LexinFintech Holdings Ltd.

Ladies and gentlemen, thank you for standing by and welcome to the Lexin FinTech second 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 would now like to hand the conference over to your first speaker today, Ms. Patricia Cheng, Head of Capital Markets. Thank you. Please go ahead.

Hi, everyone. Welcome to Le Xin's second quarter 2021 earnings call. Our results were issued earlier today and are available online. Joining me today on the call are Mr. Jay Hsiao, our founder, chairman, and CEO, Mr. Chris Chiao, our interim CFO, Mr. Jayden Chiao, chief risk officer, and Ms. Beryl He, senior finance director. Jay will first provide an overview of our recent performance and highlights. Chris will then discuss the financial results and Jayden will cover credit performance. Before we begin, please note that the safe harbor statement in the earnings press release, which applies to this call, as well as will be making forward-looking statements. The call may include discussions of non-GAAP financial measures. You can find the reconciliation between non-GAAP and GAAP in the earnings press release. Finally, Unless otherwise stated, all numbers mentioned during this conference call are in RMB. I will now pass it over to Jay. His remarks will be in Chinese and translation will follow. Jay, 交给你。 好的,大家好,很高兴再次跟大家交流。 第二季度是乐欣的一个重要的里程碑。 我们在几个关键的经营指标上都创下了历史新高。 贷款发放、债贷余额、营收和净利润均取得了突破。 这是一个来之不易的结果。

In the course of our development, we have experienced many ups and downs, and we have been actively facing them. For those of you who have been following our analysts, you have witnessed some of the difficulties and challenges we faced in the past, and witnessed how our team responded to changes, actively adjusted and achieved good results, especially the change in assets caused by the epidemic last year. This also made us reflect and adjust the main development strategy, and made a comprehensive upgrade to the risk management system, and improved our ability to manage assets. Fortunately, our efforts have gradually come to fruition. In the past few seasons, our asset quality has continued to decline, and our profits have also continued to decline. In the second quarter, the average of 90 days has decreased by 100 points to 1.85 points. Looking back, our assets have also remained stable. Jason will explain this in detail later. I would like to emphasize that in the past, our entire series of adjustments and upgrades have been very effective. This also helps us in the future. in the face of the uncertainty of the industry. Then I will talk to you about the changes we have been concerned about recently, especially the price of the top 24. How will it affect us and how will we deal with it? This policy is a adjustment that has a greater impact on the development of the industry. Therefore, we are also actively preparing to face this major change. First, we will slow down our growth rate. asset quality, and maintain a good financial model. Therefore, we decided to release a guide for the whole-year loan, from the previous 2400 to 2500 billion yuan, down to 2300 billion yuan. For Lexin, when it comes to monitoring the price of the top line, a healthy and sustainable financial model is more important than the growth of scale. We will not sacrifice the long-term sustainable development of the company for the scale of one or two seasons. When the price is gradually affected by the 24th, our overall strategy is to conduct more detailed management of customers, eliminate high-risk customers, and re-adjust our risk bias, and further reduce the risk of assets to a reasonable level. In fact, we will also raise the price of customers below 24 to match the impact of a part of the decline, and increase the operation of this part of the customer, and increase the asset size of the people. Secondly, we want to fully improve our operating efficiency, improve our operating level to maintain our profitability. We believe that the industry is changing constantly. As long as we are actively responding, the impact is controllable. Once our response measures are in place, our profitability will reach the current level. Ensuring the sustainability and high growth of core businesses is our main task. At the same time, we will continue to develop new consumer strategies, In the second quarter, the products of the first and second quarter maintained a good growth trend, cooperated with more than 1,000 businesses, and served more than 600,000 users. It contributed 3.49 billion GMV. It is more than five times in the first quarter. We will also actively promote new business, expand new development space, and make the development of pleasure more diverse. The core of consumer finance is consumption and finance. The two are head-to-head, and the future can be better co-developed. This is Lexin's concept and Lexin's future core competitiveness. Thank you for your attention and support. Next, I would like to invite Chris to discuss some of the performance of our core business figures of this quarter.

