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5/21/2025
Good day and thank you for standing by. Welcome to Le Xing First Quarter 2025 earnings conference call. At this time all participants are in listen-only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you'll need to press star 1-1 on your telephone. Please translate your question to English and mute yourself after your question. You will then hear automated message advising your hand is raised. To withdraw your question please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Will Tan, head of capital markets. Please go ahead.
Thank you operator. Hello everyone. Welcome
to the first quarter 2025 earnings conference call. Our results were released earlier today and are currently available on our IR website. Today you will hear from our chairman and CEO Mr. Jay Wenjiexiao who will provide an update on overall performance and strategies of our business. Our CRO Mr. Armin Sanwenqiao will then provide more details on our risk management initiatives and updates. Lastly, our CFO Mr. James Zeng 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 presented in Renminbi terms and all comparisons are made on -over-quarter basis unless otherwise stated. Please kindly note Jay and Armin will give their whole remarks in Chinese first. Then the English version will be delivered by Jay's and Armin's AI-based voices. With that, I'm now pleased to turn over the call to Mr. Jay Wenjiexiao, chairman and CEO of Lexin. Please.
We have now completed this difficult transformation and are now entering a new phase of high-quality development. The transformation of the underlying capacity will bring about a continued value release. We are confident in our performance this year. The two-year risk and the strategic transformation of data double-discounts we insist on prioritizing risk and upgrading our underlying capacity for business and the strategy of operating in the period of wind control, marketing and operations has also strengthened the system's ability to build and achieve effective cooperation between risk and business. So far, we have completed the construction of new risk systems and risk infrastructure. The construction of a comprehensive chain-line quantification management analysis system has achieved a different price for different subjects. The economic performance has been significantly improved. Lexin's multi-business ecosystem has also achieved good performance. Personal consumer-friendly business has enhanced the ability and efficiency of customers by assigning models to the flow of the front-line system. In the price of the cross-selection, the E-Models have launched a series of product evidences such as the chain-line sequence, the fire-chain and the -Zhou-Zhuan. The optimization of the balance, the profit rate and the limit have increased the competitiveness of the offer. Lexin's retail business has also redeveloped its own risk system and upgraded the supply chain and expanded the user's operating boundary. The distribution of goods and services that match the differences between different users has been greatly improved according to the distribution rate. The transaction scale has increased by 16.2%. In the face of the small micro, the use of the non-business business has been improved. The user's credit rating has been improved. The user's credit rating has been improved. The market competitiveness of the product has been improved. As the number of small micro, the group of individual business owners and other people has increased, the business has been improved. The transaction of the lower-end area of the four or five lines has been increased by 70%. The profit has been gradually increased. In terms of overseas business, the financial products have been upgraded and modified The risk system of the mid- and high-end companies has been improved. The ability to operate the customer channels has been improved. The cost of the customer services has been reduced by 19%. The overall profit has been increased. The matured control, technology and the ability to control the middle and back of the market has allowed us to open up more overseas markets. As the mature and development of each business, the enthusiastic business ecology will gradually become our unique core competitiveness. In the future, we will focus on the following tasks. First, we will focus on the customer services. We will improve customer experience. We will promote the long-term growth of high-quality users and increase the production of high-quality products. We will provide competitive offers and flexible payment methods. We will enhance the consistency of the users. We will surround the life cycle of the users and create better products and services. We will focus on the construction of the energy consumption capacity. We will optimize the user's customer service experience and improve customer satisfaction. Second, we will strengthen the cooperation of the ecological business. We will continue to create a unique competitive advantage. We will use the diversified products and services to match different users. We will cover the needs of the users and the consumers in the whole life cycle. We will increase the sales of the business and improve the customer experience. We will improve the customer experience. We will improve the customer experience. We will improve the customer experience. We will increase the sales of the business and the consumers. We will increase the sales of the business and the consumers. We will expand the business and the consumers. We will improve the business and the consumers. We will improve the quality of the products. We will focus on the quality of the products. We will explore the potential of cooperation with large platforms. We will expand the business and the consumers. We will keep the scale of the business and the consumers. Third, we will increase the investment in technology. We will invest in AI. We will make AI able to handle all kinds of business. We will improve the competitiveness. We will use the mature AI model of localization to re-create the business process. We will increase the efficiency of the business. We will reduce the cost of service. We will explore AI with the ability to adapt to financial conditions. We will apply it in the field of cash flow strategy and support. We will use the process of automation and decision-making to implement, promote, and operate the customers. We will further enhance the ability of the company to operate in a centralized way. We will continue to develop the technology and participate in political challenges. We will expand the business and voice gap. Our skills and patience will get improved a lot. I have great confidence that the public's value for2500 will continue to grow. We will keep working on regrowth and reintegration into 2025.
