LexinFintech Holdings Ltd. American Depositary Shares

Company Overview

Business Model: LexinFintech Holdings Ltd. is a consumer finance technology company operating in China. It leverages AI and big data for online risk assessment to connect financial institutions with young generation consumers (ages 23-40) and SME owners. The company operates a consumption ecosystem that integrates online consumer financing, offline inclusive financing, fintech SaaS, and e-commerce platforms. Its primary services include credit facilitation, tech-empowerment, and installment e-commerce.

Market Position: The company is positioned as a leading consumer finance technology provider in China, specifically targeting young generation consumers. Its competitive advantages stem from its consumption scenarios, efficiency in risk management, and user experience, differentiating it from traditional banks and other platforms. The tech-empowerment service further enhances its competitive standing by leveraging its technological capabilities and business expertise.

Recent Strategic Developments:

• Technology & Platform Enhancement: Since 2024, the company has built an Intelligent Credit Platform (ICP) within its Fenqile app, utilizing big data and cloud computing to match borrowers with financial institutions.
• Service Expansion: In H2 2021, credit digitalization solutions were introduced for financial institutions, with nine partners receiving fintech upgrade services as of December 31, 2024. The Maiya buy-now and pay-later service was launched in 2021.
• User Acquisition Optimization: In 2021, the company refined its online user acquisition model, improved user cohort classification, and expanded its offline sales force to reach regional users and SME owners.
• Capital Management: In August 2023, a semi-annual cash dividend policy was approved, targeting 15% to 30% of net profit. In November 2024, a 25% dividend payout ratio of total net profit was approved for 2025.
• Convertible Notes: US$300 million convertible notes issued in September 2019 were fully paid by April 2024.
• Asset Acquisition: In February 2020, the company acquired a land plot in Shenzhen for RMB1.032 billion.

Geographic Footprint: The company's primary operations are conducted in mainland China, with its corporate headquarters located in Shenzhen. Key operational centers for collection and customer service are in Wuhan, Changsha, and Nanchang, while system hardware and backup systems are hosted in leased facilities in Shenzhen, Guangzhou, and Beijing. The company is selectively exploring international markets.

Cross-Border Operations: LexinFintech Holdings Ltd. is a Cayman Islands holding company. Its operations in China are primarily conducted through PRC subsidiaries and variable interest entities (VIEs) due to foreign ownership restrictions in internet-based businesses. VIEs contributed 77.2% of total revenues in 2024. As of December 31, 2024, RMB5,813 million (US$796 million) was restricted from transfer by PRC subsidiaries and VIEs. Capital contributions from LexinFintech Holdings Ltd. to PRC subsidiaries totaled RMB3,812 million (US$522 million) as of December 31, 2024, and service fees paid by VIEs to wholly foreign-owned enterprises (WFOEs) were RMB1,611 million (US$221 million) in 2024.

Financial Performance

Revenue Analysis

Profitability Metrics (2024):

• Gross Margin: 35.39%
• Operating Margin: 9.53%
• Net Margin: 7.75%

Investment in Growth:

• R&D Expenditure: RMB578 million (US$79 million) in 2024, representing 4.1% of operating revenue and a 12.7% YoY increase.
• Capital Expenditures: RMB244 million (US$33.9 million) in 2024. Expected 2025 capital expenditures are RMB304 million, with RMB268 million allocated for a new headquarters and RMB36 million for IT infrastructure.
• Strategic Investments: The company makes equity investments in online consumer finance, insurance, and other fintech sub-sectors. In 2023, an investment loss of RMB303 million was recorded due to impairment losses for an investment and related prepayment for equity interest in a domestic private bank.

Currency Impact Analysis:

• The company's reporting currency is Renminbi (RMB). Translations to U.S. dollars (USD) use the December 31, 2024 exchange rate of US$1.00=RMB7.2993.
• All revenues and substantially all expenses are denominated in RMB. Foreign exchange risk primarily relates to cash and cash equivalents denominated in USD.
• The functional currency of LexinFintech Holdings Ltd. and its Hong Kong subsidiaries is USD, while PRC entities' functional currency is RMB.
• Foreign currency translation adjustments, net of tax, resulted in a loss of RMB16.0 million in 2024.
• Limited hedging options are available in China, and the company has not entered into hedging transactions to date to reduce foreign currency exchange risk. Governmental control of currency conversion may limit the ability to utilize operating revenue effectively.

