Chronicle Journal: Finance

LexinFintech Holdings Ltd. Reports Third Quarter 2020 Unaudited Financial Results

SHENZHEN, China, Nov. 24, 2020 (GLOBE NEWSWIRE) -- LexinFintech Holdings Ltd. (“Lexin” or the “Company”) (NASDAQ: LX), a leading online consumption and consumer finance platform for new generation consumers in China, today announced its unaudited financial results for the quarter ended September 30, 2020.

Third Quarter 2020 Operational Highlights:

  • Total loan originations1 in the third quarter of 2020 reached RMB48.3 billion, an increase of 30.6% from RMB37.0 billion in the third quarter of 2019.
  • Total outstanding principal balance of loans1 reached RMB67.4 billion as of September 30, 2020, representing an increase of 31.0% from RMB51.5 billion as of September 30, 2019.
  • Number of active users2 who used our loan products in the third quarter of 2020 reached 7.4 million, representing an increase of 21.3% from 6.1 million in the third quarter of 2019.
  • Number of new active users who used our loan products in the third quarter of 2020 was 1.7 million, representing a decrease of 32.9% from 2.5 million in the third quarter of 2019.
  • Number of orders placed on our platform in the third quarter of 2020 was 84.4 million, representing an increase of 49.9% from 56.3 million in the third quarter of 2019.
  • The GMV3 of our e-commerce channel amounted to RMB1.3 billion, representing a decrease of 37.1% from RMB2.1 billion in the third quarter of 2019.
  • The weighted average tenor of loans originated on our platform in the third quarter of 2020 was approximately 11.4 months. The nominal APR4 was 15.0% for the third quarter of 2020.
  • Total number of registered users reached 106 million as of September 30, 2020, representing an increase of 69.6% from 62.6 million as of September 30, 2019; and users with credit line reached 25.2 million as of September 30, 2020, up by 51.0% from 16.7 million as of September 30, 2019.
  • 90 day+ delinquency ratio5 was 2.60% as of September 30, 2020.

1 Originations of loans and outstanding principal balance represent the origination and outstanding principal balance of both on- and off-balance sheet loans.

2 Active users refer to, for a specified period, users who made at least one transaction during that period through our platform or through our third-party partners’ platforms using credit line granted by us.

3 GMV refers to the total value of transactions completed for products purchased on the e-commerce channel, net of returns.

4 Nominal APR refers to all-in interest costs and fees to the borrower over the net proceeds received by the borrower as a percentage of the total loan originations of both on- and off-balance sheet loans.

5 90 day+ delinquency ratio refers to outstanding principal balance of on- and off-balance sheet loans that were 90 to 179 calendar days past due as a percentage of the total outstanding principal balance of on- and off-balance sheet loans on our platform as of a specific date. On-balance sheet loans that were over 179 calendar days past due and charged off are not included in the delinquency rate calculation. Off-balance sheet loans that were over 179 calendar days past due are assumed charged off and not included in the delinquency rate calculation. The Company does not distinguish on the basis of the on- or off-balance sheet treatment in monitoring the credit risks of borrowers and the delinquency status of loans.

Third Quarter 2020 Financial Highlights:

  • Total operating revenue reached RMB3.2 billion. Credit-oriented services income reached RMB2.0 billion, representing an increase of 5.8% from the third quarter of 2019. Platform-based services income reached RMB614 million, representing an increase of 159% from the third quarter of 2019.
  • Gross profit reached RMB978 million, representing a decrease of 42.5% from the third quarter of 2019.
  • Net income was RMB345 million, representing a decrease of 52.4% from the third quarter of 2019.
  • Non-GAAP EBIT6 was RMB499 million, representing a decrease of 41.0% from the third quarter of 2019.
  • Adjusted net income6 was RMB443 million, representing a decrease of 38.0% from the third quarter of 2019. Adjusted net income per ADS6 was RMB2.15 on a fully diluted basis.

6 Non-GAAP EBIT, adjusted net income, adjusted net income per ordinary share and per ADS are non-GAAP financial measures. For more information on non-GAAP financial measures, please see the section of “Use of Non-GAAP Financial Measures Statement” and the tables captioned “Unaudited Reconciliations of GAAP and Non-GAAP Results” set forth at the end of this press release.

