LexinFintech Holdings Ltd. (LX) Q1 2023 Earnings Call Transcript

LexinFintech Holdings Ltd. (NASDAQ:LX) Q1 2023 Earnings Conference Call May 23, 2023 10:00 PM ET

Company Participants

Jamie Wang - IR Manager

Jay Xiao - Chairman and CEO

James Zheng - CFO

Jared Wu - President

Conference Call Participants

Frank Zheng - Credit Suisse

Alex Ye - UBS

Yada Li - CICC

Operator

Good day and thank you for standing by. Welcome to LexinFintech's First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

And now I'd like to hand the conference over to Ms. Jamie Wang, IR Manager. Please go ahead ma'am.

Jamie Wang

Thank you. Hello everyone. Welcome to Lexin's first quarter 2023 earnings conference call. With us today on the line today are CEO, Jay Xiao; President, Jared Wu; and CFO, James Zheng.

Before we get started, I'd like to remind you that the call and presentation containing business outlook and forward-looking statements, which are based on the assumptions as of today. The actual results may differ materially and we undertake no obligation to update any forward-looking statements.

Jay will first provide an update on our overall performance, James will cover the financial results in more detail, and lastly, Jared will then discuss risk management.

I'll now turn the call over to our Jay. His remarks will be in Chinese and the English translation will follow. Jay please.

Jay Xiao

[Foreign Language]

Good morning and evening everyone. Its my pleasure to speak with all of you again. In the first quarter, with the gradual recovery of consumption post-pandemic and the continued improvement of the overall macroenvironment, consumer finance started moderate growth as this maintains growth through a two-wheel drive strategy with upgrading and data-driven optimization, we achieved another quarter of strong results.

RMB60.9 billion in loan origination volume, up 41% year-over-year. Total outstanding balance at RMB107 billion, up 28.0% year-over-year. Revenue at RMB2,980 million, up 74.0% year-over-year. Net profit of RMB327 million, an increase of 302% year-over-year.

As demonstrated by the first quarter results, our profitability has continued to improve. With net profit margin rising to 11.0% from 4.8% in the first quarter of last year. And has grown steadily for the fourth consecutive quarters and various operating indicators are moving in a positive direction.

Let me elaborate in more detail. There were three major operational highlights in the first quarter. First, as we enhanced our user risk assessment capabilities, we accelerated our pace in reducing high-risk user segments and therefore improve the overall asset quality.

Second, we continue to refine operations and further optimize operational efficiency. Third, we have been implementing cost efficiency initiatives, as a result, our profitability has been steadily rebounding.

First, in terms of asset quality, we further pushed ahead on overhauling our risk management system, focused on maintenance and operation of high quality existing customers and gradually eliminated more high risk users.

We have iterated and upgraded the user assessment system, the risk renting model, which automatically integrates a variety of risk models along with the combination of multi-dimensional risk factors into an overall user risk assessment scheme. These upgrades help us to conduct more comprehensive risk assessments and therefore, make more accurate decisions on users. After being put into use, the new loan volume in the first quarter contributed by prime users increased to 88.0% from 77.0% a year ago.

Second, in terms of operational optimization, we upgraded our marketing system and segmented our user into more detailed and various categories. Based on the underlying customer tagging system and over 10 evaluation models of users borrowing with a mix, marketing preferences, responsiveness, offer satisfaction, and et cetera.

For some certain customer groups, the application this new detailed separation of user segment model pushed up the operating profit of that specific customer group by 70.0%.

On this basis, we sorted out a marketing strategy decision tree structure and launched marketing strategies accordingly which significantly boosted users' activities. Under this new optimized operational system, in the first quarter, our telemarketing capabilities has been significantly strengthened and the loan volume contributed by the telemarketing channels grew by 92.0% sequentially. At the same time, the cost significantly decreased in the quarter with telemarketing cost per sale fell 49% year-over-year, we expect it to save 23.0% of the original annual telemarketing cost.

On front [ph] of reactivating paid up customers, the conversion rate increased 15.0% quarter-over-quarter. Loan volume from those converted customers grew 15.0% quarter-over-quarter. Additionally, this results were achieved with half of the marketing cost.

Third, we have enhanced profitability attributing to our continuous efforts in cost optimization initiatives and a further reduction in financing costs.

In the first quarter of 2023, G&A expenses stood at RMB97 million, a 17.0% decrease from a year ago. This is a clear indication of our improved operational efficiency.