Business Segment Analysis

The company operates as a single operating segment, but its revenue streams are derived from distinct business lines.

Credit Facilitation Service

Financial Performance:

• Revenue: RMB10,999,931 thousand (+13.8% YoY)
• % of Total Revenue: 77.5%
• Key Growth Drivers: This service matches consumers with financial institutions using AI-based technology. Loans are funded by institutional funding partners, consolidated trusts, asset-backed securitized debts, and the microcredit company. Guarantee services are provided through qualified financing guarantee companies or third-party partners.

Product Portfolio:

• Major product lines include credit lines for first-time users (RMB3,000 to RMB200,000) and existing users (up to RMB200,000).
• Personal installment loans generally have credit terms ranging from 1 to 36 months.
• Specific loan products include Le Gold Card, Lehua Lending, and Lehua Card (interest rates as low as 10%, credit lines up to RMB200,000), Le Zhouzhuan for SME owners (interest rates starting at 10%, credit lines up to RMB200,000), and Speedy Loan (interest rates starting at 18%, credit lines up to RMB200,000).

Market Dynamics: The company leverages its industry-leading fintech prowess and effective risk management capabilities to compete in China's well-developed and highly competitive credit service market. It has an extensive network of financial institution partners with broad geographic coverage within China.

Tech-Empowerment Service

Financial Performance:

• Revenue: RMB1,881,376 thousand (+14.7% YoY)
• % of Total Revenue: 13.2%
• Key Growth Drivers: This service generated approximately 22% of total loan originations in 2024. It encompasses several models:
  • Profit-sharing model: Provides technology solutions to financial institutions, taking no or limited credit risk, and charging a service fee as a pre-set percentage of agreed-upon interests. As of December 31, 2024, 54 institutional funding partners used this model.
  • Fintech SaaS model: Offers tailored digitalized credit service capabilities to banks, charging pre-set service fees without credit risk.
  • Intelligent Credit Platform (ICP) model: Built within the Fenqile app since 2024, it uses big data and cloud computing to match borrowers with financial institutions, does not bear principal risk, and charges service fees or a share of interests.

Market Dynamics: The tech-empowerment services market is described as early-stage, tech-intensive, and capability-driven, where the company's technological capabilities and business experience provide a competitive advantage.

Installment E-commerce Platform Service

Financial Performance:

• Revenue: RMB1,322,287 thousand (-24.5% YoY)
• % of Total Revenue: 9.3%
• Key Growth Drivers: The Fenqile platform offers flexible payment options, including zero down payment and installments. In 2024, total Gross Merchandise Volume (GMV) decreased by 31.3% YoY, while e-commerce GMV per active user increased by 3% YoY from 2023.

Market Dynamics: The online and offline consumption market in China is intensely competitive. The company serves merchants, large brands, and small and mid-sized enterprises on its e-commerce platform.

Key Growth Drivers (Overall):

• User acquisition is primarily driven by online advertising (e.g., Douyin, WeChat), organic traffic (brand recognition, word-of-mouth), offline sales teams, and e-commerce platforms. Offline user acquisition channels saw an 8.3% growth in transaction volume per order in 2024.
• The average GMV per existing active user increased by 21.6% in 2024 YoY.
• As of December 31, 2024, 40% of active users utilized more than one product.
• Seasonality impacts demand, with less user traffic during Chinese New Year (Q1) and higher demand in March, April, September, October, and November due to promotional campaigns.

International Operations & Geographic Analysis

Revenue by Geography: Substantially all revenues are derived from China.

International Business Structure:

• Holding Company: LexinFintech Holdings Ltd. is a Cayman Islands holding company.
• Hong Kong Subsidiary: Installment (HK) Investment Limited.
• PRC Subsidiaries (WFOEs): Beijing Shijitong Technology Co., Ltd., Shenzhen Lexin Software Technology Co., Ltd., Shenzhen Lexin Financing Guarantee Co., Ltd., Beihai Dulin Information Technology Co. Ltd., Shenzhen Lexin Information Service Co.,Ltd.
• Variable Interest Entities (VIEs): Beijing Lejiaxin Network Technology Co., Ltd., Shenzhen Xinjie Investment Co., Ltd., Shenzhen Qianhai Dingsheng Data Technology Co., Ltd., Shenzhen Mengtian Technology Co., Ltd., Beihai Super Egg E-Commerce Co., Ltd.
• Subsidiaries of VIEs: Shenzhen Fenqile Network Technology Co., Ltd., Shenzhen Beizhipiji Technology Co., Ltd., Ji’an Fenqile Network Microcredit Co., Ltd., Shenzhen Fenqile Trading Co., Ltd., Shenzhen Dingsheng Computer Technology Co., Ltd., Beihai Aurora Technology Co., Ltd., Beihai Lexin Information Technology Co., Ltd., Ganjiang New Area Mengtian Financing Guarantee Co., Ltd.
• Licenses: Key licenses held by PRC entities include domestic call center service, online data processing and transaction processing, internet content service, network microcredit, and financing guarantee business licenses.

Cross-Border Trade: The filing does not explicitly detail export markets or import dependencies for goods. However, inter-company transactions include capital contributions from the Cayman Islands holding company to PRC subsidiaries and service fees paid by VIEs to WFOEs. Transfer pricing policies are relevant for international tax strategy.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: The board authorized a US$50 million share repurchase program in March 2022 and an additional US$20 million program in November 2022. As of March 31, 2024, approximately 22 million American depositary shares (ADSs) were repurchased under the March 2022 program.
• Dividend Payments:
  • RMB164 million (US$22.5 million) in 2024.
  • RMB136 million in 2023.
  • Dividends declared include US$0.058 per ordinary share (US$0.116 per ADS) for H1 2023, US$0.033 per ordinary share (US$0.066 per ADS) for H2 2023, and US$0.036 per ordinary share (US$0.072 per ADS) for H1 2024.
• Future Capital Return Commitments: In November 2024, the board approved a dividend payout ratio of 25% of total net profit for the entire year of 2025.

Balance Sheet Position:

• Cash and Equivalents: RMB2,254,213 thousand (US$308,826 thousand) as of December 31, 2024, down from RMB2,624,719 thousand in 2023.
• Total Debt: RMB5,227,461 thousand (US$716,159 thousand) as of December 31, 2024, up from RMB4,965,279 thousand in 2023.
• Net Cash Position: The company was in a net debt position of RMB2,973,248 thousand as of December 31, 2024, compared to RMB2,340,560 thousand net debt in 2023.
• Financing receivables, net: RMB4,781,142 thousand (US$655,014 thousand) as of December 31, 2024.
• Debt Maturity Profile (as of December 31, 2024):
  • Less than 1 year: RMB4,390,584 thousand (primarily funding debts and borrowings).
  • 1-2 years: RMB1,334,117 thousand.
  • More than 3 years: RMB607,101 thousand (borrowings).
• Convertible Notes: US$300 million convertible notes issued in September 2019 were fully paid by April 2024, with a carrying value of nil as of December 31, 2024.

Cash Flow Generation:

• Operating Cash Flow: RMB1,081,458 thousand (US$148,159 thousand) in 2024, a decrease from RMB2,817,572 thousand in 2023.
• Free Cash Flow: Not explicitly stated, but can be inferred from operating and capital expenditures.
• Investing Cash Flow: Used RMB904,880 thousand (US$124,000 thousand) in 2024, compared to provided RMB2,334,452 thousand in 2023.
• Financing Cash Flow: Used RMB387,277 thousand (US$53,100 thousand) in 2024, compared to used RMB3,882,952 thousand in 2023.

Currency Management:

• Approximately 98% of cash and equivalents, restricted cash, and restricted term deposits/short-term investments were held in PRC financial institutions as of December 31, 2024.
• The company has not entered into hedging transactions to reduce foreign currency exchange risk.

Operational Excellence

Production & Service Model: The company utilizes AI and big data for online risk assessment and management. It operates online direct sales and an installment e-commerce platform. Services include loan facilitation, matching, account maintenance, collection, payment processing, financing guarantee services, and technology-driven platform services to financial institutions.