“I am happy to announce a record quarter of loan originations, where we exceeded our guidance and continued our strong growth. Our RMB48.3 billion in loan originations exceeded our previous record of RMB42.8 billion, and represented a year-on-year growth rate of 30.6%, demonstrating our continued ability to serve our customers and connect them with financial institutions and retail merchants both online and offline,” said Mr. Jay Wenjie Xiao, Lexin's chairman and chief executive officer. “Our continued ability to grow our loan originations is also a demonstration of our funding partners' trust and confidence in our ability to generate high quality loan assets, and the continued increased adoption of the profit sharing model by our funding partners, which has now reached 39.4% of our loan originations, demonstrates our partners’ confidence in our risk control and the quality of the assets that we are generating.”

“As China's consumer market continues to recover, we have seen strong momentum in our consumption-focused strategy, which brought our registered user number and the number of orders placed on our platform in the quarter to a record high," Mr. Xiao added.

“We performed strongly for the quarter and are very much on track to achieve our full year loan origination guidance of RMB170-180 billion,” said Mr. Craig Yan Zeng, Lexin’s chief financial officer, “Due to the change in accounting policies, we are not able to directly compare this year’s numbers with last year’s, but we can see that while the impact of the new profit sharing model will bring pressure on margins in the short term, the new model is far more competitive and will bring benefits to our long term development.”

“In spite of the challenges in the industry and to the economy, our credit performance and credit quality continues to be stable and within our expectations,” said Mr. Ryan Huanian Liu, Lexin’s chief risk officer, “Our vintage charge-off rates7 is within expectations at approximately 4.5%, and our 90 day+ delinquency rate was 2.60% as of September 30, 2020. We expect to continue to perform strongly and improve in the future.”

7 Vintage charge-off rate refers to, with respect to on- and off-balance sheet loans originated during a specified time period, which we refer to as a vintage, the total outstanding principal balance of the loans that are charged off during a specified period, divided by the total initial principal of the loans originated in such vintage. Please refer to vintage curve at the end of Third Quarter 2020 Financial Results” of this press release.

Third Quarter 2020 Financial Results:

Operating revenue decreased from RMB3,188 million in the third quarter of 2019 to RMB3,154 million in the third quarter of 2020. This decrease in operating revenue was due to a decrease in online direct sales and services income, partially offset by the increase in credit-oriented services income and platform-based services income for the quarter, driven by continuing increases in the number of active users on our platform, and the change of the presentation of guarantee income along with the adoption of ASC 326. Before the adoption of ASC 326, gain or loss related to financial guarantee not accounted for as derivatives was recorded in one combined financial statement line item within “(Loss)/gain on guarantee liabilities, net.” After the adoption of ASC 326, the gain released from the guarantee liabilities accounted for under ASC 460 is recorded as “Guarantee income” as a separate financial statement line item within revenue and the relevant credit losses are recorded as “Provision for credit losses of contingent liabilities of guarantee.”

Online direct sales decreased by 53.3% from RMB989 million in the third quarter of 2019 to RMB462 million in the third quarter of 2020. This decrease was primarily due to the decrease in the number of e-commerce orders during the third quarter of 2020.

Credit-oriented services income increased by 5.8% from RMB1.9 billion in the third quarter of 2019 to RMB2.0 billion in the third quarter of 2020. The increase was primarily resulted from the increase of RMB598 million due to change of presentation of guarantee income as aforementioned, partially offset by the decrease in loan facilitation and servicing fees-credit oriented.

Loan facilitation and servicing fees-credit oriented decreased by 35.8% from RMB1,650 million in the third quarter of 2019 to RMB1,058 million in the third quarter of 2020. This decrease was primarily due to the Company’s business strategy shift to increase the loan originations under platform-based model.

Guarantee income for the third quarter of 2020 was RMB598 million. The guarantee liabilities accounted for under ASC 460 are released from the underlying risk, i.e., as the underlying loan is repaid by the borrower or when the lender is compensated in the event of a borrower’s default.

Interest and financial services income and other revenues increased by 39.5% from RMB264 million in the third quarter of 2019 to RMB369 million in the third quarter of 2020, which was consistent with the increase in the origination of on-balance sheet loans in the third quarter of 2020.