Hello, everyone. It's my pleasure to speak to you all again. The second quarter was a major milestone for Lexin. We achieved all-time high in several key metrics. Loan origination, loan outstanding, operating revenue, and net income all made record breakthroughs. This is not an easy victory. We have gone through many ups and downs in our journey, and we have always responded with vigor. For those of you that have been following us, you were witnessed in some of our most difficult and challenging moments and saw firsthand how the team responded to change and turned the business around, especially following the decline in credit performance after COVID-19 last year. The incident made us rethink our strategy and carry out a full upgrade of the risk control system, strengthening our capability in managing our risk asset quality. The assets have been paying off. Our credit performance continued to trend well in the past few quarters. The 90-day delinquency ratio fell by over 100 basis points to 1.85% year-over-year in the second quarter. Sequentially, the level was held steady. Jayden will elaborate on this later. What I would like to highlight is a series of changes we have implemented and the capability that we have built up. They have laid a solid foundation, helping us to face any industry headwinds that may come our way. Now, let me get to what you're most interested in, the regulatory change, especially the 24% pricing cap, how it will affect us, and how we will be responding. This will have a major impact on the industry. And in response, we are also embarking on a transition ourselves. First of all, we will slow down our pace, and we will step up the focus on asset quality and profitability of our business model. We have therefore decided to lower four-year loan facilitation volume to RMB 230 billion from 240 to 250 billion previously. At Le Xin, a healthy and sustainable business model is more important than scale. we will not sacrifice the long-term health of the company for the sake of volume in one or two quarters. With pricing affected by the 24% cap, we will embrace more precision and differentiation in our customer strategy. We will spell a scale back from low-quality customers. We set a risk preference in order to adjust down overall asset risk. For customers currently at below 24%, there's scope for pricing to go up. We will increase the intensity on servicing this group and increase their size. In addition, we will also enhance our operational efficiency with the ultimate goal of maintaining profitability of our business. The industry will never stop evolving. We are confident that any impact will be transitory and manageable. And once the measures get all put in place, profitability will return to current levels. Ensuring quality and sustainable growth of the core business is a top priority. At the same time, we will also continue to further develop our new consumption strategy. Momentum from Ma Ya, that is our buy now, pay later product, remains strong in the second quarter. Working with over 1,000 merchants and serving over 600,000 consumers, it generated GMV of RMB 349 million, more than five times the amount we got in the first quarter. The initiative will allow us to tap into new opportunities and diversify the revenue base. At the core of consumer finance lies consumption and finance. The two can drive a much stronger outcome when they go hand in hand. This is the belief of Le Xin and also our core competence. Thank you for your interest and support. Next, I would like to invite Chris to go through the financials in more detail. Chris, 交給你。 好的。

Overall, we have achieved very good performance in the second quarter. Whether it is customer index, income or profit, we have made history. Next, I will introduce to you the specific factors of business growth. First of all, from the income, our active number of users reached 8.4 million, which increased by 24%. The amount of loan issuance increased by 47.6%, reaching 6.06 billion yuan. The remittance amount increased by 46.2%, reaching 9.05 billion yuan. Their total revenue rose by 10.5%, reaching 33 billion yuan. The ratio also rose, rising by 11%. Platform service revenue is the largest driving force of this quarter, increasing by 47.9%. In terms of the income contribution that does not take the risk of new generation, the total income of the platform plus e-commerce and online business has reached one-third of the total income. As for the risk and capital costs, both of them have maintained a good trend in the second quarter. The stock market remains stable and reflects the stable asset quality as well as our risk management ability. I will make a detailed introduction later. In addition, our capital costs continue to drop in this quarter. This is also under the joint promotion of quantity, risk and capital. The same ratio and ratio of the second quarter have risen. In terms of operating costs, although the second quarter sales investment has risen, this is consistent with the trend of the industry, but we have achieved better financial management in terms of management and other costs. In terms of income structure and financial structure, and fee management. The second quarter of net profit reached 7.87 billion yuan, creating a new record, with an increase of 87.7%. In the face of changes in the monitoring environment, we will continue to strengthen risk management and cost management, and improve our own response capabilities. As Jay said at the beginning, we will not compromise on the supply chain for the sake of scale. Next, We are proud of the performance in the second quarter.