Thank you for joining us today for our first quarter 2025 earnings call. Despite ongoing macroeconomic uncertainties, our gap net profit reached $430 million, a record high in 13 quarters, representing quarter on quarter growth of .6% and year over year growth of 113%. Our first quarter results demonstrate the success of our two-year transformation centering on building a model driven by data analytics, risk management and refined operations. Having completed this challenging transformation, we have entered a new phase of high quality development. The fundamental enhancement of our core capabilities will drive sustained moving forward and we remain confident in delivering our fully year performance targets. Over the past two years of transformation, we have adhered to a risk first approach, comprehensively upgrading our core business capabilities. We have iterated and optimized the full life cycle strategy, covering risk management, marketing and operations, while also strengthening our system infrastructure to achieve effective coordination between risk management and business development. By far, we have completed the upgrade of our risk management framework and established robust risk management infrastructure. Furthermore, we have built a comprehensive quantitative business analysis framework that supports differentiated credit assessment and pricing strategies tailored to various customer segments. These initiatives have resulted in significant enhancements to our refined operations. Le Xin has also achieved significant progress across multiple ecosystem businesses. For our online consumer finance business, we have notably enhanced customer acquisition capabilities and efficiency by implementing model-based decision making upfront at the traffic allocation stage. Building on our differentiated pricing strategy, we launched the on-demand credit product, Linghuojie Flexible Loan in the first quarter, featuring flexible use of credit and repayment. The new product, together with our existing products, Le Jinkai and LeZhou Dran, forms a competitive product matrix. Our overall product offering features optimized credit lines, rates and tenors, making our financial solutions more competitive in the market. For our installment, e-commerce business, we revamped the risk management system, upgraded the e-commerce supply chain, and expanded the boundary of user development. We matched different users with tailored installment services. As a result, approval rates of installment applications increased significantly in the first quarter, driving e-commerce GMV to increase by 16.2%. For our offline inclusive finance business, targeting small and micro business owners, quantitative assessment is combined with manual review to accurately determine the credit lines granted for high-quality users. In the first quarter, our offline inclusive finance business not only saw lower risks, but also higher product competitiveness as we continued to increase penetration of small and micro business owners in lower tier cities and strengthen localized operations. GMV from tier 4, tier 5, and lower regions has accounted for over 70% of our inclusive finance GMV in the first quarter, alongside sequential profit growth. For our overseas business, we have completed the upgrading of financial products in the Mexico and Indonesia markets, improved the risk management system, and enhanced the operational capabilities of customer acquisition channels. In the first quarter, customer acquisition costs decreased by 19% quarter over quarter, and the overseas business has achieved profitability. Our matured risk management capabilities, technological strength, and back office support enable us to expand into more overseas markets. As these businesses develop and mature, Lexan's ecosystem will gradually become our unique competitive edge. Moving forward, we will focus on the following areas. Firstly, we will maintain a user-centric approach, focusing on enhancing user experience and promoting the steady growth of high quality customers. Our strategy involves strengthening our product portfolio with more competitive offers and flexible repayment methods designed to boost user loyalty throughout the entire customer life cycle. Additionally, consumer protection will remain a priority. We will continue to optimize customer engagement and service experiences in order to increase overall customer satisfaction. Secondly, we will strengthen synergies across our ecosystem businesses to further build our unique and differentiated competitive advantage. We will match diverse products and services to different user segments, addressing their demands for carefree consumption and flexible liquidity throughout their entire life cycle. For the installment e-commerce business, we will improve the merchandise supply chain to meet the differentiated demands of users with varying risk profiles. This will help unlock consumption potential across different customer tiers and increase GMV from high quality users, enhancing customer engagement and acquisition. For the inclusive finance business, we will leverage our in-house offline teams capabilities in customer acquisition and personalize -on-one service. We will enhance the quality of our online business and strengthen localized markets in lower tier cities, explore and refine various business models and strengthen localized operations and deepen market penetration to increase the share of quality microbusiness owner customers. For the online consumer finance business, we will focus on expanding high quality customer acquisition channels, tapping into the potential of large platform partnerships and broadening our business boundaries to maintain sustainable growth and scale. Thirdly, we'll increase investment in technology, particularly in applying AI to empower various business scenarios and enhance the company's competitiveness by locally deploying mature and high performance large AI models. We will reshape business processes, improve operational efficiency and reduce service costs. We will explore the application of AI agents with financial adaptive capabilities in the pre-lending process to autonomous decision making and task execution. We will promote process automation and decision making, in net profit for fully year 2025, we affirming our fully year 2025 profit guidance of substantial year over year growth. The company has always attached great emphasis on shareholder returns and remains committed to delivering value to our shareholders through various channels. In November 2024, we announced to increase our cash dividend payout ratio from 20% to 25% of total net profit starting from 2025. The board of directors has approved to further increase the dividend payout ratio to 30% of net profit effective from the second half of 2025. Now I would like to give the floor to our CRO Arvin. Thanks.