Platform-based services income increased by 159% from RMB237 million in the third quarter of 2019 to RMB614 million in the third quarter of 2020. This increase was primarily contributed by an increase in the loan facilitation and servicing fees-performance based, partially offset by the decrease in loan facilitation and servicing fees-volume based.

Loan facilitation and servicing fees-performance based increased by 222% from RMB180 million in the third quarter of 2019 to RMB580 million in the third quarter of 2020. This increase was primarily due to an increase in the origination of off-balance sheet loans under the performance-based model within platform-based services.

Cost of sales decreased by 51.4% from RMB979 million in the third quarter of 2019 to RMB476 million in the third quarter of 2020, which is consistent with the decrease of online direct sales revenue.

Funding cost increased by 21.3% from RMB118 million in the third quarter of 2019 to RMB143 million in the third quarter of 2020, which was consistent with the increase of the funding debts to fund the on-balance sheet loans.

Processing and servicing cost increased by 104% from RMB177 million in the third quarter of 2019 to RMB362 million in the third quarter of 2020. This increase was primarily due to an increase in fees to third-party insurance companies and guarantee companies, an increase in fees to third-party payment platforms, an increase in risk management expenses, an increase in credit assessment cost, and an increase in salaries and personnel related costs.

Provision for credit losses of financing receivables increased by 41.4% from RMB154 million in the third quarter of 2019 to RMB217 million in the third quarter of 2020. The increase was primarily due to earlier recognition of credit losses under ASC 326 as well as the negative impact of the ongoing COVID-19 pandemic since the beginning of this year.

Provision for credit losses of contract assets and receivables increased by 74.5% from RMB59.9 million in the third quarter of 2019 to RMB104 million in the third quarter of 2020. This increase was mainly due to the significant increase in off-balance sheet loans originated as a result of the continuing growth of our business, earlier recognition of credit losses under ASC 326 as well as negative impact of the ongoing COVID-19 pandemic started in 2020.

Provision for credit losses of contingent liabilities of guarantee was RMB874 million in the third quarter of 2020. After the adoption of ASC 326 on January 1, 2020, a separate contingent liability in full amount determined using current expected credit losses (“CECL”) lifetime methodology is accounted for in addition to and separately from the guarantee liabilities accounted for under ASC 460, and relevant credit losses are recorded as “Provision for credit losses of contingent liabilities of guarantee.” Before the adoption of ASC 326, gain or loss related to such financial guarantee was recorded in one combined financial statement line item within “(Loss)/gain on guarantee liabilities, net.”

Gross profit decreased by 42.5% from RMB1,701 million in the third quarter of 2019 to RMB978 million in the third quarter of 2020. The decrease in the gross profit is primarily due to the significant increase of processing and servicing cost, provision for credit losses of financing receivables, provision for credit losses of contract assets and receivables and provision for credit losses of contingent liabilities of guarantee.

Sales and marketing expenses decreased by 29.2% from RMB508 million in the third quarter of 2019 to RMB360 million in the third quarter of 2020. This decrease was primarily due to a decrease in online advertising cost.

Research and development expenses decreased by 2.3% from RMB121 million in the third quarter of 2019 to RMB118 million in the third quarter of 2020. This decrease was primarily due to a decrease in salaries and personnel related costs.

General and administrative expenses decreased by 7.7% from RMB111 million in the third quarter of 2019 to RMB103 million in the third quarter of 2020. This decrease was primarily due to a decrease in salaries and personnel related costs.

Change in fair value of financial guarantee derivatives was a loss of RMB21.8 million in the third quarter of 2020, as compared to a loss of RMB119 million in the third quarter of 2019. The loss was primarily due to the re-measurement of the expected loss rates of the underlying outstanding off-balance sheet loans at the balance sheet date.

Change in fair value of loans at fair value was a loss of RMB11.4 million in the third quarter of 2020. Starting from the second quarter of 2020, for the loans we acquired/purchased from the relevant funding partners during the period, we account for them using fair value option pursuant to ASC 825, Financial Instruments, and record them as “Loans at fair value”. Changes in fair value of these loans are reported net and recorded as “Change in fair value of loans at fair value”.