Customer metrics, top line and bottom line all reached record high. Let me explain the drivers in more detail, starting with the top line. Number of active users reached 8.4 million in the quarter, 24% higher year-over-year. Loan origination rose by 47.6% to RMB 60.6 billion year-over-year. and loan outstanding increased by 46.2% to $90.5 billion. Total revenue went up by 10.5% to $3.3 billion as a result, setting another record level. It was also higher sequentially by 11%. Platform-based services income was the biggest revenue driver, up by 47.9%. The part of revenue without any credit exposure, that is platform-based services plus online services, now made up a third of our total revenue. Moving on to credit costs and funding. Both maintained good momentum in the second quarter. Provision held steady sequentially, indicating stable asset quality of a portfolio and ability in managing risk, which Jayden will talk more about later. Additionally, funding costs continued to go down quarter over quarter. Driven by the positive trends in volume, risk, and funding, tick rate improved both year over year as well as Q over Q. While spending in sales and marketing went up in the second quarter in line with the industry trend, and we maintained our discipline in administrative and other expenses. From business mix to risk management, funding structure, and cost control, all this came together to drive the 87.7% growth in net income. Amid the regulatory headwinds, we'll continue to stay prudent in risk management and cost management. As Jay said at the beginning, We will not compromise on quality for the sake of scale. Next, I would like to turn the call over to Jayden to discuss our credit performance. Jayden, over to you.

Thank you, Chris and Patricia. As both Jayden and Chris mentioned, asset quality remains stable in the second quarter. Our 90 days plus delinquency ratio finished quarter at 1.85%, down over 100 basis point year over year. It remains steady to first quarter's 1.84%. Moreover, the 30 days plus delinquency ratio improved to 3.37% from 3.6% in the first quarter. In terms of charge-off, the vintage rate was also stable at about 3.5% for loans originated during the 12 months ended June 30th. The new customers that we acquired in the second quarter so far have proven to be as good as first quarter, as shown by the first payment default rate for 30 days plus. FPD30 for new loan originations remained at below 1%. Of course, we cannot be content with our existing efforts. Regulatory changes will lead to changes in industry and credit quality. We need to make sure that our system can screen in quality assets, set the right pricing, and monitor performance. To this end, risk management remains the key focus. I took on the CRO role earlier this year with clear mandate to solidify our risk control initiatives. We have been instituting changes before the latest policy changes. These include refining risk strategies across customer lifecycle, as well as strengthening the risk models for each product and channel. We have also stepped up the collection effort. All these aim at boosting Le Xin's capability to weather any market uncertainties. With that, I conclude our prepared remarks. Operator, please proceed with question and answer session.

Thank you. We will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Please note there may be a short pause as we collate the questions. Your first question comes from the line of Eddie Lang of Bank of America, Mary Lynch. Please ask your question.

Thank you. I will ask in Chinese first, and then I will translate it myself. Two small questions. First, Jenny also talked about the issue of regulation. And then we also talked about our original goal, The amount of the loan may be reduced. I would like to ask, from the perspective of the user, will we have some changes in the future in terms of channels or customers? Another question is, I would like to ask the question of the buyer. I would like to ask some of their users. We have been doing this for about half a year. I have two quick questions. The first one is about the regulation. As Jay mentioned that you guys would be adjusting down the full year long growth target. So on a user perspective, How would that change our user acquisition channel or marketing activities? And then secondly, about buy now, pay later initiative. Any demographic or user profile characteristics that you can share with us? How these users might be different from the mainstream users of our long borrower user base? Thank you.

Okay, let me answer these two questions. First of all, when it comes to the vulnerability of policy, we take the initiative to lower the target. We mainly want to ensure that we can further improve our asset quality on the 24th interest rate line. When we lower the price of the whole thing, it means that our possible income will be reduced. Then we have to eliminate some high-risk users. This also helps us to reduce our risk. So we hope that under such a adjustment, we can help maintain a relatively healthy table rate and our continuous profit and loss. So I think the impact of this 24, why did I say at the beginning that the impact will be relatively large? This does not only affect our entire fund, the entire fund. I think its impact on us is the management of our stock customers, as well as some adjustments to our entire customer strategy and customer channels. I think this is still a relatively systematic project. So in terms of acquisition, we have already made some positive adjustments and preparations for this matter. I think in the future, we will use the entire quality of an assessment user, the entire standard of 24, to do the acquisition. In terms of advertising, We will re-adjust the selection of the entire customer group. We will definitely reduce the proportion of customers with small amounts and high interest rates in the past. We will strengthen the acquisition of the core customer group of 24. Of course, this may lead to an increase in the cost. But in fact, we will increase the construction of the entire capacity of the entire customer in the whole line. As you all know, we have a very strong offline team. The growth of this team is also a very fast path for our customers in the past. What about the offline customers of PuHui? It has a few very significant features. First of all, all of its prices range from $20 to $100. Moreover, all of its risks are significantly lower than the risks of our entire market. Second of all, it has a very high price tag. It will also be relatively high. In this way, in fact, our whole offline, the whole general meeting, it will become our future. In the face of 24, 24, this example is a very important one. The whole catcher is a catcher. So we will focus on strengthening the whole of an offline part of the whole investment. And our investment has begun to take effect in the last three seasons. We started from the beginning of this year, about one thousand, more than one thousand people. The size of a team has now grown to two thousand. And we can see that the scale of our customers every month is almost doubled compared to the beginning of the year. In fact, let's talk about the purchase pressure and the whole thing we have analyzed. Do you want me to translate it for you?