The CRO Arvin is a company that has been working on the development of the wind control technology and the application of smart wind control tools and the intensive exploration of large models in the field of wind control. As a result, the risk of new assets and all assets has continued to decline in the first quarter and has returned to the fourth quarter of 2024. The new asset FPD7 has dropped by about 5%, the total asset entry rate has dropped by about 11%, the total asset 90% of bad rates has dropped by about 9%. Next, I would like to introduce to you the key risk management measures we have taken in the first quarter. First, in model identification ability construction, we have continuously improved the performance of all types of risk identification models in the first quarter. First, by building a multi-model fusion model, we have improved the risk of identification ability of models by using text, time, and quality, and image characteristics. Second, by using two stages of modeling, we have improved the risk of distinguishing the risk of the client from the different -to-K customers by using sample optimization and the ability of the client to use the -to-K client to do deep joint modeling, fully utilize the data and free data of the -to-K client to improve the performance of the model. Fourth, we have strengthened the risk management of government projects, on the one hand, we have strengthened and accelerated the reduction in the number of people, stability of the product, and the growth of the product. On the other hand, we have improved the offer of the client to promote the growth of the asset, and together we have improved the risk of the asset to decrease, and the health of the asset to continue to improve. In the second quarter, we will be able to use the risk management tools and risk management strategies that are fully integrated with the government projects to ensure that the risk of the asset is maintained. In the second quarter, we will continue to improve and use the risk of the automatic inspection and handling ability to strengthen the access to the transaction management of the product.
Thanks, Jay. Next, I will provide a review of our key initiatives and achievements in risk management for the first quarter. In the first quarter, we remained committed to our strategy of prioritizing asset quality, security, and security. We have focused on the first quarter, focusing on scale stability and profitability enhancement. Specifically, we focused on improving risk identification capability, optimizing risk strategy system, and developing smart risk tools, as well as actively exploring the application of large models in risk management. Thanks to the initiatives we've taken, risks of both new and overall assets maintains a downward trend in the first quarter, leading risk indicator for new loans. First payment default, FPD, over seven days of the first quarter, declined by about 5% compared to the previous quarter. On total loan portfolio, day one delinquency ratio decreased by about 11%, and 90 days delinquency ratio decreased by 9% quarter over quarter. I will introduce in detail the key initiatives we've taken for the first quarter. Firstly, in terms of risk identification capabilities, we've continued to improve the performance of our risk identification models. We built a multimodal fusion model, integrating different types of heterogeneous data, including textual time series, numerical, and graph features, which help further improve the risk identification capabilities by 10%. Meanwhile, we deployed a two-stage modeling structure. A standard model was used to identify the -to-long tail customer groups. We then optimized the data samples and brought additional data sources to conduct more granular risk identification for these customers, further improving the risk differentiation capabilities. Besides for customers from different channels, we conducted deep joint modeling with our channel partners. This allowed us to fully leverage both partner channel data and our own internal data to improve model performance. Secondly, we also strengthened risk management through preventive and proactive approaches. Regarding high-risk assets, we adopted a preventative approach. Specifically for customers who have borrowings across multiple platforms exhibit weaker repayment capabilities or present volatile risk profiles, we reduced or suspended their credit lines. Additionally, we optimized repayment reminders and enhanced the auto-dividt repayment functionality both on and after the due date to minimize the formation of overdue assets. Regarding high-quality assets, we conducted a proactive approach. We promoted the growth of high-quality assets by strengthening the competitiveness of offers to customers. These concerted efforts have collectively contributed to reducing risks, optimizing our asset mix, and enhancing asset quality. In the second quarter, we will respond more quickly to market dynamics and asset quality performance, fully leveraging a combination of proactive and preventative risk management approaches and tools to ensure the continued decline in asset risk levels. Thirdly, we continue to ramp up the development and application of