Global Supply Chain Architecture: Key Suppliers & Partners:

• E-commerce Fulfillment: The company sources products from third-party suppliers, notably JD.com, and utilizes the warehousing and delivery infrastructure of JD.com and SF Express.
• Funding Partners: Cumulatively served over 170 funding partners as of December 31, 2024, with institutional funding accounting for 100% of newly funded loans in 2024. Two institutional funding partners accounted for more than 10% of total funding cost for 2022, 2023, and 2024. Institutional Funding Partner A accounted for 49.9% of funding debts in 2024, and Institutional Funding Partner B accounted for 12.3% in 2024.
• Guarantee Companies: Two guarantee companies accounted for more than 10% of deposits to insurance companies and guarantee companies as of December 31, 2024 (Guarantee Company A: 20.4%, Guarantee Company B: 12.1%).
• Inventory Suppliers: One inventory supplier accounted for more than 10% of total purchases in 2023, and Inventory supplier C accounted for 11.0% of accounts payable in 2024.
• Technology: The proprietary Wormhole system connects users and funding partners in real time.

Facility Network:

• Corporate Headquarters: Shenzhen, China, leasing approximately 14,704 square meters of office space.
• User Services & Operations: Leases approximately 24,072 square meters for user, data verification, and collection services in Beijing, Shanghai, Wuhan, Nanchang, Changsha, and Ji’an.
• Other PRC Locations: An additional 6,087 square meters leased in other PRC locations.
• Data Centers: System hardware and backup systems are hosted in leased facilities in Shenzhen, Guangzhou, and Beijing, provided by major domestic internet data center providers.

Operational Metrics:

• Cumulative loan originations (inception to Dec 31, 2024): RMB1,325 billion (US$182 billion).
• Loan originations: RMB212 billion (US$29.1 billion) in 2024, a 15.2% decrease from RMB250 billion in 2023.
• Outstanding principal balance of loans: RMB110.3 billion (US$15.1 billion) as of December 31, 2024, an 11.1% decrease from RMB124 billion in 2023.
• Active users for loan products: 8.2 million in 2024, a 3.5% decrease from 8.5 million in 2023.
• 90 day+ delinquency ratio: 3.6% as of December 31, 2024, an increase from 2.9% in 2023 and 2.5% in 2022.
• Total registered users: 228 million as of December 31, 2024.
• Users with credit line: 45 million as of December 31, 2024, with over 87% aged 23-40 and over 67% urban working population.
• Cumulative active users: 33.2 million in 2024.
• Repeat users: Around 89% of active users in the same or previous year.
• Weighted average tenor of loans originated: Approximately 12.9 months in 2024.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: The company utilizes direct online sales and an online marketplace.
• Channel Partners: Refers users to third-party platforms for loan and other products.
• Digital Platforms: Operates through its proprietary platform, www.fenqile.com, and its mobile application. User acquisition is also driven by online advertising (e.g., Douyin, WeChat) and organic traffic (brand recognition, word-of-mouth marketing).
• Offline Sales: Employs offline sales teams for regional users and SME owners, with offline user acquisition channels achieving 8.3% growth in transaction volume per order in 2024.

Customer Portfolio: Enterprise Customers: The company serves merchants, large brands, and small and mid-sized enterprises on its e-commerce platform. Customer Concentration: No single customer accounted for more than 10% of total operating revenue, financing receivables, or contract assets and receivables for any period presented.

Regional Market Penetration: The company's market penetration is primarily focused on the China market, particularly targeting the young generation consumer segment and SME owners.

Competitive Intelligence

Global Market Structure & Dynamics

Industry Characteristics: China's credit service market is well-developed and highly competitive. The online and offline consumption market is also intensely competitive. The tech-empowerment services market is in an early stage, characterized by its tech-intensive nature and reliance on strong capabilities. Tighter regulations are expected to increase compliance costs, promote reasonable credit products, and enhance the competitive edge of established players.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: The company faces competition from major internet companies, traditional financial institutions, other installment loan service providers, JD Finance, payment service operators, local brands, and buy-now-pay-later (BNPL) startups.

Regional Competitive Dynamics: The competitive landscape varies across different segments of the Chinese market, with intense competition in both online consumer finance and e-commerce. The tech-empowerment sector, while early-stage, is also highly competitive due to its technology-intensive nature.

Risk Assessment Framework

Strategic & Market Risks

Global Market Dynamics: The company is exposed to changes in China's economic, political, or social conditions, government policies, and global economic downturns, which may impact demand for its products, credit performance, and funding costs. Technology Disruption: There is a risk of technology disruption if the company is unable to keep pace with rapid advancements in fintech and maintain its competitive edge. Customer Concentration: While no single customer accounts for more than 10% of revenue, the company's focus on the young generation consumer segment in China presents a concentration risk to demographic and market shifts within this group.