Funding costs further dropped to 6.6%, which is 0.2 percentage point lower than last quarter and 1.6 percentage point lower from a year ago. It's worth noting that this is a historic low of funding costs during the past three years. In April, we successfully resumed our Annual Financial Partners Conference, which got suspended during the three-year pandemic period. In the conference, we are very honored to have over 100 financial institutional partners with whom we will surely strengthen our business cooperation in the future.

We remain committed to investments in research and development as we firmly believe in technology is the core engine of our business growth. In the first quarter of 2023, research and development investments reached RMB130 million, maintaining one of the highest technology input levels amongst our peers.

On the data front, we have put tremendous effort in data mining and analysis of our entire data. Accordingly, we're able to find links and correlations amongst various data sets. And links between low level fundamental data sets and business models, -- foundation of Lexin's data-driven and intelligent decision-making approach.

Furthermore, we developed simulation predicting model attribution model of abnormalities, AB testing platform, and et cetera. AuthBridge [ph] empowered management to steer business in a more data-driven and intelligent manner.

We have been continuously exploring the utilization of new technology in optimizing operation efficiency and users' experience. In the first quarter of 2023, we expanded the application of our AI large language model in our business at this faster pace.

We saw a noticeable improvement in efficiency among the application areas including coding assistant tools, initiatives of designs, telemarketing, and smart customer services.

For example, the application of this AI model in our telemarketing scenario pushed up credit line approval rates by 70% versus the technology service supplied by vendors and also boosted order placing rates on the exact date that borrowers are granted with credit line by 10%.

Looking ahead, we'll also comprehensively apply the model to the areas of risk management, anti-fraud, and et cetera. In addition, we further enhanced our existing unique Lexin ecosystem.

First, e-commerce business reached RMB113 billion GMV, an increase of 69.0% from last year. Cumulative customers grew by 71.0% compared to last year. The robust growth of GMV end users in e-commerce business effectively fueled the engine of Lexin consumption ecosystem.

Second, the technology impairment SaaS business achieved tangible progress, therefore, won the recognition from various financial partners including local commercial banks with AUM over RMB1 trillion, regional urban, and rural banks. The technology impairment service facilitates our cooperation with financial partners and deepens our business relations.

Third, we plan to expand our offline sales team and leverage our expertise in direct sales channels in light of the gradual recovery of China's economic activity. Our offline acquisition channels bring more first-hand user information hence more accurate credit assessments and eventually creating a unique competitive advantage.

The strong results in the first quarter were mainly attributable to our risk management capabilities upgrading in customer's assessment and therefore, the improvement in customer and asset quality.

It is also due to our continued refining of operations and cost reduction initiatives. As of the -- as for the second quarter, we understand the economic recovery and resuming consumption is a long process. We'll continue to undertake a more prudent approach. Based on preliminary affirmations, loan volume in the second quarter is expected to reach RMB63 billion to RMB63.5 billion, a 28% to 29% growth year-over-year.

Next, I'll hand over the call to our CFO, James to share more detailed financials. Thank you.

James Zheng

Thank you, Jay. I will now provide more details on our financial results. Please note that all numbers are in RMB unless otherwise stated. In the first quarter, we continued our fourth consecutive quarters of recovery, both in our overall business and in our financial numbers.

We expected this trajectory of turnaround to continue in light of the rebound of China's economy and our dedicated efforts in optimizing operations. The strong performance in the first quarter was a result of the management's continuous efforts in overhauling our risk management, focusing on better quality user segments, upgrading our technology, and operational capabilities, as well as our new cost restructuring initiatives.

First, please let me explain at a high level what happened in the quarter as compared with the same quarter of 2022. The loan originations for the quarter reached RMB60.9 billion, an increase of 41% year-over-year, beating Q1 guidance we gave earlier.

Revenue grew by 74.2% year-over-year to reach around RMB30.0 billion for the quarter, which was mainly driven by the GMV growth and an increased loan balance, which reached RMB107 billion.

The weighted average APR stood at approximately a little over 24% for the fifth quarter, close to around 1 percentage point lower than a year ago. Loans with APR under 24% now make up more than 80% of our loans.

Partially offsetting the negative impact from the lower APRs on our loans was a decrease in our cost of funding from 8.2% a year ago to 6.6% in Q1. It's worth noting that this is a historical low of funding cost during the past three years.

Loan tenures increased to 15.1 months versus 12.3 months a year ago. As we emphasized last quarter, overhauling risk management remains our top strategy for the year. We continue to focus on upgrading to better credit user segments and rebooting the risk team, the systems, and the process, and the infrastructure. Jared will elaborate more on this shortly.