Let me do very quickly the translation of this. On the regulatory change, we have decided to revise our guidance because quality is very important to us. So that's why in this process, we need to reduce high-risk users. And the purpose is to maintain tick rate and profitability of a business. And you can see that the changes that we have to make include funding and also how to service our existing users and also in terms of our customer acquisition strategy. There's going to be major adjustments that we have to do and also we have been doing. And we have been adjusting our business as a result for our customers. Now when you look at them based on the 24% of this criteria, And we have to adjust, you know, how we screen and how we do the advertising. We would not go after, you know, small amount loan size and also a high pricing rate. And we also have to strengthen our reach to this core group of customers. And of course, there will be some increase in the cost. And in terms of the offline, we would also step up, you know, our offline team build out. When you look at our Hui business, the offline business, all the pricing is below 24%. And also the asset quality is better than the overall average. And also the average loan size is also higher. So this is a main channel for us and one that we will continue to invest in. At the beginning of the year, there's about 1,000 people in the team. Now it's about 2,000 now. And we already started to see the impact in the third quarter. And when we look at the monthly contribution from the Puhui team, it's almost a double from the beginning of the year.

The quality of its entire user is obviously better than the quality of this kind of modern customer itself Because the characteristics of buying and selling have two core characteristics First of all, it is the most consumer-friendly In the case of consumer-friendly, it will naturally attract more of this kind of advantageous human rights Because in finance, you will have a reverse choice when you charge the fee The higher the interest rate you charge, the more the bad people will not care about this interest On the contrary, the better people will care more about the high or low interest rate So the purchase price is naturally a product that is free of charge. It can attract more customers who are paying the full price. So the quality of the customer base will become better. In addition, we can see that the entire customer base of the purchase price, because we are in the offline store of the entire store, the brand chain store, to receive customers, those who can consume offline today, especially those who go to the whole department store to consume, On Maya, the quality from the Maya users is significantly better than Fengqiluo.

There are two characteristics. First of all, Maya, the product itself is interest-free installment. And when you look at interest-free, naturally, it's going to attract good quality customers. When you have high interest rates, only the poor quality guys would actually go for the high interest rates because they cannot get loans elsewhere. But for this one, it's interest-free, so it naturally attracts the good quality users. And then second characteristic is data. We do it offline together with Morph and other brands. And nowadays, only customers with a certain income level, they would go to malls and these shops. So again, for that one, we are able to attract better quality customers this way. And so far, when you look at the potential and risk, we do see that Maya is better than Shengqi Luo.

Thank you. Thank you very much. Thank you.

Your next question comes from the line of Ethan Wang from CLSA. Please ask your question.

其实主要就两点,一点是take rate, 一个是未来两十三年的loan ordination。 I want to know how the management level is going to change. The second question is about the capital light business model. In the past, we have always emphasized capital light, but there have been some changes. We want to keep the capital light percentage at a relatively stable level. In the future, in the case of APR below 24, OK, so I have two questions. The first one is still on the regulatory challenge about keeping the APR lower than 24%. Just wondering if management has done some quantitative forecasts on the impact to take rates and long-duration in the next two to three years. The second question is on the capital life business model. We've been doing the transformation to capital life for some years, but then we decided to keep that percent stable. Just wondering under the new 24% APR cap, does that strategy change or We just want to remain at the current level. Thank you.