intelligent risk management tools, which significantly increase the accuracy and time efficiency of credit line and pricing decision making. We have developed credit line robot and pricing robot and gradually applied them in various business scenarios. Our A-B testing results demonstrate that these robot tools substantially helped improve the effectiveness and time efficiency of decision making. Over the past year, our efforts in enhancing risk identification capabilities, building a more robust risk management framework, and applying intelligent risk management tools comprehensively have contributed to a sustained decline in risk levels for both new and total assets for four consecutive quarters, looking ahead to the second quarter of 2025. Amid increased volatility in the external environment and evolving industry dynamics, we will continue to strengthen our capabilities in automated high-risk assets screening and resolution, further refine credit approval and lending management, and swiftly identify and address potential high-risk assets. These measures are aimed at ensuring that key risk indicators remain on a downward trajectory. Next, I will hand over to our CFO, James, to provide a review of the company's financial performance for the first quarter.
Thanks, Auburn. I will now provide a detailed overview of our first quarter financial results. Please note that all figures are presented in Rimming B terms and all comparisons are made on a -over-quarter basis, unless otherwise stated. Our first quarter financial performance marked another strong leap forward and a well-on track on our profit growth roadmap. During the quarter, our net income increased by .6% to $430 million and .4% -over-year, even though the overall new loan volume and the loan balance declined slightly due to the Chinese New Year seasonality. Our net income margin increased to .9% from .9% last quarter. Net profit take rate, calculated as the net income divided by the average loan balance, increased to .58% from .31% from last quarter and .66% a year ago, advancing by 27 basis points sequentially. The net income margin and the net take rate all reached the highest level in the last three years, laying a solid foundation for future profit expansion. From the economics perspective, the 27 basis point net profit take rate improvement -over-quarter is led by a 47 basis point increase of revenue take rate, which is calculated by dividing the sum of credit facilitation service and the tech empowerment service income after deducting the funding and the credit cost by the average loan balance. During the quarter, the revenue take rate increased from .22% to .69% of the previous quarter. The improvement of revenue take rate reflects our ongoing risk-centered business transformation, which resulted in better asset quality and therefore a lower credit and funding cost and a refined business operations. The specific business execution involved focus on retaining prime customers through competitive loan offers, including lower prices and improved tenor, and migrating subprime borrowers to capitalized model via intelligent credit platform, ICP, to reduce the risk exposure of the optimized probability. Next, I will provide more details in the following three highlights. First, reduction in credit costs driven by continuous improvement in asset quality. The reduced credit costs reflected our sustained improvements in asset quality driven by our enhanced risk management capability. The following key risk indicators demonstrated improvement. On the loan balance side, day one delinquency rate declined by 11% and the 90-day delinquency ratio declined by nearly 33 basis points from .6% to 3.3%. On the new loan side, on quarterly basis, the first payment default rate over seven days decreased by about 5%. With higher quality new loans gradually replacing matured vintage loans, we expect to see continued asset quality improvement contributing to our profit expansion. Meanwhile, our provision coverage ratio, which is calculated as the total outstanding provision divided by the total outstanding loan balance between 90 and 180 days, stood sufficiently at 268%, the highest level since the second quarter of 2024. Second, decrease in funding costs. Funding costs for new loans and the capital heavy model dropped by nine basis points to 3.93%, further boosting our revenue take rate. While we've already achieved relatively low funding costs, we expect to maintain this advantage through improving asset quality, strengthening partnerships with funding partners, and diversifying our funding sources. Third, capital light model volume growth. During the quarter, we have optimized our risk bearing arrangements by shifting more high risk volumes to the capital light model through our Intelligent Credit Platform, ICP, where we don't take principal risks for customers with risk rating beyond our preferred range. Total volume under the capital light model increased by 43% quarter over quarter and accounted for 28% of the total GMB, up from 20% of last quarter. Under the capital heavy model, we have improved competitiveness of our offering with lower pricing and improved detailer to attract the client customers. The APR was lowered