Income tax expense for the third quarter of 2020 was RMB44.7 million, as compared to income tax expense of RMB124 million in the third quarter of 2019. The decrease of the income tax expense was consistent with the decrease of the taxable income from the same period of 2019. In addition, RMB16.2 million income tax provision relating to 2019 was reversed as one subsidiary of the Group was certified to be qualified for using a preferential tax rate of 10% for 2019 annual tax clearance in this quarter.

Net income for the third quarter of 2020 was RMB345 million, representing a decrease of 52.4% from RMB724 million in the third quarter of 2019.

Adjusted net income for the third quarter of 2020 was RMB443 million, representing a decrease of 38.0% from RMB714 million in the third quarter of 2019.

Please click here to view our vintage curve:

http://ml.globenewswire.com/Resource/Download/28eefd47-dc92-4437-af0f-2c178e76f308

Management Share Purchase

Lexin’s senior management team including Chairman and CEO Jay Wenjie Xiao, president Jared Yi Wu, and other members of the senior management team have purchased in their personal capacity 1.85 million of the Company’s ADS since the announcement of the management share purchase plan on September 14, 2020. The total shares purchased represent a total transaction value of $12.9 million, and the purchases were made during the open trading window period and in compliance with the Company’s guidelines. These purchases represent part of the $20 million worth of the Company’s ADS that the senior management intends to purchase.

Outlook

Based on Lexin’s preliminary assessment of the current market conditions, the Company reiterates total loan origination guidance for fiscal year 2020 to be between RMB170 billion and RMB180 billion. This is Lexin’s current and preliminary view, which is subject to changes and uncertainties.

Conference Call

The Company’s management will host an earnings conference call at 6:00 AM U.S. Eastern time on November 24, 2020 (7:00 PM Beijing/Hong Kong time on November 24, 2020).

Participants who wish to join the conference call should register online at:

http://apac.directeventreg.com/registration/event/8098922

Please note the Conference ID number of 8098922.

Once registration is completed, participants will receive the dial-in information for the conference call, an event passcode, and a unique registrant ID number.

Participants joining the conference call should dial-in at least 10 minutes before the scheduled start time.

Additionally, a live and archived webcast of the conference call will be available on the Company’s investor relations website at http://ir.lexin.com.

A replay of the conference call will be accessible approximately two hours after the conclusion of the live call until December 9, 2020, by dialing the following telephone numbers:

 United States:1 855 452 5696 or 1 646 254 3697
 International:61 2 8199 0299
 Replay Access Code:8098922

About LexinFintech Holdings Ltd.

LexinFintech Holdings Ltd. is a leading online consumption and consumer finance platform for new generation consumers in China. The Company provides a range of services including financial technology services, membership benefits, and a point redemption system through its ecommerce platform Fenqile and membership platform Le Card. The Company works with financial institutions and brands both online and offline to provide a comprehensive consumption ecosystem catering to the needs of young professionals in China. Lexin utilizes advanced technologies such as big data, cloud computing and artificial intelligence throughout the Company's services and operations, which include risk management, loan facilitation, and the near-instantaneous matching of users’ funding requests with offers from the Company's many funding partners.

For more information, please visit http://ir.lexin.com

To follow us on Twitter, please go to: https://twitter.com/LexinFintech.

Use of Non-GAAP Financial Measures Statement

In evaluating our business, we consider and use adjusted net income, non-GAAP EBIT, adjusted net income per ordinary share and per ADS, four non-GAAP measures, as supplemental measures to review and assess our operating performance. The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. We define adjusted net income as net income excluding share-based compensation expenses, interest expense associated with convertible notes, investment-related impairment and investment (income)/loss and we define non-GAAP EBIT as net income excluding income tax expense/(benefit), share-based compensation expenses, interest expense, net, investment-related impairment, and investment (income)/loss.

We present these non-GAAP financial measures because it is used by our management to evaluate our operating performance and formulate business plans. Adjusted net income enables our management to assess our operating results without considering the impact of share-based compensation expenses, interest expense associated with convertible notes, investment-related impairment and investment (income)/loss. Non-GAAP EBIT, on the other hand, enables our management to assess our operating results without considering the impact of income tax expense/(benefit), share-based compensation expenses, interest expense, net, investment-related impairment and investment (income)/loss. We also believe that the use of these non-GAAP financial measures facilitates investors’ assessment of our operating performance. These non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP.