The improved results from our efforts can be partially seen in our 30-day plus delinquency rate, which improved to 4.57% in the first quarter as compared to 4.62% in the fourth quarter of last year. The 90-day plus delinquency rate stood at 2.53%, basically remaining stable as compared to the previous quarter. This was due to 90-day plus delinquency rate much is a more lagging indicator than 30-day plus metric.

In Q1, we have been pushing ahead a series of cost restructuring initiatives that we launched last year. We have seen some further improvements to operating expenses. Total operating related cost and op expenses including processing and servicing cost, sales and marketing, R&D, and G&A as a percentage of average loan balance stood at 1.16% versus 1.28% in Q1 of last year.

This cost optimization happened despite of a slight pickup of sales marketing expenses, while G&A, R&D, and the processing and the servicing cost all came down. We will remain committed to undertaking these cost restructuring initiatives and expect our efforts to bear more fruit in the long run.

As a result of the aforementioned, we are able to report net income of RMB327 million, an increase of 302% year-over-year. The net margin improved to 11% versus 4.8% in Q1 last year. This clearly represents a steady upward trajectory of our operation result with each quarter improving over a year ago.

Apart from the above year-over-year analysis, I would also like to elaborate a little bit more on the progress achieved through quarterly comparisons. Total GMV was RMB60.9 billion, an increase of 8.7% quarter-over-quarter as we grew the business with prudent approach and put risk management as a top priority.

In the first quarter, we saw the GMV on our e-commerce platform came down slightly from boosted high level during Singles' Days Shopping Festival in Q4 last year. If we carve out the revenue from e-commerce business, total Q1 revenue grew by 4.5% quarter-over-quarter. Considering the impact of e-commerce business seasonality, total revenue for the whole group stay at about RMB3 billion, almost flat on quarter-over-quarter basis.

Take rate fell slightly to 2.5% from 2.6% last quarter. The minor fluctuation in take rate is a blended result of the more booking of provision due to longer tenure loans and the continuous improvement in asset quality and the reduction in funding costs.

Operating expenses stayed almost flat by a minor 1.6% increase quarter-over-quarter, attributing to pickup of sales and marketing related costs in user growth. As a result of aforementioned, we achieved a sequential growth in the net income of 8.7% and a boosted net margin to 11% from 9.9% in last quarter.

To summarize, we have delivered a noticeable improvement during the first quarter from both a year-over-year and a quarter-over-quarter perspective. This marks the fourth consecutive quarter of V-shaped recovery both in topline and bottom-line since we hit the lowest point of operational results in Q1 last year.

As we mentioned last quarter, although we are fully aware we have a long way ahead in our turnaround. The year of 2023 unfolds with a good start indicating we are well on track.

Next, let's take a detailed look at the financials. As mentioned, our total operating revenue for the first quarter was RMB3 billion, representing a decrease of 2.2% quarter-over-quarter due to seasonality of e-commerce business and an increase of 74.2% year-over-year, mainly driven by the credit facilitation services and the e-commerce business.

Revenue from credit facilitation service was approximately RMB2.1 billion, representing a 7.8% increase quarter-over-quarter and a 136% increase year-over-year, which is driven by the GMV growth.

Revenue from tech-empowerment service was RMB368 million, representing 10.9% decrease quarter-over-quarter and a 26% decrease year-over-year, which was primarily due to the change of product mix among various tech-empowerment services.

Revenue from installment e-commerce platform service was RMB499 million, representing a decrease of 25.9% from the last quarter and an increase of 56.6% year-over-year, which is due to seasonality of e-commerce business.

Moving on to the expense side of the quarter. Sales and marketing expense increased by 4% quarter-over-quarter, which was mainly due to our stepped up investment in acquiring better quality users.

Our goal is to upgrade to better quality customer groups and obtain higher LTV. While we're taking a prudent new acquisition strategy now, we will keep on closely monitoring macro data as China's economy is gradually recovering and seize the growth opportunity when the right timing comes.

Research and development expenses decreased by 4.5% quarter-over-quarter and decreased 15.1% year-over-year to RMB129 million due to efficiencies.

G&A expense stayed almost flat on a quarterly basis and a decrease of 17% year-over-year to RMB97 million. It's a noticeable cost efficiency achievement that the G&A expense remained at almost the same level on a quarter-over-quarter basis, while our topline GMV maintained an upward momentum due to a series of cost initiatives.

