-off works. Basically, the charge-off time, for example, in the seventh month. As it goes out, it would actually be consistent with the 30-day numbers. While there have been early charge-offs in the past, again, I don't think you can read actually too much into the curves in that way, if you will. Right. Thank you. Our next question comes from Alex Ye from UBS. Please ask your question. [Non-English content] So I have two questions. First one is on the regulatory front. Given there are still some uncertainties around the regulatory developments, I'm just wondering whether the management is considering to apply for a national online microloan license so as to a hedge to the regulatory risk. I'm wondering if you have heard of any new regulatory development on this front, given that this particular license is still on consultation draft stage. The second question is on the Maiya product. I'm wondering whether we should expect some synergies between this product and our major installment loan products going forward. Basically that should have resulted in lower customer acquisition cost. If we see more synergies going forward. I'm just wondering if you have seen any early trends on such conversion of customers. Thank you. [Non-English content] Alex we did mention the regulatory situation a little bit earlier, but I think what we want to emphasize here is that the regulations, as we all know, around loan facilitation are out and have been established. We would say that in fact, it's stable and the regulatory environment around the loan facilitation model is also stable. The associated risk with the model and also with the environment have actually decreased and been reduced over time. That's the first thing we would like to emphasize about this. With regards to what you asked about the national microloan license. We do have microloan licenses. For example, we have the Jiangxi microloan license. When we look at the underlying model involved with a national microloan license, we think that the leverage levels are too low. It's not consistent with the type of business and the business model that we would like to operate. Actually, we will not be pursuing that particular license. Now, with regards to your second question on Maiya, shall we say, whether or not it can lead to other conversions or positive externalities? It's clear that for the BNPL clients, for the customers, these are very, very good customers and there's a very good and open space and opportunity here. Obviously, potentially a most obvious solution will be consumer loans that are of lower interest, and we can see a very strong potential market for offering these things to the BNPL customers. Now, it's also interesting to note that there's a lot of potential for customer acquisition. What we're finding is because BNPL is so new and it is an open space and a space of tremendous potential growth, the customer acquisition costs are also quite low. Give an example. When we did a promotion with the Yitian outlets here in Shenzhen, we spent only something like RMB 50,000-RMB 60,000 and we got over 1,000 new customers. Literally the customer acquisition cost was like tens of RMB. Hence we can see the tremendous potential here, given how BNPL is a completely new space and hence the potential for many fronts, including on the customer acquisition side. Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question, please press star one on your telephone. Our next question comes from Cindy Wang from DBS. Please go ahead. [Non-English content] My first question is related to the SMB loan. Because this type of the loan has been growing very strongly and achieved RMB 2.1 billion loan balance in first quarter, could you provide some colors on what's the loan tenure and the size of the loan as well as the APR for this new SMB loan? My second question is related to the co-develop with the small and medium size of banks for the joint operation services. Could you provide what type of the products you are going to work with these banks and what's the profit model will looks like going forward? The third question is related to the asset quality trend. Could you give us some colors on what the trend looks like in the second quarter of this year and how do we expect in the second half of this year? Is there any possibility that the vintage charge-off rate is going to improve to 3%-3.5% instead of your early guidance of 3.5%-4% this year? Thank you. [Non-English content] Cindy for your first two questions. On the SMB loans, the typical size these days would be about RMB 100,000 to RMB 150,000. The pricing would be typically 18%-24% in terms of interest, the tenure would be 12 months. It's fair to say that there is a high variation in terms of the different SMEs and potential customers out there. In the future, as we do more of the business and we get into more detailed calculations, we will have variations in the products as well. Now on your second question with regards to the cooperation with the smaller and medium-sized banks and what products we would cooperate on, well, we'll first start with working with a select group for deeper cooperation. What we do see, of course right now, is a situation where for a lot of the financial institutions, the credit, the money can't leave the province. Also, their operations on several levels has room for improvement. What we would aim to do is actually to work with them and cooperate with them on a one-on-one basis and on a side-by-side basis effectively to help them develop new and more innovative products targeting their customers, to help them run their operations better, especially when it comes to managing their existing customers, and to look more closely at their portfolio and their customers as well. What we would make on this would effectively be like a commission on the business. Obviously, under this model, we won't be taking on any risk. [Non-English content] Cindy I think as mentioned earlier, everything that we see from the first quarter is going in a positive direction and this continues in the second quarter. We will definitely continue to further refine our risk control models and to improve it. We certainly hope to improve the numbers and to continue to see the asset quality continue to improve. Also taking risks. Of course, we continue to grow. Overall, we want to be cautiously optimistic about the general asset quality trends. I think what we would like to do is maintaining the outlook at 3.5%- 4%. Great, thank you. We are now closing on the end of the call. Your final question comes from the line of Yada Li from CICC. Please ask your question. [Non-English content] Okay, I'll translate my question. I have two brief questions. The first one is about our funding partners. Could you please share more information with us on how many funding partners we have in total by the end of Q1, 2021? Besides, how many partners do we have under the profit-sharing model? The second question is regarding our new joint operation service model. I was wondering if you could help us understand what's the actual difference between the new joint operation service model and what we've been doing before. Thanks so much. Ok [Non-English content] I think with regards to the first question, our asset quality and the attractiveness of our assets has always been high. We've consistently had over 100 funding partners, and certainly we continue to increase the number. It's perhaps worth noting and highlighting that of late, there's been a series of local regulations or guidelines targeting towards more, shall we say, local type banks. Hence, as a result, some of our operations and our goals have targeted the local banks in light of the type of guidance that they've received. We've signed up over 10 regional banks recently, but we don't have the definitive exact number on that particular initiative to give you on the call right now. That's on the first question. Now, on the second question, there's actually a very obvious difference in terms of the cooperation and how it works. At a high level or at the customer acquisition level, the traditional model is our customers, and it's our traffic, and it's our customers and our traffic getting directed to the financial institution. Under the new cooperation model, it will no longer be using our particular customer's traffic or our current products. It would be working with the financial institutions themselves to develop local products and to help with their local operations and based on their local environment and conditions to develop the appropriate set of products targeting their local customers. Again, at a high level, and a very key thing is this is not our customers being diverted there. It's rather developing a capability not only to serve well the local bank customers, but also actually to help with the local customer acquisition. We would be able to, for example, help direct their online advertising and marketing, something that we certainly have expertise in. Ultimately, interestingly, once the product is developed and we have these revenue drivers, in terms of the revenue and the profit and the split, it may actually be very similar to our existing products. Hence, in that sense, it's similar, but again, the underlying model is very different. Also, I think it's important to emphasize that, for example, we see a lot of banks, they have many depositors, they have many customers, but they don't necessarily know how to develop the right type of financial products and loan products to target or serve these depositors and customers. That's what we aim to do, and we aim to help with a complete model. This would involve actually a dedicated team, and in fact, dedicated teams that would live and breathe and actually work at the banks, if you will, side by side. Hence that you can see that this would actually be a very different product than what our existing products are. All right. Thank you very much. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.