So this part of the user, in fact, for us, we just have to put it in one one is to set the price appropriately down, in fact, he can these users can continue in the future of the whole policy can keep this part of the user of the transaction In addition, we have a part that does belong to its entire risk range, not in the second price range, etc. Then we certainly need to eliminate this part of the user In terms of our internal calculation, in the short term, during the entire switching process, we hope that in the future, our entire 24 users will be able to achieve a larger proportion. Under this proportion, for the entire proportion of 24, we need to lower the risk of this part of the user in the entire table. In other words, in the future, if we cut all the users to 24, we must also lower the corresponding risk. So we hope that our risk can be from the current risk of the whole market to a lower level in the future. And in addition, this problem is actually related to the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of the whole of How to balance I think this will also we will also from the whole revenue and risk aspect to calculate that overall I think Long-term look at the next two to three years or even I think we don't need so long we can when our structure is in place We see on our own model that we are capable of reaching a level like this today so I think We have carried out internal analysis and models on the 24% impact. At the moment, most of our customers in terms of risk profile, they are below 24%.

And for this group of customers, definitely we have scope we can bring down on the pricing to meet the criteria. And we will keep these customers and their volume. And for the group with risk above 24%, this is the group that we need to reduce. And with lower pricing, our aim is to bring down the overall risk. And so we have to maintain our asset quality. And on the profit-sharing model, that is the capital-like model that you mentioned, we aim to at least maintain at today's level. But, of course, we would look at the mix between profit-sharing and risk-bearing. We would adjust the mix. And the aim is, of course, to ensure that we meet the requirement and also to keep the asset quality. And once all the measures that we have begun, once they are all put in place, we do expect that our take rate would be about 3 to 3.5% would be able to maintain at that level.

Got it. Thank you.

Your next question comes from Chi Yao of MS. Please ask your question.

I have a question about the new personal information protection law mentioned in the EARLY RELEASE. I would like to ask, what are the processes of our loan? What processes or environments are likely to be affected and need some adjustments? Do we have any initial adjustment plans? In addition, we estimate that there may be some additional recovery costs involved. What kind of scale will it be? This is the first one. The second question is, I still want to ask about the price of 24. After we adjust it, So I briefly translate the first question is about the new personal data protection regulations and just want to ask management based on your judgment, which roughly what part of the process can be impacted and should be modified as a result? And is there any preliminary plan? And then related to the extra compliance cost, what would roughly be the impact to the cost side? The second question is related to the 24% pricing cap. So just wondering, is there any new levers that Lushin can pull in order for lower potential funding costs? Thanks.

Let me answer the first question. It actually emphasizes a minimum requirement principle. LeXion has already met the requirements of the company, and has done a more comprehensive and strict control over the application process and all the links of our entire app. So now our entire data collection level is all in line with this minimum requirement principle. There will be some minor changes in this process. For example, when we were collecting user information or obtaining user authorization, is based on the general authorization agreement. Now, in each use scenario, the user has to make a separate authorization. So, this may be a small change in the process. In addition, there will be a certain degree of increase in the cost of the contract, but it will not affect the result of the whole seal. On the personal data protection, that one, the principle is to base on the minimal requirement. And this is a principle that we have always been following in our data collection process.

We have made adjustments to our app as a result in order to make it more compliant. There are some minor changes. For example, in the authorization process, in the past, there was a master authorization. So the users, they would agree to a master policy. And now in each usage scenario, the individual would have to give a separate permission on it. That's going to increase our compliance cost a little bit, but it's not going to affect the results of our risk analysis. And at the moment, there are a lot of definitions and also the details actually not yet come out from the regulators. Exactly how much change or how much more change we'll have to carry out, we'll closely monitor the situation.

OK, let me talk about the second question, which is about the capital cost under the price of 24. We expect that in the long term, the entire capital cost will be stable. For the users under 24, we expect that its overall risk will be better than that of the current customer group. The overall risk will drop. Then, in the case of better asset quality, we will have more acceptance from the funders. On your second question about funding cost, in the long run, we do expect the funding cost to be stable and also to go down a little bit.

And with the pricing cap of 24%, that means risk is going to improve. And asset quality is also going to be better. That will allow us to tap into more funding partners. And we will also increase the issuance of ABS. And we will improve, that will help us to improve our funding structure and also the funding cost.

Thank you very much.

Your next question comes from Alex Yee of UBS. Please ask your question.