Going forward, we plan to step-up efforts in this regard. Net profit was approximately RMB327 million in the first quarter, a 8.7% increase quarter-over-quarter and 302% increase year-over-year, which beat the high end of our initial expectations.

At the end of the first quarter, the company had a cash position of around RMB6.5 billion on hand and a net equity position of RMB9 billion.

Finally, I would like to discuss our outlook for the second quarter of 2023. As we know, economic and consumption recovery usually will take time as evidenced by the ongoing current quarter's modest growth. Therefore, we remain cautious and are monitoring closely on the overall macro and consumption outlook.

Based on the company's preliminary assessment of the current market conditions, total loan originations for the second quarter of 2023 are expected to be around RMB63 million to RMB63.5 billion, representing an increase of 28% to 29% on a year-over-year basis. These estimates reflect the company's current expectation, which is subject to change.

The strong results of first quarter demonstrates clearly that our turnaround is well underway. In the long run, our dedicated efforts in risk management, cost initiatives, as well as new user acquisitions will establish solid foundations for our long-term goal of sustainable growth.

With that, I would like to turn the call over to our President, Jared Wu, who will discuss our risk management. Jerry, please go ahead.

Jared Wu

[Foreign Language]

Thank you, James. Good morning and good evening, everyone. It's my pleasure to speak with all of you again.

Next, I'd like to elaborate a bit more regarding our risk management measures and improvements for the past quarter. Ever since the beginning of the year 2023, we saw a gradual recovery of China's economy.

Accordingly, at the company level, we continue to implement our unwavering focus on risk management and the continuation of a prudent risk management and customer acquisition approach. In addition, we have been allocating more resources and putting more effort to better serve and favor our prime customers.

In terms of our risk modeling, we have been continuously iterating our thoughtful model and enhancing our risk -- user risk assessment capability. In the first quarter of 2023, the day one delinquency continued to drop and overall asset quality got improved.

With 30-plus day delinquency down 5 bps quarter-over-quarter at 4.57% and 90-plus day delinquency, based on our last indicator, standing unchanged sequentially at 2.53% as of the end of the first quarter.

Currently, as business and daily life of people continue to normalize and consumer confidence being gradually restored, we will continue to hold risk management as one of the top priorities in business operations and we expect the overall asset quality to continue to maintain a positive upward momentum.

In the first quarter, increasing portion of prime customers remain our most crucial objective. Thus, we continue to work on upgrading our risk management system, including the following key initiatives.

First, we continue to iterate and upgrade our risk management system under the business strategy of risk driving operations, improved the granularity and the overall efficiency of risk management.

Further refining our customer segments and increasing the depth and width of our user identification capabilities, while continuing to review prior year's customers and optimize our asset structure.

Second, we put heavy emphasis on investing in the coverage of PBOC credit data and strengthen the utilization of credit data. In the meantime, we continue to introduce more compliance data sources, combined with the thorough usage of internal consumption behavioral data to ensure that we can identify customer credit profile more accurately by further refined customer segmentation accordingly.

Third, we continue to iterate and upgrade model matrix for different customer segments and our ability to assess customer credit profile has also brought further improvement, which should be the most essential pillar for us to increase the proportion of prime customers and will be one of the most key projects in which we continue to invest in it. We believe that in the remainder of 2023, we will make more breakthrough in our user identification capabilities.

2023 is a year of economic recovery in China. We are committed to upgrading our core risk management capability and accelerating the strengthening of our refined risk management system.

As Jay and James mentioned earlier, we maintain a cautious view of the macroeconomic environment, adhering to the principle of risk-driven, monitor the market externally, and build capacities internally.

Above all, we firmly believe that with a diverse vision in mind and a solid infrastructure, we can continuously generate sustainable long-term returns for all shareholders.

Jamie Wang

Thank you. This concludes our prepared remarks. Operator, we are now ready to take questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions]

Our first question comes from the line of Frank Zheng from Credit Suisse. Please ask your question Frank.

Frank Zheng

[Foreign Language]

Thank you management for taking my questions. This is Frank from Credit Suisse. My first question is regarding the supply and demand dynamics most recently. In the first quarter and second quarter to-date, how would you describe the recovery of credit demand? And on the supply side, is there any change in terms of risk appetite?

On the other hand, could the management provide some more color on the strategic or operational focus for the rest of the year? Thank you very much.