These non-GAAP financial measures have limitations as an analytical tool. One of the key limitations of using adjusted net income and non-GAAP EBIT is that they do not reflect all items of income and expense that affect our operations. Share-based compensation expenses, interest expense associated with convertible notes, income tax expense/(benefit), interest expense, net and investment-related impairment and investment (income)/loss have been and may continue to be incurred in our business and are not reflected in the presentation of adjusted net income and non-GAAP EBIT. Further, these non-GAAP financial measures may differ from the non-GAAP financial information used by other companies, including peer companies, and therefore their comparability may be limited.

We compensate for these limitations by reconciling the non-GAAP financial measure to the most directly comparable U.S. GAAP financial measure, which should be considered when evaluating our performance. We encourage you to review our financial information in its entirety and not rely on a single financial measure.

Exchange Rate Information Statement

This announcement contains translations of certain RMB amounts into U.S. dollars (“US$”) at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB6.7896 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on September 30, 2020. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about Lexin’s beliefs and expectations, are forward-looking statements. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. Among other things, the expectation of its collection efficiency and delinquency, business outlook and quotations from management in this announcement, contain forward-looking statements. Lexin may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Lexin’s goal and strategies; Lexin’s expansion plans; Lexin’s future business development, financial condition and results of operations; Lexin’s expectation regarding demand for, and market acceptance of, its credit and investment management products; Lexin’s expectations regarding keeping and strengthening its relationship with borrowers, institutional funding partners, merchandise suppliers and other parties it collaborates with; general economic and business conditions; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in Lexin’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Lexin does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries, please contact:

LexinFintech Holdings Ltd.

IR inquiries:
Tony Hung
Tel: +86 (755) 3637-8888 ext. 6258
E-mail: IR@lexin.com

Media inquiries:
Limin Chen
Tel: +86 (755) 3637-8888 ext. 8047
E-mail: liminchen@lexin.com

SOURCE LexinFintech Holdings Ltd.

LexinFintech Holdings Ltd.
Unaudited Condensed Consolidated Balance Sheets

 As of 
(In thousands)December 31, 2019 September 30, 2020 
 RMB RMB US$ 
ASSETS         
Current assets         
Cash and cash equivalents 2,085,234  1,593,413  234,684 
Restricted cash 1,813,855  2,281,501  336,029 
Restricted time deposits 1,962,293  2,067,485  304,508 
Short-term financing receivables, net of allowance for credit losses of RMB318,262 and RMB772,813 as of December 31, 2019 and September 30, 2020, respectively 3,752,690  4,914,926  723,890 
Loans at fair value -  367,438  54,118 
Accrued interest receivable, net of allowance for credit losses of nil and RMB1,681 as of December 31, 2019 and September 30, 2020, respectively 54,284  91,837  13,526 
Prepaid expenses and other current assets 1,324,924  1,275,570  187,871 
Amounts due from related parties -  941  139 
Deposits to insurance companies and guarantee companies 1,251,003  1,170,314  172,369 
Short-term guarantee receivables, net of allowance for credit losses of RMB49,833 and RMB17,544 as of December 31, 2019 and September 30, 2020, respectively 1,183,278  1,079,194  158,948 
Short-term contract assets and service fees receivable, net of allowance for credit losses of RMB94,894 and RMB61,428 as of December 31, 2019 and September 30, 2020, respectively 2,971,976  3,545,337  522,172 
Inventories, net 106,781  59,238  8,725 
Total current assets 16,506,318  18,447,194  2,716,979 
Non‑current assets         
Restricted cash 86,537  125,299  18,455 
Restricted time deposits 4,350  9,415  1,387 
Long‑term financing receivables, net of allowance for credit losses of RMB55,283 and RMB34,462 as of December 31, 2019 and September 30, 2020, respectively 658,798  257,967  37,994 
Long-term guarantee receivables, net of allowance for credit losses of RMB750 and RMB3,910 as of December 31, 2019 and September 30, 2020, respectively 281,699  240,540  35,428 
Long-term contract assets and service fees receivable, net of allowance for credit losses of RMB2,845 and RMB13,692 as of December 31, 2019 and September 30, 2020, respectively 482,875  364,600  53,700 
Property, equipment and software, net 92,553  103,702  15,274 
Land use rights, net -  1,009,067  148,620 
Long‑term investments 511,605  475,423  70,022 
Deferred tax assets 157,138  599,720  88,329 
Other assets 454,421  509,292  75,011 
Total non‑current assets 2,729,976  3,695,025  544,220 
TOTAL ASSETS 19,236,294  22,142,219  3,261,199 
          