about 100 basis points from .9% down to .6% for the last quarter, while at the same time, the user quality has improved as evidenced by the super client customers taking a higher percentage of new loans. With the capital light model, we migrated more sub-clients customers to the ICP platform offering risk-based pricing and shortened loan tenor to reduce overall risk exposure. As a result, the overall tenor for new loans under both capital heavy and capital light models slightly decreased quarter over quarter. To summarize the above three highlights, due to the improvement of credit costs and funding costs, our net profit take rate increased from .31% to .58% last quarter. Additionally, the capital light model volume growth has lowered the risk exposure for our business, enabled differentiated risk-based pricing for high-risk users, enhanced risk-adjusted returns, and sustained our offer competitiveness for high-quality customers. Next, let's go through some key financial items. Total revenue from lending related business, which include credit facilitation and service income and tech-empowered service income combined decreased by 15% quarter over quarter. There are three factors attributing to the change. One, lower APR of loans and the capital heavy model as our effort to attract better quality customers as mentioned earlier. Two, increased early payoff due to more flexible early payoff terms for offer competitiveness and customer satisfaction. Three, the GMV volume shift to capital light model where the revenue is booked net of related credit costs, while in comparison, under the capital heavy model, gross revenue and credit costs are booked in two separate lines. Loan volume originated under the capital heavy model decreased by 11% quarter over quarter and accounted for 72% of total GMV, down from the 80% in the previous quarter. As a result, credit facilitation and service income primarily associated with the capital heavy model decreased by 19% quarter over quarter. In contrast to the decline in the credit facilitation and service income, the tech-empowered service income, which is primarily associated with our capital light model, increased by 4% quarter over quarter. This revenue now accounted for 20% of total revenue, up from 16% last quarter, mainly driven by the increased volume from the capital light model and partially offset by increased provision driven by our prudent provision estimation. Similar to the revenue side of the story, total credit costs, including total provisions and fair value change of financial guaranteed derivatives and the loss of fair value decreased by 40% quarter over quarter. This is partially due to the asset quality improvement. As a cross-reference, we can take a holistic view to add total revenue and credit costs and both the capital heavy and capital light models together. Total revenue from lending related business net of total cost was about 18.2 billion, increased by .6% or 97 million from 17.2 billion last quarter. Separately, installment e-commerce platform service income decreased by .4% while G&E grew by .2% quarter over quarter. Similarly, this difference was caused by accounting difference due to the volume mix shift between the third-party sellers and the company direct sourcing. For third-party sellers, only platform service commission is recognized as a revenue rather than the entire transaction amount under the direct sourcing model. This structure volume mix change is evidenced by the sales volume from third-party seller accounting for 56% of the total e-commerce G&E in the first quarter up from 36% in the last quarter. As a result, our installment e-commerce platform service income decreased despite total e-commerce G&E increase from 970 million to 1.1 billion. Furthermore, it's worth highlighting that the gross profit from e-commerce business more than doubled in the first quarter. As a priority within our integrated ecosystem, we'll keep growing our e-commerce business moving forward by developing tailored financial solutions that actively stimulate and fulfill the evolving consumption and financing needs across diverse customer segments. We aim to diversify our revenue structure and eventually enhance the overall operational resilience and profitability. Total operating expenses, which include processing and servicing costs, sales and marketing expenses, research and development expenses, and general and administrative expenses remain relatively stable at 1.3 billion. Driven by the aforementioned factors, our net income in the first quarter increased by .6% -over-quarter from 363 million to 430 million, and our net income margin increased from .9% to 13.9%. For balance sheet items, as of March 31, our cash position, which includes cash, cash equivalents, and restricted cash, was approximately 5 billion人民幣. Shareholder equity remains solid at about 11.2 billion. Looking ahead, despite challenging macroeconomic environment, evolving industry landscape, and geopolitical uncertainties, the management remains confident in achieving a significant -over-year growth in net income, reaffirming our full-year earning guidance. This concludes our prepared remarks for today. Operator, we're now ready to take questions.
Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. And please translate your question to English and mute yourself after your question. To withdraw your question, please press star 1-1 again. Please stand by as we compile the Q&A roster. Just a moment for our first question, please. Our first question comes from Emma Su from BOFA. Your line is now open.
So how does the company address various external challenges, such as the impacts of the new rules on loan facilitation business and geopolitical uncertainties on the company's listed assets? Does the company have any plans for Hong Kong IPO?
So, we have a lot of information on the new rules. We support the regulatory agency to further implement the new rules. Although the new rules have a short-term impact on the industry, we think it will be a long-term impact. But from a long-term perspective, it will promote the development of the industry. It is very beneficial for the industry to have the ability to deal with the impacts of the new rules. So we are very happy to see the new rules. We are very confident that we will continue to achieve our goals. We have already taken some active measures to explore the possibility of listing in different exchanges, including in Hong Kong. Once we have a specific plan or important progress, we will announce this information
to the market in time. This is the translation for Jay's remarks. This finds significant changes in the macroeconomic environment and industry landscape this year. The company has delivered outstanding results by adhering to its strategy, focusing on risk management, data analytics and refined operations. Although external challenges persist, the company is well prepared to navigate through them and management remains confident in achieving its 2025 performance targets. Regarding the new rules on -facilitation-based business, we welcome and support regulators' efforts in standardizing the industry. While the full impact of these rules remains to be seen in the short term, they are expected to foster a more compliant, healthy and sustainable environment for the sector in the long run, a trend that particularly benefits large and compliant platforms like LeXin. For us, we have the capabilities and resilience to address the potential impacts of the new rules. Therefore, we are confident in achieving our full-year profit target. Regarding the geopolitical uncertainties, the company has proactively taken measures to prepare, including exploring potential listings on different exchanges, including Hong Kong Stock Exchange, in order to protect the interests of all shareholders. Once any concrete plans or significant progress is materialized, we will promptly disclose relevant information to the market in accordance with
laws and regulations.
Thank you. Just one moment for our next question, please. Our next question comes from Alex Yee from UBS. Your line is now open.
Thank you, Yicheng, for giving me the opportunity to ask questions. I have two questions. First, I would like to ask if you could introduce the progress of the company's development plan and the progress of the current stage of improvement. How do we understand the level of our development and the main goals of the next stage? My first question is, what are the progress and development plans for your ecosystem business? And second, can you give us more color in terms of where we are in terms of our asset quality improvement trend and how to understand the strength of your current resumption capabilities and what's your plan for the next stage? Thank you.
Okay, let me answer
the first question. As we all know, Lexin is a relatively diverse business with its own unique ecosystem. As I mentioned in my speech earlier, in terms of our personal consumer performance, we are constantly improving our overall ability to optimize our operations. Our ability to improve our operations and our efficiency are continuously being enhanced. In the future, we will continue to increase our business capabilities and our ability to optimize our customers' understanding of the whole business, and provide different products to different users to enrich our entire product lineup and enhance our competitiveness. At the same time, we will also start to develop some new growth channels, especially since this year, we continue to enhance our important business opportunities. We can see that this growth channel has been growing well since this year. We can use this large platform to further expand our company's whole customer channel to help us continue to grow steadily. The second thing is that I would like to talk about our retail sales business. Since last year, we have redeveloped our retail risk management system and upgraded our supply chain. It helps us meet the needs of our customers on different levels. In the future, we will fully implement our retail sales. It helps our entire platform to actively improve our customer service and our customers' unique role in improving our ability to handle environmental change in the future. It also helps us to continue to improve our company's whole business. In the retail business, we are also continuously optimizing our entire business model, because it is a very unique business model, and we are also continuously expanding our retail risk management model to help us increase our competitiveness in the lower-level market. We are also strengthening our competitiveness in the lower-level areas, in the small and small businesses. I think that we have seen a very good performance in the retail business business. It is our own customer service channel, and it has been performing very well in all aspects of our sales. Let's talk about our overseas business. We think that we are still further optimizing our business model and building more good foundations. Our overseas business is also profitable overall. We are also continuing to maintain a more cautious approach to