Jay Xiao

[Foreign Language]

Jamie Wang

So, okay. So, I'll do the translation. Thank you, Frank. In terms of demand side, as you can see from our first quarter's results, our overall loan volume have increased and we are -- we actually saw the rebound of the overall demand in the first quarter.

It was mainly attributed by a couple of factors. The first one with the COVID and the lockdown quarantine being over, there was a spike in consumption needs and also the overall recovery.

Second, it was mainly due to our refined operations as well as the capabilities in risk assessment being increased. We were able recognized customers to better serve the right customers and the good existing customers.

This is that most of you already knew that we have a very large existing customer pool. With our improved risk assessment capabilities, we are able to better pick them out and better explore their value from the existing customers.

And as of right now in the second quarter of 2023, we are -- as we can see the data right now, the trend is still stable. But as the spring breaks bypass, the demand has been slowing down a little bit, but the trend of increasing is still remaining relatively strong.

And in that sense, we also have different products at our own ecosystem, we have the e-commerce, a very special consumption scenario. When the lending need is relatively not as strong as the previous quarter, we have another option to create demand, which is the product -- discount on products to attract our customers whether it's new, whether it's the existing ones to make assumptions and to create demand.

So, the second quarter as of right now, we are preparing the 618 festival, which would be a great opportunity to generate more demand, thanks to our unique ecosystem.

When it comes to the funding cost side, I'd say the supply is still relatively strong and sufficient right now. Based on the current national situation right now from our funding partners, they have limited options to really invest in. And after 10 years, our risk level and our capabilities in risk management are recognized and approved by them.

And also as you might know already, we had this Corporation Conference Day with our funding partners and all of them showed the willingness to make the corporation deeper. And also as you can see, our funding cost actually lowered in the first quarter and the overall supply is still relatively strong. I hope that answers your questions, Frank.

Operator

Thank you.

Jay Xiao

[Foreign Language]

Jamie Wang

Okay. In terms of our key strategies, there are four main ones. The first one is the risk management capability upgrading. We have been undergoing certain strategies to upgrade our structure and to lower risk level, we are presented with this management 2.0 system and when it's ready, it will be -- we will get the upgrade in capabilities in risk management.

Hence, we are actually doing it step-by-step to adjust and to operate. When it's ready, our capabilities in risk management and identifying in user risk will be significantly upgraded.

And also, we continue to do the elimination of high risk users and we are in the progress of making it a common operational saying to do the routine elimination of the high risk users.

Secondly, we'll try to continue to differentiate ourselves from others in customer acquisition. Like I said earlier, we have different scenarios like e-commerce scenario and we have a very strong offline [Indiscernible] team. These are the advantages that will help us to strengthen our own capabilities.

And third, we'll continue to do the refine operations to further increase the customer's LTV as well as the operational efficiency. Fourth, we'll continue to go through -- undergo b the cost efficiency initiative. As you can see, in the first quarter, it shows some prominent results.

The percentage of our operational costs as over the outstanding loan balance actually decreased and our net margin increased to 11% And for the rest of the year, we aim to continue to increase our own profitability.

And thanks for your question, Frank.

Operator

Right. Thank you. Our next question comes from the line of Alex Ye from UBS. Please go ahead, Alex.

Alex Ye

[Foreign Language]

So, I'll translate for my question. First is on the loan volume run rate in April and May. Could you share with us how it has sequential movement seen so far? And how does the growth you have seen now compared to your previous notation.

Second question is on your asset quality trend. Could you share with us some of the early asset quality indicators the trend in April and May and do we expect further improvement from here? Thank you.

Jay Xiao

[Foreign Language]

Jamie Wang

So, as you heard already, for the second quarter, our guidance for the loan volume was RMB63 billion to RMB 63.5 billion. But I could share some months-over-month in the first quarter results with you.

The numbers of application-wise, there was a minor peak in volume after the Chinese New Year. In the month of February, it showed a 8% an increase quarter-over-quarter. For the month of March, it shows 2% month-over-month And as of now, May, we are seeing a minor decrease in the amount month-over-month as the COVID passed needs spiked kind of slowed down a little bit.

We're seeing a little bit slow down in demanding a bit entering the second quarter, but it's still in line with our management team's expectation.

Jay Xiao

[Foreign Language]]

Jamie Wang

Okay. In terms of risk, we are seeing the first quarter's risk being stable and discrete and for the second quarter as of right now, certain early indicators, it's stable right now.