LIABILITIES         
Current liabilities         
Accounts payable 201,837  65,692  9,675 
Amounts due to related parties 40,804  57,184  8,422 
Short‑term borrowings 1,977,691  2,155,572  317,481 
Short‑term funding debts 3,755,528  4,654,269  685,500 
Accrued interest payable 87,003  59,128  8,709 
Guarantee liabilities(1) 1,726,368  -  - 
Deferred guarantee income(1) -  970,221  142,898 
Contingent guarantee liabilities(1) -  2,622,095  386,193 
Funds payable to individual investors 618,749  930,018  136,977 
Accrued expenses and other current liabilities 1,394,639  2,453,386  361,345 
Total current liabilities 9,802,619  13,967,565  2,057,200 
Non‑current liabilities         
Long‑term funding debts 450,595  1,182,257  174,128 
Deferred tax liabilities 309,646  39,870  5,872 
Convertible notes 2,046,051  2,002,444  294,928 
Other long-term liabilities 27,844  29,840  4,395 
Total non‑current liabilities 2,834,136  3,254,411  479,323 
TOTAL LIABILITIES 12,636,755  17,221,976  2,536,523 
SHAREHOLDERS’ EQUITY:         
Class A Ordinary Shares 170  175  26 
Class B Ordinary Shares 61  58  9 
Additional paid‑in capital 2,519,886  2,677,072  394,290 
Statutory reserves 352,313  352,313  51,890 
Accumulated other comprehensive loss (7,288) (10,576) (1,556)
Retained earnings 3,734,397  1,901,201  280,017 
TOTAL SHAREHOLDERS’ EQUITY 6,599,539  4,920,243  724,676 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 19,236,294  22,142,219  3,261,199 
          

(1) We have adopted ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) effective January 1, 2020 using the modified retrospective method.

Before the adoption of ASC 326, the guarantee liabilities subsequent to initial recognition were measured at the greater of the amount determined based on ASC 460 and the amount determined under ASC 450. An excess liability was recorded when the aggregate contingent liabilities under ASC 450 exceeded the balance of guarantee liabilities determined under ASC 460.

After the adoption of ASC 326, a contingent liability in full amount determined using CECL lifetime methodology of the guarantee (i.e., the contingent aspect recorded as “Contingent guarantee liabilities”) shall be accounted for in addition to and separately from the guarantee liability (i.e., the noncontingent aspect recorded as “Deferred guarantee income”) accounted for under ASC 460.


LexinFintech Holdings Ltd
.
Unaudited Condensed Consolidated Statements of Operations