Thank you for the opportunity to ask my question. I have two questions. The first one is about the development of the small bank loan. Can you please tell us about the latest situation? In addition, the interest rate has also been below 24%. Since it is at 21%, if it is not affected by this uptrend and downturn, will it still be able to grow as a relatively large driver next year? Will this be a focus of future development? For example, is there a comparison of goals in the next two or three years? I will translate my question. First one is on your latest development of your SME loans. I'm wondering whether the average interest rate or cap is below 24% for this type of SME loan. And if it is, then I would presume it would be under less affected by the 24% IRR cap. So would you expect this business to continue to maintain a stable growth driver for the next year? Do you have any sort of targeted volume contribution for this SME wetlanding business in the next two to three years? My second question is about my ER business. Could you share with us the latest development status for this business? For example, the latest growth status for the past few months, and how do you plan to continue to grow this business going forward? Thank you.

First of all, I would like to answer this question of Xiao Wei. Xiao Wei is a new business that we have started to invest in this year. I have introduced it to you before. In fact, some of the users on our platform are already Xiao Wei's managers. We sent some of our customers to do this business from our platform. In fact, we have also done some of the things that everyone in the industry is doing. A whole tax, based on the tax of the user, the ticket, the tax ticket, etc. to do the entire loan. Then we also did some for some scenarios, such as cross-border e-commerce, etc. A part of the entire industry of the car. So I think that to start this business, first of all, we still have a relatively low attitude. Because this kind of credit for small and medium-sized enterprises is indeed a relatively difficult thing. The difficulty is its amount. Compared to personal loans, its amount is larger. The performance of the whole risk of gold and silver is actually taking longer to be seen clearly. So our goal for this year is to be able to do the whole test of the sample of these products that we are doing today. We can see clearly the performance of its entire risk. If our entire risk performance today and prove that we are more mature in terms of the entire risk model in this field today, we will push its entire volume next year.

We started the SME business this year because on our platform, some of the users, they are actually small business owners. So we started this group. We do the lending based on tax and invoices. And the business that we serve include cross-border e-commerce and the auto industry. We took a prudent view in this business because you can see that, you know, for the SME lending, the loan amount is bigger than retail. And also the duration, it takes longer to see the progression of risk and to monitor the performance. So right now, we are starting with a test sample so we can better observe the risk characteristics and also we can fine-tune a risk model. If a risk model proves to be effective, we are going to step up the volume next year.

As for buying pressure, as you can see, it is also a new business that we have invested in this year. As we just talked about, the quality of the entire customer of this product is also very good. Its market space is also very large. Our business is in the first quarter of this year. In the second quarter, we are starting to do more industry testing, including testing this product with more brands. From the effect received by the entire brand, in fact, everyone's feedback on this product is still good. We can see that the acceptance rate of this product in China should be as a result of our continuous education, we can start to accept it better. And we can see that the application effect in a part of the entire brand can significantly improve the sales of the entire offline brand, as well as its retail price. So this has actually been approved by our current test brand. In the next three seasons, we will start to build some regional teams. In the second season, most of the testing will be done in Shenzhen. In the next three or four seasons, we will start to build regional teams. We will start to try to replicate and verify this model in several places across the country. We can also see that this business model is still in a relatively early stage. We also believe that this model can be so successful around the world. In China, it also has its vitality and a space for growth. At present, Lexin's layout in this field is the market. The market is definitely our leading position.

On Maya, we also started this new business earlier this year, and as I said earlier, the quality has been better than our average user, and also the potential, we see strong potential coming from this market. So first quarter, that was a rollout, initial rollout, and the second quarter, we pilot tested the business in more industries. We worked with more brands, and the feedback from them has been positive. And we do see that there's recognition in China for this business, and that's going to help drive the GMV. And for some brands that we do offline, they have reported back that the average spending has gone up, and there's also more additional purchases. And from 3Q, we've been building regional teams. So in the second quarter, we pilot tested it in Shenzhen, and now we are rolling it out in a few more cities to further test this business model. Now, I have to say that it's still in an early stage, but then when you look at the buy now, pay later model, it's present globally. So I do see that there is strong potential in China, and Le Xin is definitely one of the leading players in the area. 好的,翻译完毕。 Thank you.

Your next question comes from Jackie Zuo of China Renaissance. Please ask your question.