Operational & Execution Risks

Global Supply Chain Vulnerabilities: The company depends on business partners such as JD.com and SF Express for its e-commerce supply chain and fulfillment. It also relies on a concentrated number of institutional funding partners and guarantee companies, which could pose risks if these relationships are disrupted. Regional Disruptions: Operations are susceptible to natural disasters, health epidemics, and other outbreaks, particularly in its key operational cities in China (Shenzhen, Wuhan, Changsha, Nanchang, Guangzhou, and Beijing). Investor Protection Measures: The company provides investor protection measures to institutional funding partners, which could be deemed financing guarantee services, potentially leading to penalties or required business model changes under evolving regulations.

Financial & Regulatory Risks

Currency & Financial Risks: All revenues and substantially all expenses are denominated in RMB. Foreign exchange risk primarily relates to cash and cash equivalents denominated in U.S. dollars, and the company has not entered into hedging transactions to mitigate this risk. Fluctuations in interest rates could also negatively affect the business, particularly for its debt portfolio. Credit risk is significant for its loan businesses, as evidenced by the increasing 90 day+ delinquency ratio. The company was classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes for the taxable year ended December 31, 2024. Regulatory & Compliance Risks: The company is subject to evolving PRC laws and regulations concerning online consumer finance, investor protection, trust company collaborations, asset segregation, cybersecurity, data privacy, credit reporting, e-commerce, anti-money laundering, and corporate governance. Uncertainties exist in the interpretation and enforcement of PRC laws regarding the VIE structure. The PRC government imposes controls on RMB convertibility, which could limit the company's ability to utilize its operating revenue effectively.

Geopolitical & External Risks

Country-Specific Risks: The value of RMB is subject to changes in PRC policies and international economic/political developments. Geopolitical Tensions: Tensions in international trade, particularly between the United States and China, may impact the business. Recent U.S. tariffs on Chinese goods and proposed expansions of outbound investment regulations and sanctions against "foreign adversaries" including China could affect the broader economic environment and the company's operational flexibility.

Innovation & Technology Leadership

Research & Development Focus: Global R&D Network: R&D expenditure was RMB578 million (US$79 million) in 2024, representing 4.1% of operating revenue and a 12.7% YoY increase. The R&D efforts are primarily focused on developing the company's technology platform and website. Innovation Pipeline: The company focuses on applying AI and machine learning for credit assessment, risk management, operational efficiency, and targeted marketing. Key areas of development include data and model development, lifecycle risk control system reconstruction, intelligent tool development, and a data-driven marketing system.

Intellectual Property Portfolio:

• Patent Strategy: The company holds 221 registered patents in China, 234 patent applications, 230 software copyrights, 20 copyrights for artworks, 185 registered domain names (e.g., lexin.com, fenqile.com), and 508 registered trademarks. Two information security patents were acquired in 2024.
• IP Litigation: Not explicitly detailed, but the company maintains a record of zero data breaches and intercepted 160 million data security threats in 2024, indicating a strong focus on IP protection and cybersecurity.

Technology Partnerships: The company engages in strategic alliances and research collaborations, particularly through its tech-empowerment services, where it offers credit digitalization solutions to financial institutions and operates an Intelligent Credit Platform.

Leadership & Governance

Executive Leadership Team

International Management Structure: The company's management structure includes regional teams for collection and customer service in cities like Wuhan, Changsha, and Nanchang, indicating a degree of localized operational management within China.

Board Composition: The board consists of eight directors (one female, seven male). Jay Wenjie Xiao, as CEO and Chairman, beneficially owns 73.8% of the aggregate voting power, making LexinFintech Holdings Ltd. a "controlled company" under Nasdaq rules. The board includes three independent directors: Wei Wu, Neng Wang, and Annabelle Yu Long. It operates with an audit committee, a compensation committee, and a nominating and corporate governance committee, with independent directors chairing these committees.