But from the new loan perspective, the structure -- the overall structure is actually better, what if the RR1 to 3 -- the percentage of R1 to 3 is being increased, the R6 to 8 percentage is being decreased from the new loan perspective. They are overall better.

And with the monthly new loan structure being continually improved, our overall risk level will be improved in the future with and there are still some optimizing in rooms when it comes to the overall risk level.

Hope that answers your question, Alex?

Operator

Right. Thank you. Our next question comes from the line of Yada Li from CICC. Please go ahead, Yada.

Yada Li

[Foreign Language]

Then I'll do my translation. Hello management. This is Yada from CICC and my first question is regarding the choice of the lending model. And could you please give us more color on the trend of credit facilitation and the risk sharing model or tech-empowerment services in the future. And would there be any plans to increase the on balance facilitation?

Secondly, I was wondering about the recent updates and outlook of [Indiscernible] and other new consumption business? That's all. Thank you.

James Zheng

So, I would take a crack at the first part of the question and Jay will answer the second part of your question. The first part of the question is related to risk taking and profitability. Obviously, at the company level, we always try to achieve the balance. Obviously, it makes sense that if risks improves, then I would do little bit more so that they increase profitability. If somehow the risk is worsening, obviously, I don't want to do more, right? I want to do less so that I can retain my profitability. So, that has been our kind of attitude.

Results out of this basically is reflected here in terms of the proportion of the business where we take risks that is in the loan facilitation business and in rev share business reflected in our tech-empowerment part of the business.

Right now the rev share business, basically we don't take much risks in this part, it accounts for roughly 26% or so. And in the last year, several quarters has been hovering between say 20% to 30% also.

So, we are watching very closely of the overall macroeconomic data and our overall risk indicators If the overall macro data continue to improve and our asset quality continue to improve, obviously, the overall credit situation is improving, then it doesn't preclude us from really taking a little bit more risks so that we increase the overall profitability for the company. So, basically, that's our kind of thinking if you will to run the business.

Now, Jay, for the second part of the question.

Jay Xiao

[Foreign Language]

Jamie Wang

Okay. So, as you know, we have our own Lexin ecosystem. In terms wise, the overall increase has been very strong, especially with other e-commerce peers or others in the industry being in the very heavy competition.

As you can -- as I shared already in the first quarter not only the volume in GMV increased year-over-year, but also the revenue as well as the customer cumulative trading customers.

They are only larger than our main business or other business within the company. They are exponentially actually larger than the overall increase speed in the industry. So, the customer that we serve in our e-commerce areas are mostly customer with actually credit consumption.

Under the current situation right now, the overall macro economy and environment with ATR requirements being a little bit higher.

These requirements being a little bit higher actually gives the e-commerce sector a bit more opportunity increase spend a little.

Furthermore, e-commerce could actually help us with the customer acquisition and as well as the customer retention with our main business, which is our loan facilitation business in the future.

Next is our offline [Indiscernible] team. Our offline pooling [Indiscernible] team mainly realized on the offline BD operations, which is right now the economy being resumed, being in recovery. The team actually helps with our customer acquisition costs and as well as risk level.

We can see there are a lot of advantages comparatively when the online traffic being more expensive as well as being more rare, the offline [Indiscernible] team helps us to evaluate customers with -- to evaluate customers more accurately as well as gave us the capability to understand their willingness as well as to keep them in retention.

Especially with the existing customers' competitions, we get to know them better via [Indiscernible] team, and we will continue to increase the investment on our offline [Indiscernible] team to help us to differentiate when it comes to customer acquisition front to better acquire better customers.

In another business, I'd like to mention, it's our second empowerment SaaS business. It's pretty much accumulated experience of 10 years of standardized capabilities. We already got into corporation with relative sizable volume with five to six of our banking partners and our funding partners.

It's pretty much a monetization of our past experience. We use them to -- we use our experiences and capabilities to help them and in return, they strengthen the cooperation in our main business helping us with a relatively lower funding cost than the current average funding cost. So, I think this is a very unique system that Lexin has.

We believe the cooperation between aforementioned business will be strengthened and will be more inter-relatable in the future to help us to differentiate ourselves amongst our peers. Hope that answered your question, Yada.

Operator

Thank you. I'm showing no further questions. I'll now like to turn the conference back to management team for closing remarks.

Jamie Wang

Thank you again everyone for joining us. If you have further questions, please contact us via our contact information available on our IR website. Thank you.

Jamie Wang

[Foreign Language]

Operator

Thank you. That concludes today's conference call. Thank you for participating. You may now disconnect.