谢谢管理层。 我这边有两个问题质问一下。 第一个也是关于买押的,因为我们上个季度其实给出了一个三个亿的买押GMV的一个guidance, As we are also building a team in this area, we would like to know if we will see a three-week GMV buy pressure guidance. How will it increase? The second question is about the three-week situation. One is the loan volume, the other is the APR and take rate. I understand that we are also making adjustments to the 24% APR. I would like to ask about the volume of the third quarter. Compared to the second quarter, the long volume of the third quarter is expected to be at a certain level. As for the APR, I don't know if we have already started making some adjustments. So I have two follow-up questions. Number one is also about Maya products. Given we are starting to assembly our regional teams for Maia, do we have any Maia GNV guidance for the third quarter? And second question is about also the third quarter so far, the volume and APR. So for the loan volume so far, what is the expected volume compared with the second quarter? And also, based on my understanding, we are maybe starting to adjust the APR. So what is the APR level in the third quarter? And how would that impact our net take rate? and also what is the percentage of the high-risk customers based on our estimate. Thank you.

So our overall growth is expected to be faster after our entire team is completed. So I think in the third quarter, in the final quarter, we still have to see if some of the latest projects can be launched in this quarter. Overall, the numbers we see are still growing significantly in the third quarter and the second quarter.

On Maya, we do expect meaningful increase from second quarter to third quarter. As I said earlier, we've been building our teams in New City and going beyond Shenzhen. But of course, more meaningful growth will come after the complete build-out. And at the moment, we do see meaningful increase queue-on-queue, and also we're trying to bring more cooperation agreements online.

The second one is about our entire API, including some of the cases of Tegulate. We have started to adjust it in the third quarter. So when this policy comes out, we will start to adjust it as soon as possible. Our entire Z-code API has been down since July and August. I think this is mainly a result of our own initiative in adjustment. What this will bring is that the take rate may also fall. But what I just talked about is the core and key thing in the entire model of the S&P 24. After we make these adjustments, we hope that our risk and our asset quality will improve and the risk will also fall accordingly. Today, in fact, we have just adjusted and the whole time is too short. The risk after the adjustment has not yet been shown. On your second question about the APR and take-away rates, we started adjusting our business as soon as the policy came out. And in July and also August, APR has been in a downtrend.

And it has led to a lower attack rate. But of course, in this adjustment process, our risk has also been improving. So therefore, the risk cost will be lower. But you know how it's a bit too early to say, because we only started this process, you're not going to see any immediate like numbers, any immediate results. But we do expect that once we complete this process, we'll be able to get a better risk and we'll be able to maintain our profitability.

Okay, thank you, Jay. Thank you, Tracy. Thank you. Just say it. Just say it.

Just say it. Okay. Let me briefly talk about the third dimension, which is the issue of high-risk users in Q3. From our current situation, we see that high-risk users based on the risk dimension, that is to say, those with a price of more than 24, from the point of view of orders, our current ratio is actually less than 10%. So we expect that this ratio will further decrease in Q3, because the whole impact is on two aspects for us. One is the number of users. The main impact for the number of users is that maybe for the previous high-risk users, because of the financing, there will be some problems with the payment of the debt. The other thing is that our new customers, as we mentioned earlier, we have already made some predictions and adjustments to this policy for a long time. We have made a lot of adjustments from the customer side and the entire risk level. We have also done a lot of detailed management work on the risk division of users. So we will find that the added asset quality will improve. On your third question about the high risk of borrowers in the third quarter, at the moment, if you look at our borrowers,

with actually pricing risk above 24%, this portion is less than 10%. And in Q3, we have already started to further lower this part. And let me talk about how we do this in terms of our existing customers and also new customers. For our existing customers, definitely, we do expect higher default, some difficulty in the repayment when the liquidity gets tighter. We're going to manage them through a continuous monitoring. But at the same time, when you look at our new customers, this group, we have fine-tuned our strategy in terms of customer acquisition, further segmentation, and in terms of the new risk that we are acquiring, it will be much better quality. As a result, it's going to be able to offset the risk coming from the existing customers. Therefore, we do expect more stable performance.

Once again, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. Once again, it is star and 1 if you wish to ask a question.

Operator, I think we can wrap up the call here. If there's any further questions, we can always continue offline.

Thank you. Ladies and gentlemen, that does conclude the conference call for today. Thank you for participating. You may all disconnect.