 For the Three Months Ended September 30,  For the Nine Months Ended September 30, 
(In thousands, except for share and per share data)2019 2020  2019 2020 
 RMB RMB US$  RMB RMB US$ 
Operating revenue:                   
Online direct sales 988,964  461,959  68,039   2,539,291  1,473,075  216,960 
Membership services(1) 24,166  27,602  4,065   86,491  76,098  11,208 
Other services(1) 23,277  26,048  3,835   59,841  63,408  9,339 
Online direct sales and services income(1) 1,036,407  515,609  75,939   2,685,623  1,612,581  237,507 
Loan facilitation and servicing fees-credit oriented(1) 1,649,969  1,058,468  155,895   3,282,343  2,752,731  405,433 
Interest and financial services income and other revenues 264,255  368,702  54,304   887,568  946,224  139,364 
Guarantee income(2) -  597,542  88,008   -  1,981,113  291,786 
Credit-oriented services income(1) 1,914,224  2,024,712  298,207   4,169,911  5,680,068  836,583 
Loan facilitation and servicing fees-performance based(1) 180,058  580,358  85,477   454,957  1,251,341  184,303 
Loan facilitation and servicing fees-volume based(1) 57,307  33,375  4,916   144,955  68,104  10,031 
Platform-based services income(1) 237,365  613,733  90,393   599,912  1,319,445  194,334 
Total operating revenue 3,187,996  3,154,054  464,539   7,455,446  8,612,094  1,268,424 
Operating cost:                   
Cost of sales (979,179) (475,824) (70,081)  (2,532,635) (1,475,704) (217,348)
Funding cost (117,586) (142,658) (21,011)  (380,522) (449,102) (66,146)
Processing and servicing cost (177,004) (361,839) (53,293)  (432,002) (1,031,248) (151,886)
Provision for credit losses of financing receivables (153,601) (217,222) (31,993)  (489,321) (628,384) (92,551)
Provision for credit losses of contract assets and receivables (59,867) (104,452) (15,384)  (104,531) (254,578) (37,495)
Provision for credit losses of contingent liabilities of guarantee(2) -  (873,936) (128,717)  -  (2,660,101) (391,791)
Total operating cost (1,487,237) (2,175,931) (320,479)  (3,939,011) (6,499,117) (957,217)
Gross profit 1,700,759  978,123  144,060   3,516,435  2,112,977  311,207 
Operating expenses:                   
Sales and marketing expenses (507,928) (359,828) (52,997)  (1,018,689) (931,130) (137,141)
Research and development expenses (121,114) (118,325) (17,427)  (314,653) (379,141) (55,841)
General and administrative expenses (111,102) (102,501) (15,097)  (292,394) (325,820) (47,988)
Total operating expenses (740,144) (580,654) (85,521)  (1,625,736) (1,636,091) (240,970)
Change in fair value of financial guarantee derivatives, net (119,202) (21,833) (3,216)  45,521  (381,594) (56,203)
Change in fair value of loans at fair value -  (11,356) (1,673)  -  (11,356) (1,673)
(Loss)/gain on guarantee liabilities, net(2) (45,833) -  -   80,517  -  - 
Interest expense, net (8,590) (23,450) (3,454)  (9,739) (59,468) (8,759)
Investment-related impairment -  (35,370) (5,209)  -  (35,370) (5,209)
Investment income/(loss) 55,197  (1,293) (190)  53,433  9,321  1,373 
Others, net 6,095  85,241  12,555   32,077  83,295  12,268 
Income before income tax expense 848,282  389,408  57,352   2,092,508  81,714  12,034 
Income tax (expense)/benefit (123,916) (44,713) (6,586)  (315,878) 3,590  529 
Net income 724,366  344,695  50,766   1,776,630  85,304  12,563 
                    
Net income per ordinary share                   
Basic 2.03  0.94  0.14   5.01  0.23  0.03 
Diluted 1.96  0.87  0.13   4.87  0.30  0.04 
                    
Net income per ADS                   
Basic 4.05  1.89  0.28   10.02  0.47  0.07 
Diluted 3.93  1.74  0.26   9.75  0.59  0.09 
                    
Weighted average ordinary shares outstanding                   
Basic 357,428,690  364,991,825  364,991,825   354,720,615  364,328,223  364,328,223 
Diluted 369,863,610  410,968,465  410,968,465   364,924,688  411,274,741  411,274,741 

(1) Starting from the second quarter of 2020, we report revenue streams in three categories—online direct sales and services income, credit-oriented services income and platform-based services income, to provide more relevant information. We also revised the comparative period presentation to conform to current period classification.

In providing credit-oriented services, we originate on-balance sheet loans, or facilitate the loan origination of off-balance loans where we also provide guarantee services. Consequently, we take all credit risks of borrowers in respect of on-balance sheet loans, and off-balance sheet loans through the relevant guarantee arrangements. By nature, revenue earned from off-balance sheet loans where we also provide guarantee services is recorded as “Loan facilitation and servicing fees-credit oriented” and “Guarantee income,” and interest income and other fees from on-balance sheet loans is recorded as “Interest and financial services income and other revenues.”

In providing platform-based services, we do not provide guarantee services and take no credit risks of borrowers in respect of principal and interests due to the lenders for off-balance sheet loans we facilitate. We either charge the service fees for loan facilitation and servicing at predetermined rates based on the performance of the underlying off-balance sheet loans, which we refer to as performance-based model, or charge the service fees at predetermined rates of amount of loan originations upon successful matching of borrowing requests, which we refer to as volume-based model.