Regulatory Environment & Compliance

Multi-Jurisdictional Regulatory Framework: Primary Regulatory Environments: The company's operations in China are subject to a comprehensive and evolving regulatory framework from various PRC authorities, including the Ministry of Industry and Information Technology (MIIT), People’s Bank of China, China Banking and Insurance Regulatory Commission (CBIRC), National Financial Regulatory Administration (NFRA), Cyberspace Administration of China (CAC), State Administration for Market Regulation (SAMR), and others. Key regulations include:

• Corporate Governance: PRC Company Law, PRC Foreign Investment Law, and the 2024 Negative List.
• Data & Cybersecurity: PRC Cybersecurity Law, Personal Information Protection Law (PIPL), and Data Security Law. The company has obtained third-level certification regarding China’s cybersecurity rules.
• E-commerce & Consumer Protection: E-Commerce Law and various measures on financial consumer protection, advertising, and product quality.
• Financial Services: Regulations on online consumer finance, investor protection, trust company collaborations, asset segregation, and anti-money laundering (PRC Anti-money Laundering Law).
• Taxation: The Value-Added Tax Law of the PRC (effective January 1, 2026) and Enterprise Income Tax Law (25% rate). Preferential income tax rates apply to specific PRC entities, such as Shenzhen Lexin Software Technology Co., Ltd. (15% as a High and New Technology Enterprise), Shenzhen Lexin Information Service Co.,Ltd. (tax exemption for 2021-2022, then 12.5% for 2023-2025 as a "Software Enterprise Encouraged by the State"), and certain Beihai entities (15% or 9% preferential rates with local exemptions).

Cross-Border Compliance:

• Overseas Offerings: PRC legal counsel advises that the company's PRC subsidiaries and VIEs must fulfill China Securities Regulatory Commission (CSRC) filing requirements for subsequent overseas offerings.
• Cybersecurity Review: The company is not required for CAC cybersecurity review for its current operations.
• Outbound Data Transfer: The Measures for Regulating and Promoting Outbound Data Flow (effective March 22, 2024) exempts certain low-volume or contract-necessary outbound data transfers from security assessment, providing clarity on compliance requirements.
• Export Controls: The Foreign Trade Law and Regulations on the Administration of the Import and Export of Technology, including the 2023 Catalogue of Technologies Prohibited or Restricted from Export by China, govern technology exports.
• Anti-Corruption: The company is subject to local anti-bribery laws and the U.S. Foreign Corrupt Practices Act (FCPA) due to its U.S. listing.

International Tax Strategy:

• PRC Resident Enterprise Status: If classified as a PRC resident enterprise, LexinFintech Holdings Ltd. could be subject to 25% PRC enterprise income tax on worldwide income.
• Withholding Tax: Dividends from PRC subsidiaries to non-PRC residents may face a 10% PRC withholding tax, potentially reduced to 5% under the PRC-Hong Kong tax treaty for Hong Kong enterprises holding at least 25% equity. The company accrued RMB43.6 million in withholding tax liabilities for certain 2023 profits and intends to indefinitely reinvest accumulated undistributed profits of RMB7,682 million from PRC subsidiaries, thus not recognizing RMB768 million in related tax liabilities as of December 31, 2024.
• Transfer Pricing: Inter-company transactions between the Cayman Islands holding company, Hong Kong subsidiaries, and PRC entities are subject to transfer pricing regulations.

Environmental & Social Impact

Global Sustainability Strategy: Environmental Commitments: The company has not explicitly detailed global emissions targets, carbon neutrality commitments, or renewable energy adoption across its operations in the filing. Regional Sustainability Initiatives: The company actively integrates social responsibility into its operations, products, and services.

Social Impact by Region:

• Community Investment: The company has made donations for pandemic relief in Wuhan and flood relief in Henan province, demonstrating local community engagement.
• Labor Standards: The company employs 4,667 individuals as of December 31, 2024, with a significant portion in risk management (26.6%) and sales and marketing (52.2%). It received the Wealth and Society Corporate Commitment Certificate from The Asian Banker’s Global Wealth and Society Corporate Commitment Certification Program 2021, indicating recognition for its corporate commitment.

Currency Management & Financial Strategy

Multi-Currency Operations: Currency Exposure: The company's reporting currency is Renminbi (RMB). All revenues and substantially all expenses are denominated in RMB. The primary foreign exchange risk relates to cash and cash equivalents denominated in U.S. dollars. The functional currency of LexinFintech Holdings Ltd. and its Hong Kong subsidiaries is U.S. dollars, while PRC entities' functional currency is RMB.

Hedging Strategies: The company has not entered into hedging transactions to reduce foreign currency exchange risk. It relies on its operational diversification within China and the RMB as its primary operating currency.