our business. Le Xin has always had very diverse business requirements in having
online business, but also offline. We have a unique competitive edge in our own ecosystem business. More specifically, as I mentioned in my remark, for our online consumer finance business, we continue to improve the risk management capabilities on operational requirements and have witnessed a substantial enhancement in the capabilities and efficiency of customer acquisition. Going forward, we are focused on providing tailored product offers to manage customers with varying risk profiles, enriching our product portfolio to improve customer offer competitiveness and expanding customer acquisition channels. Meanwhile, we will further explore collaboration with huge traffic platforms, which have already exhibited good momentum this year, and expanded our business model to achieve sustainable volume growth. For our installment e-commerce business, we have resumed our risk management system, upgraded the merchandise supply chain, and expanded the business boundaries. By tailoring installment services to users based on their risk profiles, we better address diverse customer demand. Going forward, we will fully leverage our e-commerce business to better engage existing customers and attract new ones, making it a key lever for us to adapt to industry changes and enhance the company's operational resilience. For our offline inclusive finance business, which is quite a unique feature of our business deployment, we have strengthened our in-house channel development and optimized the risk management model to ensure the differentiated competitiveness of products and also secure sequential increase of products. Going forward, we will continue to increase the penetration of micro-business owners in lower tier cities, enhance localized business development, and increase operational efficiency. For our overseas business, we better optimize the business model and capabilities at various fronts. By far, our overseas
business
has achieved profit overall. Going forward, for overseas business, we will adopt a prudent approach in terms of investment and expansion.
Thank you.
Thank you. Thank you. Thank you. Thank
you. Thank you. Thank
you. Thank you. Just a moment for our next question,
please. Our next
question comes from Yada Li from CICC. Your line is now open.
First, I would like to ask about the company's revenue structure this year. There has been a major adjustment. I would like to know what the main reason behind it is. The second question is about the company's future plans for the shareholder return. Thank you very much. Thank you.
Okay. I will take the first question and ask Jay to talk about the second. For the first question, first of all, as I mentioned in my previous script, it is important to bear in mind that despite the different factors contributing to the -over-quarter revenue variance analysis, we should always take a holistic view to look at the total revenue and credit cost together to get the big picture. The big picture is that from the uniconomics perspective, our revenue take rate increased from .22% to .69% -over-quarter. And the net take rate after offsetting the operational cost increased from .31% to .58% -over-quarter. So in terms of the specific revenue variance analysis, basically the -over-quarter variance in total revenue was primarily due to lower credit facilitation service income driven by the reduced pricing, higher early repayment, and a shift in GNV towards the capital line model. While the tech empowerment service income saw some increase driven by the capital line GNV volume migration. Here the net-based accounting recognition is used where the revenue is net of related credit cost instead of recognizing revenue and credit cost in two separate lines. So related to this, the total credit cost declined at the same time, partially due to the same reason. Additionally, despite the sequential GNV growth of .2% -over-quarter, the e-commerce platform revenue decreased similarly as a result of the revenue recognition difference due to the volume mix shift between the third-party sellers and the company direct sourcing. For the third-party sellers, only the platform service commission recognized as revenue rather than the entire transaction amount under the direct sourcing model. The sales volume from the third-party seller account for 56% of the total e-commerce GNV in the first quarter up from the 36% in the last quarter. So in conclusion, the revenue structural variance really reflected our ongoing risk-centric business transformation and our operational refinement. While the accounting treatment across different business models may cause some top-line variances, however, our profit and profit margin continue to improve, really firmly tracking our plan.
Okay. Okay.
The company has always attached great importance from shareholders' return and is committed to delivering value to shareholders in various needs. Since November 2024, the company has increased its cash dividend payout ratio twice within six months, demonstrating that the company has been able to achieve the same value. This not only testifies to the company's stable and reliable profitability, but also reflects the management's confidence in achieving stable and sustainable growth in the future. The company will continue to create value for shareholders. We understand investors' expectations regarding shareholders' return and will work to align our dividend policy with shareholders' expectations by considering the company's resources, its business development and capital market conditions while striving to enhance returns appropriately.
Thank you for all the questions. I see no further questions at this time. I will now hand the conference back to Will for closing remarks.
Thank you, operator. This conference is now concluded. Thank you
for joining today's call. If you have any more questions, please do not hesitate to contact us. Thanks again.