Revenue from “Loan facilitation and servicing fees-credit oriented,” “Loan facilitation and servicing fees-performance based” and “Loan facilitation and servicing fees-volume based” were previously reported as one combined financial statement line item as “Loan facilitation and servicing fees” before the change of presentation.

For online direct sales and services income, we report the premium membership fees for our membership packages as “Membership services,” and the commission fee earned from third-party sellers for the online marketplace services we rendered and other services revenue as “Other services” within “Online direct sales and services income.” The premium membership fees, commission fee earned from third-party sellers and other services revenue were previously reported as “Services and others” within “Online direct sales and services income” before the change of presentation.

(2) We have adopted ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) effective January 1, 2020 using the modified retrospective method.

Before the adoption of ASC 326, gain or loss related to guarantee liabilities accounted for under ASC 460 was recorded in one combined financial statement line item within “(Loss)/gain on guarantee liabilities, net.”

After the adoption of ASC 326, the gain released from the guarantee liabilities accounted for under ASC 460 is recorded as a separate financial statement line item within revenue as “Guarantee income” and the relevant credit losses of guarantee are recorded as “Provision for credit losses of contingent liabilities of guarantee.”

LexinFintech Holdings Ltd.
Unaudited Condensed Consolidated Statements of Comprehensive Income

  For the Three Months Ended September 30, For the Nine Months Ended September 30, 
(In thousands) 2019 2020 2019 2020 
  RMB RMB US$ RMB RMB  US$ 
Net income  724,366  344,695  50,766  1,776,630  85,304   12,563 
Other comprehensive income/(loss)                    
Foreign currency translation adjustment, net of nil tax  12,661  (3,687) (543) 13,358  (3,288)  (484)
Total comprehensive income  737,027  341,008  50,223  1,789,988  82,016   12,079 
                     

LexinFintech Holdings Ltd.
Unaudited Reconciliations of GAAP and Non-GAAP Results

  For the Three Months Ended September 30,  For the Nine Months Ended September 30, 
(In thousands, except for share and per share data) 2019  2020  2019  2020 
  RMB  RMB US$  RMB  RMB  US$ 
Reconciliation of Adjusted Net Income to Net Income                       
Net income  724,366   344,695  50,766   1,776,630   85,304   12,563 
Add: Share-based compensation expenses  43,345   49,193  7,246   123,767   152,192   22,416 
Interest expense associated with convertible notes  1,868   12,127  1,786   1,868   36,246   5,338 
Investment-related impairment  -   35,370  5,209   -   35,370   5,209 
Investment (income)/loss  (55,197)  1,293  190   (53,433)  (9,321)  (1,373)
Adjusted net income  714,382   442,678  65,197   1,848,832   299,791   44,153 
                        
Adjusted net income per ordinary share                       
Basic  2.00   1.21  0.18   5.21   0.82   0.12 
Diluted  1.93   1.08  0.16   5.07   0.73   0.11 
                        
Adjusted net income per ADS                       
Basic  4.00   2.43  0.36   10.42   1.65   0.24 
Diluted  3.86   2.15  0.32   10.13   1.46   0.21 
                        
Weighted average number of ordinary shares outstanding                       
Basic  357,428,690   364,991,825  364,991,825   354,720,615   364,328,223   364,328,223 
Diluted  369,863,610   410,968,465  410,968,465   364,924,688   411,274,741   411,274,741 


LexinFintech Holdings Ltd.

Unaudited Reconciliations of GAAP and Non-GAAP Results

  For the Three Months Ended September 30,  For the Nine Months Ended September 30, 
(In thousands) 2019  2020  2019  2020 
  RMB  RMB  US$  RMB  RMB  US$ 
Reconciliations of Non-GAAP EBIT to Net Income                        
Net income  724,366   344,695   50,766   1,776,630   85,304   12,563 
Add: Income tax expense/(benefit)  123,916   44,713   6,586   315,878   (3,590)  (529)
Share-based compensation expenses  43,345   49,193   7,246   123,767   152,192   22,416 
Interest expense, net  8,590   23,450   3,454   9,739   59,468   8,759 
Investment-related impairment  -   35,370   5,209   -   35,370   5,209 
Investment (income)/loss  (55,197)  1,293   190   (53,433)  (9,321)  (1,373)
Non-GAAP EBIT  845,020   498,714   73,451   2,172,581   319,423   47,045 
                         

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